[Federal Register Volume 88, Number 217 (Monday, November 13, 2023)]
[Notices]
[Pages 77625-77642]
[FR Doc No: 2023-24868]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98869; File No. SR-NYSE-2023-36]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Enhancements to Its Designated Market
Maker Program

November 6, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on October 23, 2023, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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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 to enhancements to its Designated Market
Maker (``DMM'') program by (1) amending Rule 7.35B(d)(2) (DMM-
Facilitated Closing Auctions); Rule 36 (Access to and Communication
with Floor); Rule 76 (``Crossing'' Orders); Rule 98 (Operation of a DMM
Unit); Rule 103 (Registration and Capital Requirements of DMMs and DMM
Units); Rule 103B (Security Allocation and Reallocation); and Rule 104
(Dealings and Responsibilities of DMMs); (2) deleting Rule 104A (DMMs--
General) and Rule 106A (Taking Book or Order of Another Member); and
(3) adopting a new Rule 104B establishing the DMM Unit Introductory
Program in Exchange Traded Products (``ETPs''). The proposed rule
change is available on the Exchange's website 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
    The Exchange proposes enhancements to its DMM program by (1)
amending Rule 7.35B(d)(2) (DMM-Facilitated Closing Auctions); Rule 36
(Access to and Communication with Floor); Rule 76 (``Crossing''
Orders); Rule 98 (Operation of a DMM Unit); Rule 103 (Registration and
Capital Requirements of DMMs and DMM Units); Rule 103B (Security
Allocation and Reallocation); and Rule 104 (Dealings and
Responsibilities of DMMs); (2) deleting Rule 104A (DMMs--General) and
Rule 106A (Taking Book or Order of Another Member); and (3) adopting a
new Rule 104B establishing the DMM Unit Introductory Program in ETPs.
    As described more fully below, the proposal represents the most
comprehensive enhancement of the DMM program since its introduction in
2008. The lynchpin of the proposed changes would be the removal of the
availability of the remaining non-public information available to
individual DMMs and DMM units \4\ on the Trading Floor \5\ intraday.
Since 2008, the increasingly automated logic for executions has
severely circumscribed the amount of non-public information available
to DMMs, and the Exchange has significantly enhanced the transparency
of its marketplace over that same period.\6\ Nonetheless, given their
unique role to facilitate openings, reopenings, and the close of
trading, DMMs at the point of sale continue to have display-only access
to aggregate buying and buying/selling interest that is eligible to
participate in the Opening Auction and the Closing Auction at each
price point, respectively.\7\ Moreover, pursuant to Rule 104(e)(iii),
Floor brokers may request that a DMM provide them with the information
that is available to the DMM at the post, including such aggregate
buying and selling interest for the Closing Auction.
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    \4\ The term ``Designated Market Maker'' or ``DMM'' means an
individual member, officer, partner, employee or associated person
of a DMM unit who is approved by the Exchange to act in the capacity
of a DMM. See Rule 1.1(e). The term ``DMM unit'' means a member
organization or unit within a member organization that has met the
requirements of Rules 98 and 104. See Rule 98(b)(1) (defining DMM
unit).
    \5\ The term ``Trading Floor'' is defined in Rule 6A to mean the
restricted-access physical areas designated by the Exchange for the
trading of securities, commonly known as the ``Main Room'' and the
``Buttonwood Room.''
    \6\ For instance, the Exchange disseminates Closing Auction
Imbalance Information beginning ten minutes before the scheduled end
of Core Trading Hours, which provides updated imbalance information
and indicative closing prices. In 2019, in connection with the
transition to the Pillar trading platform, the Exchange amended its
rules to provide that Floor Broker Interest (i.e., interest
verbalized in the trading crowd by a Floor broker) would be included
in Closing Auction Imbalance Information. Beginning in 2020, the
Exchange temporarily suspended the availability of Floor Broker
Interest to be eligible to participate in the Closing Auction, as
defined in Rule 7.35. In 2021, the Exchange permanently excluded
Floor Broker Interest from the Closing Auction and required all
Floor brokers to enter orders for the Closing Auction electronically
during Core Trading Hours. See Securities Exchange Act Release No.
92480 (July 23, 2021), 86 FR 40886 (July 29, 2021) (SR-NYSE-2020-
95). Because of the absence of Floor Broker Interest in the Closing
Auction, any remaining information advantage that DMMs might have
had with respect to orders from Floor brokers--even after such
interest was included in the Closing Auction Imbalance Information--
was eliminated. Recently, the Exchange made further changes to the
Closing Auction, including adding price parameters within which the
DMM must select a Closing Auction Price, in order to make the
Closing Auction more transparent and deterministic. See Securities
Exchange Act Release No. 95691 (September 7, 2022), 87 FR 56099
(September 13, 2022) (SR-NYSE-2022-32).
    \7\ See Rules 104(a)(2) & (3). For instance, in order to
facilitate the close, the Exchange makes available to DMMs at the
point of sale aggregate order information about all orders eligible
to participate in the Closing Auction, including the full quantity
of Reserve Orders and MOC and LOC Order quantities, at each price
point. In addition, the Exchange makes such aggregate order
information available to DMM unit algorithms in connection with the
electronic message sent to a DMM unit algorithm to close an assigned
security electronically, which is sent shortly after the end of Core
Trading Hours. The information available at each price point is not
available in the Auction Imbalance Information. However, such
information is used to calculate the Continuous Book Clearing Price,
which is disseminated via Auction Imbalance Information.
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    The Exchange proposes to eliminate DMMs' access to aggregate order
information during Core Trading Hours with one limited exception during
trading halts,\8\ as well as the related ability for DMMs to share this
information with other market participants on the Trading Floor. DMM
access to aggregate order information will henceforth be only as needed
and before the open, in connection with the reopening of a security
following a trading halt, and following the end of Core Trading Hours
to facilitate the Closing Auction. In addition, the Exchange proposes
amendments to Rule 76 to entirely eliminate DMM involvement in Floor
broker cross transactions on the Trading Floor. Currently, Floor
brokers must announce these transactions at the DMM unit post/panel
where the security trades, and the assigned DMM acknowledges the Floor
broker announcement in Exchange systems. As proposed, the Exchange
would announce and acknowledge Floor broker cross transactions, thereby
eliminating Floor broker interactions with individual DMMs at the post/
panel in connection with these transactions.
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    \8\ See Rule 1.1(d) (definition of ``Core Trading Hours''). DMMs
would be provided access to aggregate order information on an as
needed basis to facilitate a reopening. See the discussion of
proposed Rule 104(a)(2), infra.
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    The Exchange believes these changes would in turn justify
elimination of certain historical restrictions governing DMM unit
operations and communications from the Trading Floor, including use of
cellular and wireless phones, as well as the prohibition on
``Aggressing Transactions'' in the final ten minutes of the trading
day, thereby reducing the burdens associated with operating a DMM unit
on the Exchange. Indeed, the proposal is designed to permit DMM units
to operate more like other market makers while retaining the DMM unit's
unique duties and responsibilities to the marketplace, none of which
would change as part of the proposal. In an effort to attract more DMM
units to the Trading Floor, the Exchange also proposes an introductory
program for non-DMM Market Makers and Supplemental Liquidity Providers
(``SLPs'') that would provide a 12-month ramp-up period for new
entrants to become fully operational Trading Floor-based DMM units.
    The numerous obligations currently imposed on DMM units and DMMs by
Exchange rules, and Rule 104 in particular, would in no way be
diminished or otherwise altered by the proposal. Similarly, the
proposal does not increase or otherwise alter the benefits of being an
Exchange DMM unit. The proposal is designed rather to modernize the
restrictions on DMMs and DMM units that flow from the potential
availability of non-public order information on the Trading Floor; the
Exchange believes that once the remaining sources of potential non-
public order information are removed, these historical restrictions on
DMM

units and DMMs are no longer necessary. The proposal accordingly does
not alter or disrupt the balance between the benefits and obligations
of being an Exchange DMM unit and is instead intended to make the DMM
business more competitive. Indeed, the Exchange believes that the
cumulative effect of the proposal would be to lower entry barriers to
the DMM unit business on the Exchange and stimulate greater competition
among existing DMM units and potential new entrants, to the benefit of
the investing public, issuers and the marketplace.
Background
    In 2008, in connection with the Exchange's transformation of its
market structure begun in 2006,\9\ the Exchange phased out the
specialist system and replaced specialists with DMMs, who are employees
of DMM units.\10\
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    \9\ See, e.g., Securities Exchange Act Release No. 53539 (March
22, 2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05) (Order
Approving Proposed Rule Change and Amendment Nos. 1, 2, 3, and 5
Thereto and Notice of Filing and Order Granting Accelerated Approval
to Amendment Nos. 6, 7, and 8 to the Proposed Rule Change to
Establish the Hybrid Market). Under the Hybrid Market, Exchange
systems assumed the function of matching and executing
electronically-entered orders.
    \10\ See, e.g., Securities Exchange Act Release No. 58845
(October 24, 2008), 73 FR 64379, 64380-81 (October 29, 2008) (SR-
NYSE-2008-46) (Notice of Filing of Amendment Nos. 2 and 3 and Order
Granting Accelerated Approval to a Proposed Rule Change, as Modified
by Amendment Nos. 1, 2, and 3, To Create a New NYSE Market Model,
With Certain Components To Operate as a One-Year Pilot, That Would
Alter NYSE's Priority and Parity Rules, Phase Out Specialists by
Creating a Designated Market Maker, and Provide Market Participants
With Additional Abilities To Post Hidden Liquidity) (``Release No.
58845''). Member organizations wanting to operate a DMM unit must
file a written application and be approved prior to operating a DMM
unit. See Rule 103(b)(i). As noted below, submission and approval of
a DMM unit's written policies and procedures addressing the
requirements of Rule 98 is also a prerequisite to operating a DMM
unit on the Exchange. DMMs are required to be a member of the
Exchange and pass a prescribed examination. See id. at (c)(i).
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    DMMs were conceived as a new type of market maker for a primarily
electronic trading environment that had the ability, and the
affirmative obligation, to contribute liquidity in a security by
trading competitively for the DMM unit's dealer account. DMMs were
designed to function in a manner substantially different from the
manner in which specialists had previously functioned on the Exchange.
In particular, DMMs no longer received copies of orders entered in
Exchange systems prior to the orders' publication to all market
participants. Similarly, the Exchange eliminated the negative
obligation \11\ to yield trading for a DMM unit's proprietary account
in order to allow public orders to be executed against each other. In
addition, DMMs ceased to serve as the responsible broker-dealer for
orders on NYSE's book.\12\
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    \11\ The negative obligation as set forth in Rule 11b-1 under
the Act required that a specialist's dealings be restricted, so far
as practicable, to those reasonably necessary to permit the
specialist to maintain a fair and orderly market. See 17 CFR
240.11b-1(a)(2)(iii).
    \12\ See, e.g., Release No. 58845, 73 FR at 64381.
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    Although DMM units were not acting as responsible broker-dealers
for orders on the NYSE's book, individual DMMs retained affirmative
obligations with respect to the quality of the markets in their
assigned securities as set forth in Rule 104, described more fully
below. In addition, DMM units were required to maintain adequate
minimum capital based on their registered securities, and to use their
capital to engage in a course of dealings for their own accounts to
assist in the maintenance, so far as practicable, of a fair and orderly
market. Transactions on the Exchange by a DMM for the DMM unit's
account are expected to be effected in a reasonable and orderly manner
in relation to the condition of the general market and the market in a
particular stock. Further, DMMs are required to maintain a bid or offer
at the National Best Bid or National Best Offer (``inside'') for
securities in which the DMM unit is registered for a certain percentage
of the trading day based on the average daily volume of the security.
DMMs are also required to facilitate transactions in their assigned
securities during openings and reopenings as well as at the close of
trading as required by Exchange rules,\13\ including the obligation to
supply liquidity as needed. Currently, DMM and DMM unit algorithms have
access to aggregate order information in order to comply with these
requirements.\14\
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    \13\ Rule 7.35A sets forth additional specific responsibilities
of DMMs with respect to Core Open Auctions and Trading Halt
Auctions. Rule 7.35B sets forth additional responsibilities of DMMs
with respect to Closing Auctions. The Exchange is not proposing
changes to those rules.
    \14\ DMM unit algorithms, however, are not provided aggregated
buying and selling interest for the Closing Auction until after the
end of Core Trading Hours.
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    These DMM obligations are accompanied by a variety of restrictions
related to communications from the Trading Floor contained in Rule 36
and DMM trading and information flow contained in Rule 98. These rules,
as well as the requirements of Rule 104, the main rule setting forth
the obligations of Exchange DMM units and DMMs, and the related
requirements embodied in the allocation process set forth in Rule 103B,
are described below.
Rule 36
    Rule 36 governs the establishment of telephone or electronic
communications connections between the Floor and other specified
locations, which requires Exchange approval. The requirements
applicable to DMM units and DMMs are set forth in Supplementary
Material .30 (DMM Unit Post Wires) and Supplementary Material .31 (DMM
Electronically Transmitted Written Communications) to Rule 36.
    Rule 36.30 governs the establishment of telephone or electronic
communications between the DMM units on the Trading Floor with certain
specified off-Floor locations.
    First, Rule 36.30 provides that, with Exchange approval, a DMM unit
may maintain a telephone line at its stock trading post location to the
off-Floor offices of the DMM unit, the DMM unit's clearing firm, or to
persons providing non-trading related services. The rule further
provides that such telephone connection cannot be used for the purpose
of transmitting to the Floor orders for the purchase or sale of
securities. Rule 36.30 permits a DMM unit to maintain a telephone line
at its trading post location to communicate with DMM unit personnel
working in locations other than the off-Floor offices of the DMM unit,
provided that the telephone numbers of such persons are provided to the
Exchange in advance.
    Second, Rule 36.30 provides that a DMM unit may also maintain wired
or wireless devices that have been registered with the Exchange, such
as computer terminals or laptops, to communicate only with the system
employing the algorithms and with individual algorithms and that will
enable the DMM unit to activate or deactivate the system employing the
algorithms or an individual algorithm or change such system's pre-set
parameters.
    In addition, Rule 36.30 provides that a DMM unit registered in an
Investment Company Unit (as defined in Rule 5.2(j)(3)), or a Trust
Issued Receipt (the ``receipt'') as that term is defined in Rule 8.200,
may use a telephone connection or order entry terminal at the DMM
unit's post to enter a proprietary order in the Investment Company Unit
or receipt in another market center, in a Component Security of such an
Investment Company Unit or receipt, or in an options or futures
contract related to such Investment Company Unit or receipt, and may
use the post telephone to obtain market information with respect to
such Investment Company Units, receipts, options, futures, or Component

