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Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Notices interest would trade with resting DMM
interest only, the incoming DMM
interest will be cancelled. If the incoming DMM interest would trade with interest other than DMM interest, the resting DMM interest will be cancelled. Since the Exchange transitioned to Pillar, the Exchange no longer enforces self-trade prevention on behalf of DMMs. Instead, DMMs may use one of the Self-Trade Prevention Modifiers STP described in Rule 7.31i2.
Rule 104b6 currently provides that DMM Units may not enter the following orders and modifiers: Market Orders, MOO Orders, CO Orders, MOC
Orders, LOC Orders, or Buy Minus Zero Plus Instructions. In the Pillar rules, Rule 7.31 sets forth which orders and modifiers are not available to DMMs, and therefore Rule 104b6 is obsolete.
The Exchange believes that the proposed new text for Rule 104b2
would provide transparency that Rule 7.31 would describe which orders and