Securities. If the order in the Component Security of the Investment
Company Unit or receipt is to be executed on the Exchange, the order
must be entered and executed in compliance with Exchange Rule 112.20
and SEC Rule 11a2-2(T), and must be entered only for the purpose of
hedging a position in the Investment Company Unit or receipt.
    Rule 36.30 requires DMM units to create and maintain records of all
messages generated by the unit's wired or wireless devices to
communicate with the system employing the unit's algorithms in
compliance with Rule 440 (Books and Records) and SEC Rules 17a-3 and
17a-4 and to maintain such records in the format prescribed by the
Exchange.
    Rule 36.31 permits DMM units to install and maintain certain
written electronic communications applications. Specifically, Rule
36.31(a) permits a DMM unit, subject to Exchange approval and the
conditions set forth in Rule 36.31, to install and maintain a wired or
wireless device capable of sending and receiving written communications
electronically through an Exchange-approved connection (a ``Permitted
Communications Device'').\15\ Under Rule 36.31(b), DMM units can
connect Floor-based personnel via a Permitted Communications Device to
persons with whom they are otherwise permitted to communicate pursuant
to Rules 36.30 and 98, i.e., certain personnel in the off-Floor offices
of the DMM unit, the DMM unit's clearing operations, and persons who
are permitted to provide non-trading related services to the DMM unit
under Rule 98. Once connected, on-Floor and off-Floor personnel are
permitted to use the Permitted Communications Device for two-way
written electronic communications as permitted by Rules 36.30 and 98.
To facilitate the DMM unit's obligation to maintain regular
communications with listed issuers, Rule 36.31(b) also permits Floor-
based DMM personnel to utilize Permitted Communications Devices for
written electronic communications with the listed issuer representative
designated under Rule 104(g)(1).\16\
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    \15\ Examples of Permitted Communications Devices include email
and instant messaging via a desktop or laptop computer.
    \16\ Current Rule 36.31 incorrectly refers to Rule 104(l)(1). As
discussed below, the Exchange proposes to delete Rule 36.31 in its
entirety.
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    Rule 36.31(c) requires that a DMM's member organization maintain
records of all written communications sent from or to the DMM via the
Permitted Communications Device in accordance with Rule 440 and SEC
Rule 17a-4(b)(4) and in such format as may be prescribed by the
Exchange.
    Finally, Rule 36.31(d) provides that a DMM's member organization
must establish policies and procedures reasonably designed to ensure
that use of the Permitted Communications Device is consistent with all
SEC rules and Exchange rules, policies, and procedures.\17\
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    \17\ Rule 36.60 (Telephone Listings) provides that a member or
member organization may not permit a non-member to list the
telephone number of a line terminating in a switchboard of the
member or member organization in any type of telephone directory
under the name of the non-member. As discussed below, the Exchange
proposes to delete this rule in its entirety as obsolete.
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Rule 76
    Rule 76 governs the execution of ``cross'' or ``crossing'' orders
by Floor brokers. Rule 76 applies only to manual transactions executed
on the Trading Floor and provides that when a member has an order to
buy and an order to sell the same security that can be crossed at the
same price, the member is required to clearly announce to the trading
Crowd the proposed cross by offering the security at a price that is
higher than his or her bid by a minimum variation permitted in the
security before crossing the orders.
    To assist Floor brokers in monitoring the price of protected
quotations and ensuring compliance with Rule 611 of Reg NMS, Rule 76.10
permits Floor brokers to enter a cross transaction into their hand-held
devices (``HHD'') at a limit price consistent with customer
instructions and as determined by the Floor broker. The Floor broker
cannot, however, use this functionality with respect to a cross
involving a principal order to buy and a principal order to sell
submitted by the same broker-dealer.
    Following entry of the orders into the HHD, a quote minder function
within Exchange systems monitors protected quotations to determine when
the limit prices assigned to the buy and sell orders are such that the
orders may be executed consistent with Rule 611. When the protected
quotation permits a Rule 611-compliant print (i.e., the desired
crossing price is at or between the protected bid and offer), quote
minder delivers an alert message indicating that the orders may be
crossed; captures within Exchange systems a time-stamped quote that
includes the time the alert is sent to the Floor broker and the
protected bid and offer at that time; starts a 20-second timer; and
enables a ``print'' key function in the HHD allowing the Floor broker
to cross the orders and print the trade through Exchange systems to the
Consolidated Tape within that 20-second time period.\18\
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    \18\ If Exchange systems do not receive the ``print'' message
from the Floor broker within the allotted time period, the ability
to execute the orders and print to the Consolidated Tape will expire
and the cross instructions will be canceled.
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    Floor brokers utilize the 20-second period to comply with Rule 76's
requirement that a Floor broker ``clear'' the trading Crowd before
executing a cross transaction, which is accomplished by the broker
verbally announcing the cross trade at the post/panel of the DMM unit
for the subject security. If there is other Floor broker and/or DMM
interest in response to the verbal announcement of the cross trade, the
Floor broker must trade with such interest on behalf of the applicable
customer order(s). If the original terms of a cross transaction cannot
be met for any reason, for example, if the crowd trades with a portion
of either the bid or offer and the Floor broker cannot otherwise
complete the proposed cross transaction in the size or price as
entered, the originally-entered proposed cross transaction is
cancelled. If the proposed cross trade is not broken up, the Floor
broker may proceed to execute the trade by selecting the ``print'' key
in the HHD prior to the expiration of the 20-second timer, which also
transmits a message to Exchange systems to print the transaction to the
Consolidated Tape. The completed transaction is then printed to the
Consolidated Tape at that price. The DMM confirms the Floor broker
announcement as required by Rule 76 in Exchange systems.
Rule 98
    Rule 98 governs the operation of DMM units and incorporates various
organizational structures for operating a DMM unit and restrictions on
DMM trading.
    Rule 98 contains narrowly tailored restrictions to address the fact
that DMMs, while on the Trading Floor, may have access to certain
Floor-based non-public information and requires DMM units to maintain
procedures and controls to prevent the misuse of material, non-public
information that are effective and appropriate for that member
organization. Current Rule 98 generally reflects a principles-based
approach to prohibit the misuse of material nonpublic information by a
member organization that operates a DMM unit.\19\
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    \19\ See Securities Exchange Act Release Nos. 72534 (July 3,
2014), 79 FR 39019 (July 9, 2014) (SR-NYSE-2014-12) (Order Approving
Proposed Rule Change Amending Rule 98 To Adopt a Principles-based
Approach To Prohibit the Misuse of Material Nonpublic Information
and Make Conforming Changes to Other Exchange Rules).

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    Specifically, under Rule 98(c)(2), a member organization seeking
approval to operate a ``DMM unit,'' which means a trading unit within a
member organization approved pursuant to Rule 103 (Registration and
Capital Requirements of DMMs and DMM Units) to act as a DMM unit,\20\
pursuant to Rule 98 must maintain and enforce written policies and
procedures reasonably designed, taking into consideration the nature of
such member organization's business, (1) to prevent the misuse of
material, non-public information by such member organization or persons
associated with such member organization, and (2) to ensure compliance
with applicable federal laws and regulations and with Exchange
rules.\21\ Further, Rule 98(c)(3)(A) provides that a member
organization shall protect against the misuse of ``Floor-based non-
public order information'' \22\ and that only the Trading Floor-based
employees of the DMM unit and individuals responsible for the direct
supervision of the DMM unit's Floor-based operations may have access
(as permitted pursuant to Rule 104) to Floor-based non-public order
information.
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    \20\ See Rule 98(b)(1) (defining DMM unit).
    \21\ Rule 98(c)(2) provides examples of conduct that would
constitute the misuse of material, non-public information,
including, but not limited to: (1) trading in any securities issued
by a corporation, or in any related product, while in possession of
material-non-public information concerning the issuer; or (2)
trading in a security or related product, while in possession of
material non-public information concerning imminent transactions in
the security or related product; or (3) disclosing to another person
or entity any material, non-public information involving a
corporation whose shares are publicly traded or an imminent
transaction in an underlying security or related product for the
purpose of facilitating the possible misuse of such material, non-
public information. See Rule 98(c)(2)(A)-(C).
    \22\ Rule 98(b)(4) defines ``Floor-based non-public order'' as
any order, whether expressed electronically or verbally, or any
information regarding a reasonably imminent non-public transaction
or series of transactions entered or intended for entry or execution
on the Exchange and which is not publicly available on a real-time
basis via an Exchange-provided datafeed, such as NYSE
OpenBook[supreg] or otherwise not publicly available. Non-public
orders include order information at the opening, re-openings, the
close, and order information in Exchange systems that is not
available via NYSE OpenBook[supreg].
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    Rule 98(c)(3)(B) specifies the restrictions applicable to employees
of the DMM unit while on the Trading Floor. Rule 98(c)(3)(C) also
provides that a Floor-based employee of a DMM unit who moves to a
location off the Trading Floor, or any person who provides risk
management oversight or supervision of the Floor-based operations of
the DMM unit and becomes aware of Floor-based non-public order
information, shall not (1) make such information available to
customers, (2) make such information available to individuals or
systems responsible for making trading decisions in DMM securities in
away markets or related products, or (3) use any such information in
connection with making trading decisions in DMM securities in away
markets or related products. The rule covers an individual that leaves
the Floor, as well as a manager providing oversight or supervision of
the Floor-based operations of the DMM unit. Submission and approval of
a DMM unit's written policies and procedures addressing the
requirements of Rule 98 is a prerequisite to operating a DMM unit on
the Trading Floor.
    Rule 98(e) sets forth the procedures a DMM unit must follow in the
event the DMM unit receives from the member organization or approved
person non-public information about a security allocated to the DMM
unit.
    Rule 98(f) describes certain reporting obligations for, among
others, DMM units, including the requirement that a DMM unit promptly
report to the Exchange any failure to maintain the confidentiality of
Floor-based non-public order information, as required by Rule
98(c).\23\
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    \23\ See Rule 98(f)(3).
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    Finally, Rule 98(g) provides that any failure by the DMM unit to
maintain confidentiality of Floor-based non-public order information or
any breach of any internal controls established to protect such
information, may result in the imposition of appropriate regulatory
sanctions, including a withdrawal of the registration of one or more
securities of the DMM unit or the withdrawal of the approval to operate
a DMM unit.
    Submission and approval of a DMM unit's written policies and
procedures addressing the requirements of Rule 98 is a prerequisite to
operating a DMM unit on the Trading Floor.
Rule 103B \24\
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    \24\ Rule 103, which governs registration and capital
requirements of DMMs and DMM units, provides that as a condition of
a member organization's registration as a DMM unit in one or more
securities, the Exchange may at any time require such DMM unit to
act as an odd-lot dealer in such securities as provided under the
rules of the Exchange. See Rule 103(d). As discussed below, the
Exchange proposes to delete Rule 103(d) as obsolete.
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    Rule 103B(III) sets out the procedures under which DMM units are
assigned to securities listed on the Exchange: an issuer may either
select a DMM unit after interviewing all DMM units eligible to
participate in the allocation process (Rule 103B(III)(A)), or delegate
the authority for selecting its DMM unit to the Exchange (Rule
103B(III)(B)).\25\
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    \25\ Rule 103B(VI)(A)(1) also sets out an abbreviated DMM
allocation process for listing companies that are a spin-off of or a
company related to a listed company or one that lists a Related
Security as defined in Rule 103B(VI)(A)(2).
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    If the issuer proceeds under the first option, the listing company
must select all DMM units to be interviewed from the pool of DMM units
eligible to participate in the allocation process.\26\ A DMM unit's
eligibility to participate in the allocation process is based on
objective criteria and determined at the time the interview is
scheduled.
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    \26\ See Rule 103B(III)(A)(1).
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    Within five business days after the issuer selects the DMM units to
be interviewed, the issuer meets with representatives of each of the
DMM units. At least one representative of the listing company must be a
senior official of the rank of Corporate Secretary or above of that
company. Additionally, no more than three representatives of each DMM
unit may participate in the meeting, each of whom must be an employee
of the DMM unit, and one of whom must be the individual DMM who is
proposed to trade the company's security, unless that DMM is
unavailable to appear, in which case a telephone interview is
permitted.\27\
---------------------------------------------------------------------------

    \27\ See Rule 103B(III)(A)(2)(b).
---------------------------------------------------------------------------

    Once a DMM unit is selected, the individual DMM assigned to the
security through the Rule 103B process must remain the assigned DMM for
at least one year from the date that the issuer begins trading on the
Exchange. The DMM unit may designate a different individual DMM within
the year by notifying the Exchange of the change and setting forth the
reasons for the change with the consent and approval of the issuer.\28\
---------------------------------------------------------------------------

    \28\ See Rule 103B(III)(C).
---------------------------------------------------------------------------

    Rule 103B(VI)(H) sets forth the allocation sunset policy, which
provides that allocation decisions remain effective for initial public
offerings that list on the Exchange within eighteen months of such
decision and that, in situations where the proposed individual DMM is
no longer with the selected DMM unit, the company may choose to stay
with the selected DMM unit or be referred to allocation and may
interview a replacement individual DMM prior to making that decision.
Rule 104
    Rule 104 sets forth the obligations of DMMs and DMM units. Under
Rule 104(a), DMMs registered in one or more securities traded on the
Exchange are required to engage in a course of dealings for their own
account to assist

in the maintenance of a fair and orderly market insofar as reasonably
practicable.
    Rule 104(a)(1) enumerates the specific responsibilities and duties
of a DMM, including: (1) maintenance of a continuous two-sided quote,
which mandates that each DMM maintain a bid or an offer at the National
Best Bid (``NBB'') and National Best Offer (``NBO'') (together, the
``NBBO'') for a certain percentage of the trading day,\29\ and (2) the
facilitation of, among other things, openings, re-openings, and the
close of trading for the DMM's assigned securities, all of which may
include supplying liquidity as needed.\30\ The Exchange provides access
to aggregate order information in order for DMMs and DMM units to
comply with the requirement to facilitate openings, reopenings, and the
close of trading.\31\
---------------------------------------------------------------------------

    \29\ See Rule 104(a)(1). Specifically, for securities that are
not ETPs and that have a consolidated average daily volume of less
than one million shares per calendar month, a DMM unit must maintain
a bid or an offer at the NBBO for at least 15% of the trading day.
For securities that are not ETPs with a consolidated average daily
volume equal to or greater than one million shares, a DMM unit must
maintain a bid or an offer at the NBBO for at least 10% or more of
the trading day. Finally, for ETPs, a DMM unit must maintain a bid
or an offer at the NBBO for at least 25% of the trading day. Reserve
or other hidden orders entered by the DMM would not be included in
the inside quote calculations. See id. at (a)(1)(A).
    \30\ See id. at (a)(2)-(3). Rule 104(e) further provides that
DMM units must provide contra-side liquidity as needed for the
execution of odd-lot quantities eligible to be executed as part of
the opening, reopening, and closing transactions but that remain
unpaired after the DMM has paired all other eligible round lot sized
interest.
    \31\ See id. DMMs utilize access to aggregate order information
in order to be able to publish a non-mandatory manual closing
imbalance beginning one hour before the scheduled end of Core
Trading Hours up to the Closing Auction Imbalance Freeze Time under
Rule 7.35B(d)(2). Since the Exchange is eliminating access to such
aggregate order information intraday, it would be unavailable to
DMMs at the close, and the Exchange accordingly proposes to delete
Rule 7.35B(d)(2) and the clause ``and if published, Manual Closing
Imbalance'' in Rule 7.35B(e)(1)(B).
---------------------------------------------------------------------------

    Rule 104(c) imposes an affirmative obligation on DMMs to maintain,
insofar as reasonably practicable, a fair and orderly market on the
Exchange in assigned securities, including maintaining price continuity
with reasonable depth and trading for the DMM's own account when lack
of price continuity, lack of depth, or disparity between supply and
demand exists or is reasonably to be anticipated.
    Rule 104(d) governs transactions by DMMs and provides that
transactions on the Exchange by a DMM for the DMM's account must be
effected in a reasonable and orderly manner in relation to the
condition of the general market and the market in the particular
security.
    Rule 104(d)(1)(A) defines a DMM unit transaction that is a purchase
(sale) that reaches across the market \32\ to trade as the contra-side
to the Exchange published offer (bid), and is priced above (below) the
last differently-priced trade on the Exchange and above (below) the
last differently-priced published offer (bid) on the Exchange as an
``Aggressing Transaction.'' Rule 104(d)(1)(B) prohibits Aggressing
Transactions during the last ten minutes prior to the scheduled close
of trading that would result in a new high (low) price for a security
on the Exchange for the day at the time of the DMM's transaction,
unless such transaction would match another market's better bid or
offer price, bring the price of that security into parity with an
underlying or related security or asset, or would liquidate or decrease
the position of the DMM unit \33\ (``Prohibited Transactions'').
---------------------------------------------------------------------------

    \32\ A DMM reaches across the market when the DMM buys from the
NYSE offer or sells to the NYSE bid.
    \33\ The phrase ``the position of the DMM unit'' in Rule
104(d)(1)(B) means the DMM unit's inventory of securities exclusive
of pending, unexecuted orders and has the same meaning as ``net
position information in DMM securities'' in Rule 98(c)(5). See Rule
104(d)(1)(B)(i). Current Rule 104(d)(1)(B)(i) incorrectly refers to
subsection (g)(1)(B), which the Exchange proposes to correct.
---------------------------------------------------------------------------

    Rule 104(d)(2) provides that the DMM unit's obligation to maintain
a fair and orderly market may require re-entry on the opposite side of
the market after effecting one or more transactions and that such re-
entry should be commensurate with the size of the transaction(s) and
the immediate and anticipated needs of the market, with two provisos:
     First, following an Aggressing Transaction, other than an
Aggressing Transaction involving an ETP, the DMM unit must re-enter the
opposite side of the market at or before the applicable Price
Participation Point (``PPP'') for that security commensurate with the
size of the Aggressing Transaction.
     Second, following an Aggressing Transaction, other than an
Aggressing Transaction involving an ETP, that (1) is 10,000 shares or
more or has a market value of $200,000 or more and (2) exceeds 50% of
the published offer (bid) size, the DMM unit must immediately re-enter
the opposite side of the market at or before the applicable PPP for
that security commensurate with the size of the Aggressing Transaction.
    Rule 104(e) describes the Trading Floor functions of DMMs.
Specifically, Rule 104(e)(i) codifies the following DMM Trading Floor
functions:
     maintaining order among Floor brokers manually trading at
the DMM's assigned panel;
     bringing Floor brokers together to facilitate trading,
which may include the DMM as a buyer or seller;
     assisting a Floor broker with respect to an order by
providing information regarding the status of a Floor broker's orders,
helping to resolve errors or questioned trades, adjusting errors, and
cancelling or inputting Floor broker agency interest on behalf of a
Floor broker; and
     researching the status of orders or questioned trades on
his or her own initiative or at the request of the Exchange or a Floor
broker when a Floor broker's handheld device is not operational, when
there is activity indicating that a potentially erroneous order was
entered or a potentially erroneous trade was executed, or when there
otherwise is an indication that improper activity may be occurring.\34\
---------------------------------------------------------------------------

    \34\ See Rule 104(e)(i)(A)-(D).
---------------------------------------------------------------------------

    Rule 104(e)(ii) provides that the Exchange may make systems
available to a DMM at the DMM unit post that display aggregate buying
and selling interest and post-trade information about securities in
which the DMM is registered. Rule 104(e)(ii) prohibits a DMM from using
any information provided by Exchange systems pursuant to subparagraph
(ii) in a manner that would violate Exchange rules or federal
securities laws or regulations.
    Rule 104(e)(iii) permits DMMs to provide market information
available to the DMM at the post as described in subparagraph (e)(ii)
to respond to Floor broker inquiries in the normal course of business,
or visitors to the Trading Floor for the purpose of demonstrating
methods of trading, provided that a Floor broker may not submit an
inquiry pursuant to Rule 104(e)(iii) by electronic means and the DMM
may not use electronic means to transmit market information to a Floor
broker in response to a Floor broker's inquiry pursuant to subparagraph
(e)(iii).
    Rule 104(f) governs temporary DMMs and provides that, in the event
of an emergency, such as the absence of the DMM, or when the volume of
business in a particular stock or stocks is so great that it cannot be
handled by the assigned DMMs without assistance, a Trading Official may
authorize a member of the Exchange who is not registered as a DMM in
such stock or stocks, to act as a temporary DMM for that day only.
    Finally, Rule 104(g) sets forth the obligation of DMMs to
communicate with their listed issuers. Pursuant to Rule 104(g)(1), on
at least a quarterly basis, each DMM unit must communicate with one or
more senior

officials of each issuer of listed securities in whose securities DMMs
associated with the DMM unit are registered, with the exception of
ADRs. Rule 104(g)(2) provides that the periodic communication
requirement can be met by either in-person meetings, telephone calls,
or written communications. Rule 104(g)(2)(B) prohibits an employee of a
DMM unit from communicating with a listed issuer contact from the
Trading Floor via telephone, but states that such an employee may,
while on the Trading Floor, use written electronic communications to
communicate with a listed issuer contact from the Trading Floor,
subject to Rule 36.31.\35\
---------------------------------------------------------------------------

    \35\ Rule 104A contains various DMM trade and data reporting
requirements carried over from the specialist era, all of which the
Exchange proposes to delete as duplicative of Exchange and SEC books
and recordkeeping requirements. Rule 106A provides that when a
member temporarily takes the book of a DMM or an order from another
member, he or she shall, while he or she is in possession of that
book or order and for the remainder of the day, stand in the same
relationship to the book or order as the DMM or other member. The
Exchange proposes to delete Rule 106A as obsolete.
---------------------------------------------------------------------------

Proposed Rule Changes
    The Exchange proposes to amend Rule 104 to eliminate DMM access to
aggregate order information intraday with one limited exception for
reopenings and limit the DMMs' ability to utilize and disseminate this
information when it is provided by the Exchange. Henceforth, DMM access
to aggregate order information to facilitate the Closing Auction would
be only as needed and outside Core Trading Hours. In addition, the
Exchange proposes amendments to Rule 76 that would permit the Exchange
to announce manual cross transactions, thereby removing any involvement
by individual DMMs in these transactions.
    Based on these changes to Rules 104 and 76, the Exchange believes
it would be appropriate to remove the restrictions on a DMM unit's
communications from the Trading Floor in Rule 36 and the specific Rule
98 restrictions arising from the presence of Floor-based non-public
order information. The Exchange notes that DMM units and DMMs would
remain subject to the Rule 98 prohibitions against disadvantaging
customers or other market participants by improperly capitalizing on
material, non-public information from any source. DMM unit operations
together with upstairs customer-facing and other operations would
continue to need to protect customer information consistent with
existing obligations that also apply to equity market makers registered
on other exchanges.
    In addition, the Exchange proposes to redefine an Aggressing
Transaction in Rule 104 as a purchase (sale) that reaches across the
market to trade as the contra-side of the Exchange published bid
(offer) priced above (below) the last consolidated trade. As discussed
below, given that the majority of volume in Exchange listed securities
is effectuated away from the Exchange, utilizing the last consolidated
trade as the benchmark for DMM transactions that reach across the
market would provide a more meaningful measure of the market for the
underlying security and the aggressiveness of the DMM transaction. The
Exchange would make DMM re-entry on the opposite side of the market at
or before the applicable PPP for that security more deterministic by
requiring re-entry to be at the same size as the Aggressing
Transaction. The Exchange also proposes to eliminate the prohibition on
DMMs engaging in Aggressing Transactions during the last ten minutes
prior to the scheduled close of trading.
    The Exchange has long maintained that, in today's marketplace,
primarily electronic DMM market-making activity is not materially
different from market-making on other exchanges. The Exchange believes
that the proposed changes provide a framework for DMM units to operate
more like other market makers while retaining the DMM's unique
responsibilities to the marketplace and continuing to guard against the
misuse of material, non-public information. As part of this effort to
reduce barriers to entry for member organizations interested in
operating a DMM unit on the Trading Floor, the Exchange proposes an
introductory program that would permit eligible member organizations to
make markets in ETPs remotely as DMM units for an initial 12-month ramp
up period before transitioning to become fully operational Floor-based
DMM units. The Exchange believes this initiative would attract new DMM
units to the Exchange and enhance competition among existing and
prospective DMM units.
Rule 104
    Rule 104 forms the cornerstone of DMM and DMM unit responsibilities
and obligations when trading assigned listed securities. The Exchange
proposes to shift the focus of the rule in places from the performance
of individual DMMs assessed by reference to qualitative criteria to the
DMM unit's performance to be assessed by a combination of qualitative
measures and fee-based incentives. This shift would also be reflected
in the elimination in Rule 103B of the requirement that issuers
interview the individual DMM proposed to trade their security as part
of the allocation process and the requirement that the same individual
DMM trade the new listing for one year from the date the issuer begins
trading on the Exchange. The Exchange would also make technical and
clarifying changes to Rule 104.
    The Exchange believes that the proposed change would modernize Rule
104 by removing the rule's emphasis on the individual Floor-based
market maker. The Exchange believes that this is a vestige of the
specialist system, where the conduct and skill of the individual trader
assigned to a listed security were paramount considerations in a manual
trading environment. In a marketplace dominated by electronic trading,
Rule 104 should instead focus on the obligations and responsibilities
of the DMM unit, which as the license holder is the responsible broker-
dealer.\36\ The proposed change is not intended to dilute any of the
standards applicable to individual DMMs and other persons associated
with the DMM unit, as these persons would continue to have the same
duties and obligations as a member organization under the Exchange's
rules.\37\
---------------------------------------------------------------------------

    \36\ See Rule 2(b)(i) (defining a member organization as a
registered broker or dealer); Rule 300(a) (providing that trading
licenses are issued to member organizations).
    \37\ See, e.g., Rule 0(b) (``The Exchange's Rules shall apply to
all member organizations and persons associated with a member
organization. Persons associated with a member organization shall
have the same duties and obligations as a member organization under
these Rules'').
---------------------------------------------------------------------------

    To effectuate these changes in Rule 104, the Exchange proposes to
add ``DMM unit'' and/or replace ``DMM'' with ``DMM unit'' in several
places in the rule, as follows:
     The title of the rule would be changed to ``Dealings and
Responsibilities of DMMs and DMM Units.''
     The first sentence of Rule 104(a) would obligate DMM units
to engage in a course of dealings for their own account to assist in
the maintenance of a fair and orderly market insofar as reasonably
practicable, and the last sentence of Rule 104(a) would refer to the
responsibilities and duties of a DMM unit.
     The first sentence of Rule 104(a)(1)(B) would set forth
the applicable pricing obligations during the trading day that a DMM
unit must adhere to, and the Exchange also proposes conforming changes
in Rule 104(a)(1)(B)(i) governing bid and offer quotations and in the
last sentence of the rule.

     Rule 104(a)(2) would set forth the obligation to
facilitate transactions in DMM unit assigned securities during openings
and reopenings as required by Exchange rules.
     Rule 104(a)(3) would set forth the DMM unit's obligation
to facilitate transactions in their assigned securities during the
close of trading.
     The heading to Rule 104(d) would be changed to
``Transactions by DMM Units'' with one conforming change in Rule
104(d)(1) and one in Rule 104(d)(1)(B).
    The Exchange proposes the following additional changes to Rule 104.
Rule 104(a)
    The Exchange proposes to transpose the current qualitative criteria
for assessing maintenance of a fair and orderly market from current
Rules 104(c)(2) and (c)(3) to Rule 104(a) with the following clarifying
changes:
     The Exchange proposes to replace ``implies'' with
``means'' and ``disparity'' with ``imbalance'' in the first sentence of
the text transposed from Rule 104(c)(2). As proposed, the sentence
would read ``The maintenance of a fair and orderly market means the
maintenance of price continuity with reasonable depth, to the extent
possible consistent with the ability of participants to use permitted
DMM order types, and the minimizing of the effects of temporary
imbalances between supply and demand.''
     In the second sentence of the text transposed from Rule
104(c)(2), the Exchange would replace ``it is commonly desirable that''
with ``should.'' As proposed, the sentence would read ``In connection
with the maintenance of a fair and orderly market, DMM units should
engage to a reasonable degree under existing circumstances in dealings
for the DMM unit's own account when lack of price continuity, lack of
depth, or disparity between supply and demand exists or is reasonably
to be anticipated.''
     In the second full paragraph of proposed Rule 104(a), the
Exchange would add ``minimum'' before ``Depth Guidelines'' in the first
sentence of text transposed from Rule 104(c)(3). Further, the Exchange
would add the following clause to the end of the third sentence of the
second full paragraph: ``provided, however, compliance with the
suggested minimum Depth Guidelines does not by itself establish
maintenance of a fair and orderly market.''
    As proposed, Rule 104(a) would reflect the responsibility of the
DMM unit for the overall quality of markets in its registered
securities, which would include the activities of its employee DMMs.
    The Exchange would add a subheading to Rule 104(a)(1)(A) titled
``Two-Sided Obligation'' to mirror the subheading in Rule 104(a)(1)(B).
    In Rule 104(a)(1)(B)(i) governing bid and offer quotations, the
Exchange would replace a reference to paragraph (1)(A) of the rule with
the defined term Two-Sided Obligation.
    As noted, Rule 104(a)(2) sets forth the obligation to facilitate
transactions in assigned securities during openings and reopenings,
including the obligation to supply liquidity as needed, and Rule
104(a)(3) sets forth the obligation to facilitate the close of trading.
Both rules provide that DMM and DMM unit algorithms will have access to
aggregate order information in order to comply with the respective
requirements.
    The Exchange proposes to eliminate intraday DMM and DMM unit access
to aggregate order information with one limited exception for
reopenings.\38\ As proposed, in order to facilitate openings and
reopenings pursuant to Rule 104(a)(2), DMMs and DMM units would only
have access to non-public aggregate order information as needed and
only (1) before the open or until a security opens for trading, or (2)
while trading is halted and only until a security is reopened for
trading. In order to facilitate the close of trading, as proposed, DMMs
and DMM units would only have access to non-public aggregate order
information as needed and only after the end of Core Trading Hours.\39\
---------------------------------------------------------------------------

    \38\ As a practical matter, all information available only to
the DMM prior to the opening would also be included in the opening
imbalance feed.
    \39\ As previously noted, the information available at each
price point is unavailable in the Auction Imbalance Information,
although this information is used to calculate the Continuous Book
Clearing Price, which is disseminated via Auction Imbalance
Information. DMM unit algorithms are not currently provided access
to such non-public information until the beginning of Core Trading
Hours for the open and until after the end of Core Trading Hours for
the close, and only in connection with messaging for the DMM to
electronically facilitate the close of trading, and the Exchange
proposes this would continue. As a practical matter, the information
currently available to DMMs would be restricted as proposed. See
also note 6, supra.
---------------------------------------------------------------------------

    A new proposed Rule 104(a)(4) would transpose current Rule
104(e)(ii) and replace ``aggregated buying and selling interest'' with
``aggregate order information.'' The Exchange would also add
specifically with respect to aggregate order information that, except
as provided in proposed Rule 104(a)(5) described below, such
information may only be used by DMMs and DMM units to satisfy the
responsibilities and duties set forth in Rule 104(a)(1)-(3), and may
only be disseminated to employees of DMM units, and the individuals
responsible for direct supervision of DMM units.
    In addition, the Exchange proposes a new Rule 104(a)(5) based on
current Rule 104(e)(iii) that would permit the DMM to provide the
information described in proposed Rule 104(a)(4) in response to an
inquiry from a Floor broker, provided that aggregate order information
can only be provided in response to an inquiry before the open or until
a security opens for trading, or while trading is halted and only until
a security is reopened for trading. The Exchange further proposes to
retain the current requirements that Floor broker inquiries be made by
electronic means and that the DMM use electronic means to transmit
market information to a Floor broker in response to a Floor broker's
inquiry pursuant to this subparagraph (5).
Rule 104(c)
    Rule 104(c) sets forth the functions of DMMs. In addition to
transposing the text of Rule 104(c)(2) and (c)(3) to Rule 104(a)
without change (other than the non-substantive clarifying changes
described above), the Exchange proposes to add ``and DMM units''
following DMM in current Rule 104(c)(4) (proposed to be renumbered as
(c)(2)) to clarify that both DMMs and DMM units are designated as
market makers on the Exchange for all purposes under the Securities
Exchange Act of 1934 and the rules and regulations thereunder.
    In addition, the Exchange would delete Rule 104(c)(5) in its
entirety as obsolete. Rule 104(c)(5) was added in anticipation of the
listing of ETPs on the Trading Floor in order to provide the Exchange
with adequate time to calculate the appropriate Depth Guidelines for
ETPs based on actual trading data. The first ETP listed in November
2022 and appropriate Depth Guidelines were implemented that same year,
rendering Rule 104(c)(5) obsolete.
Rule 104(d)
    Rule 104(d)(1)(A) defines an Aggressing Transaction as a DMM unit
transaction that (1) is a purchase (sale) that reaches across the
market to trade as the contra-side to the Exchange published offer
(bid), and (2) is priced above (below) the last differently-priced
trade on the Exchange and above (below) the last differently-priced
published offer (bid) on the Exchange. Pursuant to Rule 104(d)(B), a
DMM transaction in the last ten minutes of trading is prohibited if it
is an Aggressing Transaction, i.e., reaches across the market, and, as
a result,

creates a new Exchange high or low, unless the transaction would match
another market's better bid or offer price, bring the price of that
security into parity with an underlying or related security or asset,
or would liquidate or decrease the position of the DMM unit.
    First, the Exchange proposes to modify the second leg of the
definition of Aggressing Transaction. As proposed, an Aggressing
Transaction would be (1) a purchase (sale) that reaches across the
market to trade as the contra-side to the Exchange published offer
(bid) that (2) is priced above (below) the last consolidated sale. The
Exchange believes that the last consolidated trade is a more meaningful
benchmark of the market for the underlying security since most intraday
trading in Exchange listed securities occurs away from the NYSE.
Assessing whether a trade that reaches across the market by reference
to whether that transaction aggressively moves the price above (below)
the last consolidated trade rather than above (below) the last trade on
the Exchange and above (below) the last differently-priced published
bid or offer on the Exchange could thus result in identifying a greater
number of potentially disruptive DMM unit transactions. Moreover, these
transactions would remain subject to the DMM unit re-entry obligations
on the opposite side of the market set forth in Rule 104(d)(2) and
which this proposal does not seek to change.
    Second, the Exchange proposes to delete Rule 104(d)(B) to eliminate
Prohibited Transactions.
    Prohibited Transactions originated as a rule intended to prevent
Exchange specialists from setting a price in the final ten minutes of
trading to advantage the specialist's proprietary position in a
security.\40\
---------------------------------------------------------------------------

    \40\ In 2018, the Exchange replaced four types of DMM
transactions based on the DMM's position (Neutral, Non-conditional,
Conditional and Prohibited) with a single, enhanced DMM unit
transaction called an ``Aggressing Transaction'' that retained
specific re-entry requirements and was prohibited during the last
ten minutes of trading if the transaction resulted in a new Exchange
high or low price of the day, with exceptions for matching another
market's better bid or offer, bringing the price of that security
into parity with an underlying or related security or asset, or
liquidating or decreasing the DMM unit's position. See Securities
Exchange Act Release No. 54860 (December 1, 2006), 71 FR 71221,
71229 (December 8, 2006) (SR-NYSE-2006-76).
---------------------------------------------------------------------------

    As noted, over the years, the increasingly automated logic for
executions has severely circumscribed the amount of non-public
information that is only available to DMMs, and the Exchange has
significantly enhanced the transparency of its marketplace.\41\ Any
information advantage that DMMs may have had with respect to orders
from Floor brokers--even after such interest was included in the
Closing Auction Imbalance Information--was eliminated in 2020 once
Floor brokers could no longer represent verbal interest intended for
the Closing Auction and were required to enter orders for the Closing
Auction electronically during Core Trading Hours.\42\ Moreover, DMM
unit algorithms only have access to the same data feeds that are
available to the public and, with the proposed elimination of the
additional non-public information available to Floor-based DMMs, DMMs
would have no informational advantage, however slight, in the Closing
Auction. Like all other market participants, DMMs would only be able to
see the imbalance but not the orders that are moving the imbalance in a
given direction, and would have absolutely no information regarding the
identity of the participants in the Closing Auction. Significantly,
DMMs are now also constrained in pricing the Closing Auction. Pursuant
to Rule 7.35B(g)(2), the Auction Price that the DMM is responsible for
determining must be at or between the last-published Imbalance
Reference Price and the last-published non-zero Continuous Book
Clearing Price.
---------------------------------------------------------------------------

    \41\ See note 6, supra.
    \42\ See Securities Exchange Act Release No. 92480 (July 23,
2021), 86 FR 40885 (July 29, 2021) (SR-NYSE-2020-95) (Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 2, To Make
Permanent Commentaries to Rule 7.35A and Commentaries to Rule 7.35B
and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47).
---------------------------------------------------------------------------

    Elimination of the availability of aggregate order information to
DMMs marks the culmination of the Exchange's efforts to remove any
suggestion of informational asymmetry going into the Closing Auction.
As a result of the proposal, there would be no question that DMMs would
be on the same informational footing as all other market participants
at this crucial point in the trading day and would, like them, be
trading without access to non-public information that individual DMMs
could use to potentially disadvantage other market participants or
condition the market. DMMs engaging in Aggressing Transactions in the
final 10 minutes of the trading day would moreover be at the risk of
the market and would remain subject to the requirement to re-enter on
the opposite side of the market at or before the applicable PPP for the
security, including immediate re-entry at or before the applicable PPP
if the DMM transaction is of block size or greater. The re-entry
requirement is designed to dampen the volatility that can ensue from a
DMM quoting aggressively in their assigned securities throughout the
trading day. The proposal would retain the re-entry requirement
following an Aggressing Transaction and make it stronger and more
deterministic by requiring the DMM unit to re-enter on the opposite
side in the same size as the Aggressing Transaction.\43\ The Exchange
believes the re-entry requirement represents a significant
differentiator between DMMs and other market makers who do not have
similar stabilizing re-entry requirements.
---------------------------------------------------------------------------

    \43\ For instance, a DMM unit engaging in a 500 share Aggressing
Transaction would be required to re-enter on the opposite side at or
before the PPP in the same quantity. To effectuate this change,
``commensurate with'' the size of the Aggressing Transaction in Rule
104(d)(2)(A) would be changed to ``in the same size'' as the
Aggressing Transaction. Given this proposed bright line re-entry
requirement, the Exchange would delete the heading to Rule
104(d)(3), the last sentence of current Rule 104(d)(3)(A), and all
of Rule 104(d)(3)(B). The first sentence of current Rule
104(d)(3)(A) describing the issuance of PPP Guidelines by the
Exchange would become new Rule 104(d)(2)(C).
---------------------------------------------------------------------------

    There may be a variety of reasons related to the DMM unit's
obligations to the marketplace for a DMM unit to quote aggressively in
assigned securities at the close. For instance, a DMM may want to add
to an existing proprietary position in anticipation of having to add
liquidity on the other side during the Closing Auction--in other words,
in anticipation of facilitating the close. If Prohibited Transactions
are retained, a DMM would continue to be prohibited from engaging in
this type of desirable activity in the final 10 minutes of the trading
day if adding to the DMM unit's position results in a new high or low
price on the Exchange. Indeed, such a restriction could in fact
negatively impact the amount of liquidity available to investors on the
Exchange in securities in which the DMM unit has a position. The
Exchange accordingly believes that, in light of the proposal,
restricting DMM unit trading going into the Closing Auction no longer
serves any meaningful regulatory or other purpose and that there would
thus no longer be any reason to treat DMM units differently from other
similarly situated market makers at the end of the trading day.
    The Exchange currently employs a suite of surveillances for trading
by DMM units and other market participants intraday and in and around
the close of trading and actively examines trading patterns for
potential violations, including appropriate re-entry on the opposite
side of the Aggressing Transaction. The Exchange

believes that its rules are reasonably designed to prevent DMMs from
inappropriately influencing or manipulating the close. These rules
would not change as a result of the proposal and would continue to
require an evaluation of DMM unit trading activity, and in particular
transactions for the DMM unit's own account, from the standpoint of the
affirmative and other obligations to the marketplace, including the
responsibility to ensure that openings and reopenings are fair and
orderly, reflecting a professional assessment of market conditions at
the time, and appropriate consideration of the balance of supply and
demand as reflected by orders represented in the market.\44\
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    \44\ As noted, the Exchange supplies DMMs with suggested Depth
Guidelines for each security in which a DMM is registered, and DMMs
are expected to quote and trade with reference to the Depth
Guidelines. See Rule 7.35A.
---------------------------------------------------------------------------

    For all the foregoing reasons, the Exchange believes that deletion
of Rule 104(d)(B) would eliminate restrictions on DMM units that are no
longer necessary given the evolution of trading on the Exchange,
thereby promoting additional liquidity for investors around the close
of trading.
Rules 104(e) and (f)
    The Exchange proposes to delete Rules 104(e) (Trading Floor
Functions of DMMs) and (f) (Temporary DMMs).
    Rule 104(e) as noted sets forth certain permitted DMM Trading Floor
functions, including maintaining order among Floor brokers manually
trading at the DMM's assigned panel (Rule 104(e)(i)(A)); bringing Floor
brokers together to facilitate trading, which may include the DMM as a
buyer or seller (Rule 104(e)(i)(B)); assisting Floor brokers by
providing information regarding the status of a Floor broker's orders,
helping to resolve errors or questioned trades, adjusting errors, and
cancelling or inputting Floor broker agency interest on behalf of a
Floor broker (Rule 104(e)(i)(C)); and researching the status of orders
or questioned trades on the DMM's own initiative or at the request of
the Exchange or a Floor broker under various circumstances. Each of
these historical functions is less important in today's marketplace
and, to the extent necessary, can be performed by Exchange staff rather
than by DMMs. In addition, as set forth in Rule 104(e)(ii), the
Exchange makes available to DMMs aggregated buying and selling interest
and post-trade information in the securities in which the DMM is
registered in order to facilitate these Trading Floor functions. As
discussed above, the Exchange proposes a new Rule 104(a)(4) to retain
the substance of current Rule 104(e)(ii) and a new Rule 104(a)(5) to
permit DMMs to provide aggregate order information only in connection
with a Floor broker inquiry before the open or until a security opens
for trading, or while trading is halted and only until a security is
reopened for trading, in connection with the facilitation of the
opening or reopening of a security. The current restrictions on
electronic submission of an inquiry and electronic transmission of
market information in response to the inquiry would also be retained.
    The Exchange would delete Rule 104(f) governing temporary DMMs as
obsolete. The rule has rarely been invoked. Moreover, the Exchange's
rules provide for relief DMMs, which would be available during the
trading day to ensure no interruption of the continuity of DMM service
to the market.
Rule 104(g)
    As noted, Rule 104(g) sets forth the obligation of DMMs to
communicate with their listed issuers. In view of the proposed changes
to Rule 36 discussed below, permitting communications with any
individual, including employees from listed issuers, from the Trading
Floor, consistent with Rule 98, the Exchange proposes conforming
changes to Rule 104(g)(2)(B), which currently prohibits communications
with a listed issuer contact from the Trading Floor via telephone and
limiting communication from the Trading Floor to written electronic
communications. As proposed, Rule 104(g)(2)(B) would permit employees
of a DMM unit to communicate with a listed issuer contact from the
Trading Floor via telephone or written electronic communications,
consistent with Rule 36.30 and Rule 98. Current Rule 104(g)(2)(A)
requires that employees of a DMM unit comply with the requirements of
Rule 98 with respect to the information that may be shared with the
listed issuer contact during the required communications, which would
include communications from the Trading Floor. Rule 36.30 as proposed
also requires DMM units to establish policies and procedures reasonably
designed to ensure that use of telephones and alternative communication
devices, as well as permitted communications devices, are consistent
with all SEC rules and Exchange rules. Taken together, these
restrictions would require DMM units to reasonably ensure that
communications with listed issuer contacts from the Trading Floor are
restricted to information that is permitted by the federal securities
laws and Exchange rules.
    Rule 104(g) would become new Rule 104(e) and the numbering would be
removed from proposed Rule 104(e)(2).
Rule 76
    The Exchange proposes to modernize the way Floor brokers execute
cross transactions on the Trading Floor. Rather than perpetuating the
current practice of a Floor broker verbally announcing the cross trade
at the post/panel of the DMM unit for the subject security and having
the DMM acknowledge the Floor broker announcement, the Exchange
proposes to undertake these functions, thereby eliminating any
interaction between a Floor broker and a DMM during cross transactions.
The proposed change is consistent with and complements the elimination
of the remaining intraday DMM Trading Floor functions set forth in Rule
104, described above.
    As proposed, Floor brokers entering a cross transaction into
Exchange systems would activate a 20-second timer as occurs today, with
the difference that once the 20-second period starts, the Exchange
would announce the proposed cross transaction in place of the current
verbal announcement at the DMM unit post/panel. The Exchange believes
that the proposal would thereby remove any potential for individual
DMMs to interact with Floor brokers in connection with these
transactions.
    In today's marketplace, cross transactions are negotiated upstairs
by customers seeking a primary market print or customers who do not
wish to have their orders handled by broker-dealers that also trade as
principal. As a practical matter, cross transactions are no longer
arranged at the point of sale by Floor brokers interacting with other
brokers and the DMM in a physical trading crowd. In the current
environment, verbally announcing a proposed cross transaction at a
post/panel means announcing it to the DMM and any other Floor brokers
that happen to be nearby. As proposed, the Exchange would announce the
cross transaction to all Floor-based participants. If there is interest
in response to the Exchange announcement of the cross trade, the Floor
Broker would still be required to trade with such interest on behalf of
the applicable customer order(s), as is the case today. Similarly, if
the original terms of the proposed cross transaction cannot be met
because other Floor-based members trade with a portion of either the
proposed bid or offer and the Floor Broker cannot complete the proposed
cross transaction in the size or price entered into Exchange systems,
the

originally-entered proposed cross transaction would be cancelled, as is
also the case today.
    To effectuate the proposed rule changes, the Exchange would delete
``trading'' before ``Crowd'' in the second sentence of Rule 76.\45\ The
proposed change would have the effect of removing the restriction on
announcing a proposed cross transaction at the post/panel where the
security to be crossed is traded. The same change would be made in the
next to last sentence in Rule 76.10. It should be noted that an
Exchange announcement of a proposed cross transaction to the Crowd
would be consistent with Rule 70.30.\46\
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    \45\ The Exchange also proposes clarifying changes to replace
``member'' and ``he or she'' with ``Floor broker'' or ``the Floor
broker's'' in the first sentence of the rule.
    \46\ Rule 70.30 defines ``Crowd'' as the ``rooms on the Exchange
Floor that contain active posts/panels where Floor brokers are able
to conduct business constitute the Crowd. A Floor broker will be
considered to be in the Crowd if he or she is physically present in
one of these rooms.''
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    The Exchange proposes further conforming changes to delete ``from
their wireless hand-held devices ('HHD')'' from the first sentence of
subsection (a) of Supplementary Material .10 and the three other
references to ``HHD'' therein. One reference to HHD would be replaced
by ``Floor broker.'' The other reference is part of the phrase ``using
the `print' key function in the HHD'' that would be deleted. The
Exchange also proposes to simplify the rule by replacing references to
``quote minder'' with ``Exchange systems.''
    Finally, the Exchange proposes to delete the preamble to Rule 76
providing that ``Supplementary Material .10 to this Rule is not
applicable to trading UTP Securities on the Pillar trading platform.''
Currently, Floor brokers can effect proposed cross transactions in both
Exchange listed and UTP securities pursuant to Rule 76, although the
Cross Function described in current Rule 76.10 is unavailable for cross
transactions in UTP Securities because UTP Securities are not assigned
to a trading post/panel with a DMM. Given the proposed elimination of
verbal announcements at the point of sale for Exchange-listed
securities, the Cross Function could also be utilized for UTP
securities. As proposed, Floor brokers executing cross transactions
under Rule 76.10 would follow the same procedures for Exchange-listed
and UTP securities, with the Exchange announcing cross transactions in
both cases.
    The remaining aspects of the Crossing Function described in Rule
76.10 would remain unchanged.
Rule 36
    The Exchange proposes to combine current Rule 36.30 governing
installation and use of telephones at DMM unit posts on the Trading
Floor and current Rule 36.31 governing use of wired or wireless devices
such as computer terminals or laptops into a single, revised proposed
Rule 36.30 titled ``DMM Unit Telephones and Permitted Communications
Devices.'' \47\
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    \47\ In the heading, the Exchange would also add a missing space
between .30 and DMM and to delete ``Post Wires--''.
---------------------------------------------------------------------------

    The proposed changes would modernize DMM communications from the
Trading Floor by permitting DMM units to use any telephone registered
with the Exchange, including cellular or wireless telephones, and by
permitting wired or wireless devices, currently limited to
communications only with the system employing the algorithms and with
individual algorithms, to also communicate with persons off the Trading
Floor. Together with the proposed changes to Rule 104(g) governing
communications with listed issuers discussed above, the proposed
changes would enable DMMs to communicate from the Trading Floor with
any person off the Trading Floor, including individuals at listed
issuers, consistent with reasonable record-keeping and supervision
requirements and the Rule 98 requirements to maintain confidentiality
of non-public information about securities allocated to the DMM unit.
Current restrictions on communications with listed issuers during
specific time periods would no longer be necessary and would not be
carried forward.\48\
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    \48\ See Rule 36.31 (restricting DMM units from using a
Permitted Communications Device to communicate with a listed issuer
representative between 9:15 a.m. Eastern Time until the security
opens and beginning 15 minutes before the scheduled closing time for
a security until the security is closed).
---------------------------------------------------------------------------

    The proposed changes are based in part on Rule 36.21 governing use
of cellular and wireless phones by Exchange Floor brokers, which were
in turn based on the rules governing use of cellular phones on the
options trading floors of the Exchange's affiliates NYSE Arca, Inc.
(``NYSE Arca''), and NYSE American LLC (``NYSE American''), and include
similar proposed safeguards on the use of such devices tailored for
DMMs.\49\
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    \49\ The Exchange's affiliates, NYSE Arca and NYSE American,
operate physical options trading floors in San Francisco and New
York, respectively. NYSE American Rule 902NY (Admission and Conduct
on the Options Trading Floor), governing phone use on the NYSE Amex
Options Trading Floor, was adopted in 2009 and modeled on NYSE Arca
Rule 6.2(h) (Admission to and Conduct on the Options Trading Floor).
Both exchanges allow Floor-based permit holders and their employees
to use personal phones on the options trading floors subject to
certain restrictions.
---------------------------------------------------------------------------

    To effect these changes, the Exchange would delete the current text
of Rule 36.30 (DMM Unit Post Wires) and Rule 36.31 (DMM Electronically
Transmitted Written Communications) in their entirety. The proposed
combined Rule 36.30 would contain separate sections (a) and (b)
governing ``Telephones'' and ``Other Permitted Communications
Devices,'' respectively.
    Proposed Rule 36.30(a) governing ``Telephones'' would have four
subsections.
    Proposed subsection (a)(1) would govern registration and provide
that DMM units must register, prior to use, any new telephone,
including cellular or wireless phones, to be used on the Trading Floor
by submitting a request in writing to the Exchange in an acceptable
format. In addition, proposed Rule 36.30(a) would provide that no DMM
unit may employ any alternative communication device (other than
telephones as described herein) on the Trading Floor without prior
Exchange approval.
    Proposed subsection (a)(2) would govern functionality and provide
that when using a registered telephone or alternative communication
device on the Trading Floor, a DMM may engage in direct voice
communication to an off-Floor location with any individual with whom
telephone communications are permitted under Rule 98. Similarly,
consistent with the restriction in current Rule 36.30, proposed Rule
36.30(b) would provide that registered telephones or alternative
communication devices used by DMMs on the Trading Floor would not be
used for the purpose of transmitting orders for the purchase or sale of
securities to a DMM or the DMM unit.
    Proposed subsection (a)(3) would set forth the DMM unit's
recordkeeping requirement for telephones registered for use on the
Trading Floor. As proposed, DMM units would be required to maintain
records of the use of telephones and all other approved alternative
communication devices, including logs of calls placed, in compliance
with Rule 440 and SEC Rules 17a-3 and 17a-4. The Exchange would reserve
the right to periodically inspect such records pursuant to Rule 8210,
which governs provision of information and testimony as well as
inspection and copying of books. The Exchange proposes to use the same
record retention language for telephones currently applicable to
Permitted Communications Devices.

    Finally, proposed subsection (a)(4) would require that DMM units to
establish policies and procedures reasonably designed to ensure that
use of telephones and alternative communication devices is consistent
with all SEC rules and Exchange rules.
    Proposed Rule 36.30(b) governing ``Permitted Communications
Devices'' would also have four subsections. Rule 36.30(b) would adopt a
similar structure to proposed Rule 36.30(a) and incorporate aspects of
current Rules 36.30 and .31 as described below.
    Proposed subsection (b)(1) would govern registration and provide
that DMM units would have to register, prior to use, any other wired or
wireless devices such as computer terminals or laptops used to
communicate with (1) persons off the Trading Floor, or (2) the system
employing the DMM unit's algorithms or with individual algorithms that
enable the DMM unit to activate or deactivate the system employing the
algorithms or an individual algorithm or change such system's pre-set
parameters, which the proposed rule would together define as a
``Permitted Communications Device.''
    Proposed subsection (b)(2) would govern functionality and provide
that a Permitted Communications Device may be used only for
communications between individuals or systems located at the DMM unit
on the Trading Floor and individuals or systems with whom
communications are permitted under Rule 98.
    Proposed subsection (b)(3) would set forth record-keeping
requirements and provide that DMM units must maintain records of the
use of Permitted Communications Devices, including all communications
sent to or from Permitted Communication Devices, in compliance with
Rule 440 and SEC Rules 17a-3 and 17a-4. The proposed rule would further
provide that such records would need to be maintained in a format
prescribed by the Exchange. Both of these requirements can be found in
the current rules. Proposed Rule 36.30(b)(3) would add the proviso that
the Exchange reserves the right to periodically inspect such records
pursuant to Rule 8210, consistent with proposed Rule 36.30(a)(3).
    Proposed subsection (b)(4) would provide that DMM units must
establish policies and procedures reasonably designed to ensure that
the use of Permitted Communications Devices are consistent with all SEC
rules and Exchange rules.
    Proposed Rule 36.30(c) would be titled ``General'' and would
incorporate the limitations in current Rule 36.21 and the rules of the
Exchange's options affiliates \50\ that the Exchange may deny, limit,
or revoke registration of any device used on the Trading Floor whenever
it determines, in accordance with the procedures set forth in Rule
9558,\51\ that use of such device is inconsistent with the public
interest, the protection of investors, or just and equitable principles
of trade, or such device has been or is being used to facilitate any
violation of the Act, as amended.
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    \50\ See Rule 36.21; see generally NYSE American Rule 902NY(i)
and NYSE Arca Rule 6.2(h).
    \51\ Rule 9558 relates to summary proceedings for actions
authorized by section 6(d)(3) of the Act.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to delete current Rule 36.30
prohibiting a non-member to list the telephone number of a line
terminating in a switchboard of the member or member organization in
any type of telephone directory under the name of the non-member as
obsolete. Similarly, the Exchange would not retain text in current Rule
36.30 permitting DMMs to use a telephone connection or order entry
terminal at the DMM unit's post to enter a proprietary order in an
Investment Company Unit (as defined in Rule 5.2(j)(3)) or a Trust
Issued Receipt (as defined in Rule 8.200) in another market center in
either a component security of an Investment Company Unit or Trust
Issued Receipt, or in an options or futures contract related to such
securities, as obsolete.
Rule 98
    Rule 98 was adopted in 1986, at a time when specialist firms, which
had been independent member-owned entities, increasingly became
affiliates of larger member organizations. Given the specialists'
position in the marketplace, Rule 98 required an organizational
separation between a specialist and its affiliates in order to
eliminate or control conflicts of interest between the business
activities of affiliates of the specialist and the specialist's
responsibilities to the market and to customer orders that the
specialist represented as agent.\52\ As noted above, in 2008, the
Exchange adopted a more flexible, principles-based approach to Rule 98
that, among other things, allowed DMM operations to be integrated into
better-capitalized member organizations; permitted a DMM unit to share
non-trading-related services with its parent member organization or
approved persons; and provided flexibility to member organizations and
their approved persons in conducting risk management of DMM operations.
---------------------------------------------------------------------------

    \52\ See Securities Exchange Act Release No. 23768 (Nov. 3,
1986), 51 FR 41183 (Nov. 13, 1986) (SR-NYSE-85-25).
---------------------------------------------------------------------------

    The Exchange now proposes revisions to Rule 98 to provide a
framework for DMM unit operations on the Trading Floor once DMMs would
only be provided access to aggregate order information in order to
facilitate openings and reopenings as needed and only (1) before the
open or until a security opens for trading, or (2) while trading is
halted and only until a security is reopened for trading, and to
facilitate the closing of trading on an as-needed basis and only
outside Core Trading Hours.\53\ Importantly, the proposed changes to
Rule 98 would in no way diminish the DMM unit's obligation to maintain
confidentiality and enforce written policies and procedures to prevent
the misuse of material, non-public information by DMM units and their
employees, as well as to ensure compliance with applicable federal laws
and regulations and Exchange rules, or the obligation of individual
DMMs to refrain from trading in DMM securities on the basis of
material, non-public information.
---------------------------------------------------------------------------

    \53\ See discussion of proposed revisions to Rule 104, supra.
---------------------------------------------------------------------------

    To effectuate these changes, the Exchange would make the following
changes to Rule 98:
     The definition of ``Floor-based non-public order'' in Rule
98(b)(4) would be deleted. The Exchange believes that the concept of
Floor-based non-public order information would become obsolete with the
proposed changes to Rules 76 and 104. The current definitions in (b)(5)
through (b)(7) would be renumbered.
     Current Rule 98(c)(2) would be broken into two parts. New
Rule 98(c)(2) would consist of the first sentence of the current rule
describing the requirements for member organizations seeking approval
to operate a DMM unit pursuant to Rule 98. New Rule 98(c)(3) would
consist of the remainder of current Rule 98(c)(2) with the following
text added as the first sentence: ``Member organizations operating a
DMM unit and DMMs shall not misuse material, non-public information.''
The Exchange believes the proposed change would strengthen the
Exchange's ability to address potential misuses of non-public
information from any source under the revised rule set.
     Current Rule 98(c)(3)(A) providing that a DMM unit shall
protect against the misuse of Floor-based non-public order information
and that only Floor-based employees of the DMM unit and individuals
responsible for the direct supervision of the DMM unit's Floor-

based operations may have access to Floor-based non-public order
information would be deleted. Current Rule 98(c)(3)(B) would become new
Rule 98(c)(4)(A).
     Current Rule 98(c)(3)(B)(iii) prohibiting, except as
provided for in Rule 36.30, communications by employees of a DMM unit
with individuals or systems responsible for making trading decisions
for related products or for away-market trading in their assigned DMM
securities, would be amended to only permit those communications
consistent with Rule 98. As noted, this change would be consistent with
the proposed changes to Rule 36.30.
     Current Rule 98(c)(3)(B)(iv) prohibiting employees of a
DMM unit from having access to customer information or the DMM unit's
position in related products would be revised to limit the prohibition
to customer order information only.\54\ The reference to the DMM unit's
position in related products would be removed consistent with the
proposed changes to current Rule 98(c)(3)(B)(iii) described above.
---------------------------------------------------------------------------

    \54\ The prohibition relates to customer order information, so
the Exchange would add ``order'' to the rule text. See Securities
Exchange Act Release No. 71837 (Apr. 1, 2014), 79 FR 19146 (Apr. 7,
2014) (SR-NYSE-2014-12).
---------------------------------------------------------------------------

     The Exchange would delete current 98(c)(3)(C) specifically
addressing Floor-based employees of a DMM unit that move to a location
off the Trading Floor or any person providing risk management oversight
or supervision of the Floor-based operations of the DMM unit that
becomes aware of Floor-based non-public order information as no longer
necessary given the elimination of the general availability of such
information to DMM units.
     The Exchange would similarly delete current 98(c)(3)(D)
providing that a DMM unit may make available to a Floor broker
associated or affiliated with an approved person or member organization
any information that the DMM would be permitted to provide under
Exchange rules to an unaffiliated Floor broker.
     The Exchange would delete current Rule 98(c)(5) requiring
member organizations to provide the Exchange with net position
information in DMM securities by the DMM unit and any independent
trading unit of which it is part based on the elimination of Prohibited
Transactions. The Exchange utilizes this data to assess Prohibited
Transactions, which would be deleted as discussed above. Rules 98(c)(6)
and (7) would be renumbered accordingly.
     The Exchange would amend Rule 98(e)(1) describing steps to
be taken in the event a DMM unit receives non-public information about
a security that is allocated to the DMM unit to delete the phrase
``from the member organization or approved person.'' The proposed
change does not privilege Floor-based non-public information and
reflects that non-public information can be received from any source.
In addition, the Exchange would make clear that the non-public
information referenced therein excludes aggregate order information
provided by the Exchange as set forth in Rule 104(a)(2) and (3).
     Subsection (3) of Rule 98(f) governing reporting
obligations would be amended to delete the reference to ``Floor-based''
non-public order information. As amended, Rule 98(f)(3) would require a
DMM unit to promptly report to the Exchange any failure to maintain the
confidentiality of non-public information.
     Rule 98(f)(4) would become new Rule 98(f)(3) and the
phrase ``Floor-based non-public order information'' in that subsection
would be replaced with ``non-public information.''
     Finally, the Exchange proposes to similarly replace
``Floor-based non-public order information'' with ``non-public
information'' in Rule 98(g).
Rule 103B
    Rule 103B(III) mandates that when an issuer selects a DMM unit by
interview, the individual DMM who is proposed to trade the company's
security must participate in the interview. Further, once a DMM unit is
selected, Rule 103B mandates that the individual DMM assigned to the
security must remain the assigned DMM for at least one year from the
date that the issuer begins trading on the Exchange.\55\
---------------------------------------------------------------------------

    \55\ See Rule 103B(III)(C). The DMM unit may designate a
different individual DMM within the year by notifying the Exchange
of the change and setting forth the reasons for the change with the
consent and approval of the issuer.
---------------------------------------------------------------------------

    The Exchange proposes to remove the requirement that listed issuers
must interview the individual DMM who is proposed to trade the
company's security and the related requirement that the individual DMM
assigned a proposed security must remain the assigned DMM for one year
from the date that the issuer begins trading on the Exchange, also
known as the ``DMM one-year obligation.'' Conforming changes would be
made to Rule 103B(VI)(H) to delete the contingency where the proposed
individual DMM is no longer with the selected DMM unit.
    In addition to providing the DMM unit with greater flexibility in
determining who should participate in the interview process, the
proposed changes to Rule 103B would deemphasize the importance of the
individual DMM in the issuer allocation process. The Exchange believes
that listed issuers will not be disadvantaged by the proposal and in
fact would benefit from the ability to develop broader relationships
with a DMM unit by not limiting trading in its listed security to a
single individual for any length of time.
DMM Unit Introductory Program in ETPs
    The Exchange proposes a new Rule 104B \56\ governing its DMM Unit
Introductory Program in ETPs (the ``Program'').\57\
---------------------------------------------------------------------------

    \56\ As noted, the Exchange proposes to delete Rule 104A as
obsolete. See note 35, supra. Current Rule 104B prohibiting DMMs (to
be changed to DMM units) from charging commissions for trades in
registered securities would become new Rule 104A.
    \57\ See Securities Exchange Act Release No. 92480 (July 23,
2021), 86 FR 40885 (July 29, 2021) (SR-NYSE-2020-95) (Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 2, To Make
Permanent Commentaries to Rule 7.35A and Commentaries to Rule 7.35B
and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47).
---------------------------------------------------------------------------

    As set forth in proposed Rule 104B(a), the Program would be open to
all member organizations in good standing registered as a non-DMM
Market Maker or an SLP on the Exchange. The Program is limited to ETPs
and is designed to provide eligible member organizations with a 12-
month ramp up period to becoming fully operational, Trading Floor-based
DMM units, which the Exchange believes would encourage competition
among existing DMM units and potential new entrants to the benefit of
investors.
    Proposed Rule 104B(b) would set forth the Program qualifications.
As proposed, eligible member organizations must meet the registration
and capital requirements set forth in Rule 103 and have:
     adequate technology to support all electronic DMM
obligations through the systems and facilities of the Exchange during
the initial 12-month period;
     MPIDs that identify to the Exchange trading activity in
assigned DMM securities;
     adequate trading infrastructure to support DMM unit
trading activity, which includes support and administrative staff to
maintain operational efficiencies in the Program; and
     a disciplinary history that is consistent with just and
equitable business practices.
    In addition, proposed Rule 104B(b) would provide that individuals
to be

registered as DMMs are required to be members of the Exchange and pass
the qualifying examination for DMMs. Applications for this examination
should be submitted to the Exchange.
    Proposed Rule 104B(c) would govern the application process for the
Program. As proposed, eligible member organizations would be required
to submit a Rule 103 application to the Exchange with all supporting
documentation in order to participate in the Program. Based on the
application, the Exchange would determine whether an applicant was
qualified for the Program based on proposed Rule 104B(b) and would
notify the applicant of its eligibility decision in writing. In the
event an application is disapproved, the proposed rule would provide
that an applicant may re-apply for the Program at least three calendar
months following notification by the Exchange of disapproval. Finally,
proposed Rule 104B(c) would provide that once approved for the Program,
the DMM unit along with their DMMs would subject to the obligations as
set forth in proposed Rule 104B(e) of this Rule during the 12-month
duration of the Program discussed below.
    Proposed Rule 104B(d) would govern voluntary withdrawal from the
Program. As proposed, at any time during the 12-month duration of the
Program, a DMM unit would be able to withdraw by giving notice to the
Exchange in writing. Such withdrawal would become effective when the
ETPs assigned to the withdrawing DMM unit are reassigned by the
Exchange, which as proposed would be done as soon as practicable but no
later than 30 days from the date the Exchange receives a withdrawal
notice. As further proposed, in the event the reassignment takes longer
than the 30-day period, the withdrawing DMM unit would have no
obligations under the proposed rule and would not be held responsible
for any matters concerning previously assigned ETPs upon termination of
the 30-day period. Rule 104B(d) mirrors the voluntary withdrawal
provisions for SLPs in current Rule 107B(e).
    Proposed Rule 104B(e) would govern the obligations of DMM units and
their DMMs. As proposed, during the 12-month Program period, DMM units
and their DMMs would be subject to the duties and responsibilities set
forth in Rules 104 and 98. Further, DMMs operating in the Program would
be permitted to conduct business for the DMM unit such as entering
orders and quotations for the account of the DMM unit during the
Program. Finally, DMMs would be permitted to conduct business only on
behalf of the DMM unit with which the DMM is associated.
    In addition, the proposed rule would provide that during the 12-
month Program period, DMM units would not be required to comply with
the requirements of Rule 35.20 \58\ regarding personnel available to
DMM units on the Trading Floor; would be ineligible to compete for new
listings pursuant to Rule 103B; and would be eligible for DMM unit
pricing incentives set forth in the Exchange's Price List unless
specifically provided therein.
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    \58\ Rule 35.20 requires each DMM unit to have (1) at least one
employee approved by the Exchange for admittance to the Floor for
every Post space assigned to the unit, and (2) an adequate number of
additional approved employees to provide proper service during the
trading day.
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    Finally, proposed Rule 104B(f) would set forth the additional
requirement that all DMM units in the Program must transition to fully
operational DMM units on the Trading Floor and meet all Exchange
requirements for DMM units within the 12-month period. As proposed, DMM
units failing to fully transition as provided herein would forfeit all
ETP symbols and would be ineligible to re-apply for the Program or
become DMM units for a 12-month period. Finally, the proposed rule
would provide that member organizations disputing Exchange
determinations under this Rule would be required to follow the appeal
procedures set forth in Rule 107B(k).\59\
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    \59\ Rule 107B(k) specifies the process for SLPs to appeal non-
regulatory Exchange penalties.
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* * * * *
    The Exchange believes that the proposal would enhance and modernize
DMM unit operations from the Trading Floor and remove barriers to entry
into the DMM unit business without diluting DMM unit obligations and
responsibilities. The result would enhance and encourage competition
among current and prospective DMM units, to the benefit of investors
and issuers.
    For all of the foregoing reasons, the Exchange believes that the
proposed rule change is consistent with the Act.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\60\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\61\ 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 regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \60\ 15 U.S.C. 78f(b).
    \61\ 15 U.S.C. 78f(b)(5).
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Rule 104
    The Exchange believes that the proposed changes to Rule 104 that
would eliminate DMM access to aggregate order information intraday with
one exception for reopenings and the traditional DMM Trading Floor-
based functions involving information sharing with other Floor-based
market participants would remove impediments to and perfect the
mechanism of a free and open market and a national market system by
permitting DMM units to function more like other proprietary market
makers. The proposed changes would continue to provide DMMs with tools
to comply with their obligations to supply liquidity as needed to
facilitate openings, reopening and the close of trading, while
eliminating the potential that DMMs on the Trading Floor could utilize
non-public information to disadvantage other market participants and
public customers, particularly during the Closing Auction. Further,
restricting DMM access to aggregate order information to an as needed
basis and while trading is halted and only until the security is
reopened would not be inconsistent with the public interest and the
protection of investors because DMM units would still have the
obligation under Rule 98 to maintain the confidentiality of non-public
order information made available to a DMM for the purpose of
facilitating an intraday reopening and to appropriately supervise a
DMM's access to and use of such information. The proposed changes to
Rule 104 restricting use and dissemination of aggregate order
information are also designed to prevent fraudulent and manipulative
acts and practices and would promote the public interest and the
protection of investors.
    The Exchange believes that redefining Aggressing Transactions in
Rule 104 as transactions that reach across the market priced above
(below) the last consolidated trade would remove impediments to and
perfect the mechanism of a free and open market and a national market
system by focusing on transactions that reach across the market above
or below a price that bears a reasonable relationship to

the overall market for the security, given that most of the volume in
Exchange listed securities occurs away from the Exchange. The Exchange
believes that the proposal would not be inconsistent with the public
interest and the protection of investors. As noted, the proposal would
not eliminate the requirement that all DMM transactions be effected in
a reasonable and orderly manner in relation to the condition of the
general market and the market in the particular stock. Further, DMM
Aggressing Transactions would continue to uniquely require re-entry on
the opposite side of the market at or before the applicable PPP for the
security as warranted, including immediate re-entry if the DMM
transaction aggressively taking liquidity is of block size or greater.
The Exchange believes that requiring re-entry to be in the same size as
the Aggressing Transaction would strengthen the re-entry requirement by
making it more deterministic, thereby supporting maintenance of a fair
and orderly market and removing impediments to and perfect the
mechanism of a free and open market and a national market system.
    In addition, the Exchange believes that eliminating Rule
104(d)(1)(B) prohibiting Aggressing Transactions in the final ten
minutes of trading would remove impediments to and perfect the
mechanism of a free and open market and a national market system by
permitting DMM units to enter trades going into the close without
restriction, which the Exchange believes would benefit the marketplace
by adding liquidity to the Closing Auction. Further, eliminating
Prohibited Transactions would not be inconsistent with the public
interest and the protection of investors because DMMs, as proprietary
traders without the ability to direct or influence trading or control
the quote, would have no informational advantage going into the close
and must select a closing price between the last-published Imbalance
Reference Price and the last-published non-zero Continuous Book
Clearing Price. The Exchange believes that eliminating Prohibited
Transactions would not be inconsistent with the public interest and the
protection of investors because DMM trading decisions going into the
close would continue to be evaluated from the perspective of their
obligations to the marketplace, including the obligation to arrange a
fair and orderly close and selection of a price in the required range,
as set forth in Exchange rules. Moreover, during the last ten minutes
of trading, DMM units would still have an obligation to re-enter the
market if their trading both reaches across the market and increases or
establishes a position, which would dampen volatility and ensure that
DMM transactions bear a reasonable relationship to overall market
conditions. Indeed, as noted above, the Exchange would strengthen re-
entry for Aggressing Transactions by requiring re-entry on the opposite
side at or before the applicable PPP provided by the Exchange in the
same size as the Aggressing Transaction.
    The numerous obligations currently imposed on DMM units by Rule 104
would in no way be altered or diminished by the proposal. The Exchange
does not believe that the balance of benefits and obligations under
Rule 104 would be impacted by the proposed rule change. DMM units would
be subject to strengthened re-entry requirements when engaging in
Aggressing Transactions at or before the applicable PPP for that
security by having to re-enter on the opposite side in the same size as
the transaction, and the requirement that all DMM unit transactions be
effected in a reasonable and orderly manner in relation to the
condition of the general market and the market in the particular stock
would not be altered by the proposal. These safeguards would continue
to reasonably ensure that DMM unit transactions bear a reasonable
relationship to overall market conditions. For the same reasons, the
proposal would not alter or disrupt the balance between the benefits
and obligations of being an Exchange DMM unit.
    The Exchange believes that the replacing DMM unit for DMM in Rule
104 would remove impediments to and perfect the mechanism of a free and
open market and a national market system by emphasizing the
responsibility of the DMM unit for trading in assigned Exchange listed
securities, thereby adding additional clarity and transparency to the
Exchange's rules. The proposal would not be inconsistent with the
public interest and the protection of investors because the proposal
does not absolve individual DMMs from the obligation to comply with
Exchange rules or diminish the potential penalties for individual DMMs
that fail to do so.\62\
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    \62\ See note 37, supra.
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Rule 36
    The Exchange believes that permitting DMMs to use properly
registered and approved telephones and any other alternative
communication device as well as any wired or wireless devices such as
computer terminals or laptops (defined in the proposed rule as
``Permitted Communications Devices'') to communicate with persons off
the Trading Floor, subject to the confidentiality requirements of Rule
98, are designed to prevent fraudulent and manipulative acts and
practices and would be consistent with the public interest and the
protection of investors because the Exchange would eliminate intraday
DMM access to the remaining non-public information available to them on
the Trading Floor, as reflected in the propose changes to Rule 104.
Further, in those situations where a DMM would be provided access to
aggregate order information while trading is halted and only until the
security is reopened, DMM units would still have the obligation under
Rule 98 to maintain the confidentiality of the non-public order
information made available to a DMM for the purpose of facilitating an
intraday reopening and appropriately supervise a DMM's use of the
telephone in that circumstance.
    In addition, the Exchange would retain certain safeguards
surrounding the use of such devices that are proposed for inclusion in
amended Rule 36. The proposed safeguards would include the requirement
that DMM units register all devices to be used on the Trading Floor
with the Exchange and the specific recordkeeping requirement proposed
for both telephones and Permitted Communications Devices that would
require DMM units to maintain records of the use of telephones and all
other approved alternative communication devices, including logs of
calls placed, as well as the use of Permitted Communications Devices,
including all messages generated by the unit's wired or wireless
devices to communicate with the system employing the unit's algorithms,
in compliance with Rule 440 and SEC Rules 17a-3 and 17a-4. Further, DMM
units would be required to establish policies and procedures reasonably
designed to ensure that use of telephones is consistent with all SEC
rules and Exchange rules. The Exchange accordingly believes that these
proposed safeguards establish an appropriate regulatory framework for
supervising and monitoring mandated DMM communications with listed
issuers consistent with the objectives of section 6(b)(5) of the
Act.\63\ The Exchange also believes that the proposed amendments to
Rule 36 support the mechanism of free and open markets by continuing to
provide a means for increased and more

efficient communication by DMMs to and from the Trading Floor,
including in furtherance of their rule-based obligation to regularly
contact their assigned listed issuers.
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    \63\ 15 U.S.C. 78f(b)(5).
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Rule 76
    The Exchange believes that the proposed changes to Rule 76 would
remove impediments to and perfect the mechanism of a free and open
market and a national market system by streamlining and modernizing the
process for executing cross transactions on the Trading Floor. As
noted, the requirement that a Floor broker announce a cross transaction
at the point of sale is to ``clear'' the trading Crowd before executing
a cross transaction. While the requirement made sense when Floor
brokers that might be interested in participating in a cross
transaction still needed to stand at a post/panel throughout the
trading day, the requirement makes less sense in the current electronic
trading environment. The Exchange believes that having the Exchange
announce proposed cross transactions would make the process more
efficient by not limiting the announcement to one physical location on
the Trading Floor. An Exchange announcement would also allow additional
members of the Trading Floor community to learn about a pending cross
transaction and potentially participate, to the benefit of the
marketplace and investors. Moreover, eliminating the DMM's role in
acknowledging the Floor broker announcement would remove impediments to
and perfect the mechanism of a free and open market and a national
market system by further permitting DMM units to function more like
other proprietary market makers. As noted above, this change is also
consistent with the proposed removal of the traditional DMM Trading
Floor-based functions set forth in Rule 104. The Exchange accordingly
believes that the proposed changes to Rule 76 would promote just and
equitable principles of trade consistent with section 6(b)(5) of the
Act.\64\
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    \64\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposal also benefits investor
protection and public interest goals by eliminating interaction between
the Floor broker and the individual DMM assigned to the subject
security in the manual cross transaction process on the Trading Floor.
The Exchange believes that the proposal would eliminate any information
asymmetry that may exist when a DMM learns about a cross transaction
before the trade is executed and printed. Although the Exchange
believes any existing informational advantages are slight and the
window for the DMM to act exceedingly small, the Exchange believes the
proposal would protect investors and the public interest by adding
additional protections against the misuse of non-public information.
Similarly, having the Exchange supervise and acknowledge the
announcement of the proposed cross transaction promotes investor
protection and the public interest. The Exchange believes that the
proposal is thus designed to prevent fraudulent and manipulative acts
and practices. Finally, having the Exchange announce cross transactions
under Rule 76 and eliminating the need to announce at the point of sale
would permit extending the Cross Function in Rule 76.10 to UTP
securities, which would remove impediments to and perfect the mechanism
of a free and open market and a national market system by applying the
same streamlined process to all cross transactions on the Trading
Floor.
Rule 98
    The Exchange believes that the proposed changes to Rule 98 deleting
references to Floor-based non-public order information and to specific
requirements regarding maintenance of the confidentiality of such
information that the Exchange would no longer provide to DMMs would
remove impediments to and perfect the mechanism of a free and open
market and a national market system by simplifying information barrier
restrictions applicable to DMM units operating on the Trading Floor
consistent with the principles-based approach to protect against the
misuse of material non-public information, including specifically
prohibiting trading based on material non-public information from any
source, and will protect investors and the public interest by
reinforcing protections against the misuse of material non-public
information and deleting rules that may no longer meet this goal.
    The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market by
permitting a member organization operating a DMM unit to maintain and
enforce policies and procedures to, among other things, prohibit the
misuse of material non-public information and eliminating restrictions
on how a member organization structures its DMM unit operations. The
proposed amendments maintain the existing Rule 98 restrictions that are
specific to DMM units and DMMs but also maintain the information
barrier requirements between the DMM unit and non-DMM unit areas of a
member organization. Member organizations operating DMM units will
continue to be subject to federal and Exchange requirements for
protecting material non-public order information \65\ and protecting
customer orders that are the consistent with the existing rules
governing broker dealers that operate as equity market makers on other
registered exchanges.\66\ Moreover, member organizations operating a
DMM unit and DMMs would be specifically enjoined in proposed Rule
98(c)(3) from misusing material, non-public information, consistent
with the protection of investors and the public interest.
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    \65\ See 15 U.S.C. 78o(g) and Rule 98(c)(2).
    \66\ See Rule 5320.
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    The Exchange notes that Rule 98 will still require that member
organizations maintain and enforce policies and procedures reasonably
designed to ensure compliance with applicable federal securities laws
and regulations and with Exchange rules. The Exchange notes that such
written policies and procedures will continue to be subject to
oversight by the Exchange and therefore the elimination of prescribed
restrictions should not reduce the effectiveness of the Exchange rules
to protect against the misuse of material non-public information.
    The Exchange therefore believes that the proposed rule change will
maintain the existing protection of investors and the public interest
that is currently set forth in Rule 98, while at the same time removing
impediments to and perfecting a free and open market by removing those
restrictions related to Floor-based non-public information that the
Exchange is eliminating and restricting.
New Rule 104B
    The Exchange believes the proposal to establish a new DMM Unit
Incentive Program in ETPs open to non-DMM Market Makers and SLPs would
remove impediments to and perfect the mechanism of a free and open
market and a national market system by encouraging member organizations
that are already quoting and trading on the Exchange to become fully
operational Floor-based DMMs following the ramp-up period. The Exchange
believes that increasing the number of Floor-based DMM units would
increase competition among existing and prospective DMM units, which
would enhance price discovery, liquidity, competitive quotes, and price
improvement on the

Exchange, to the benefit of investors. Moreover, the Exchange believes
that providing for a DMM unit on the NYSE in ETPs would remove
impediments to and perfect the mechanism of a free and open market and
a national market system by allowing existing market makers and
liquidity providers to leverage existing market-making strategies on
the Exchange and provide all member organizations that choose to
participate with enhanced opportunities to qualify for the various
proposed credits to be set forth in the Exchange's Price List through
increased quoting and liquidity-providing activity.
    The Exchange believes the proposal also benefits investor
protection and public interest goals by providing for a new category of
market participant that would contribute to displayed liquidity, price
discovery, and market quality on the Exchange in ETPs. The proposed DMM
units are not intended to supplant existing non-DMM Market Makers or
SLP market participants or their roles on the Exchange, and would
instead represent an additional source of displayed liquidity on the
Exchange during the ramp-up period (and beyond such period, to the
extent DMM units thereafter transition to become fully integrated
Floor-based DMM units) that would enhance the range and diversity of
market making activity on the Exchange during that time, thus promoting
competition and market quality on the Exchange to the benefit of all
market participants.
    The Exchange believes that proposed Rule 104B would also remove
impediments to and perfect the mechanism of a free and open market and
a national market system by setting forth qualification and
registration requirements and processes for both member organizations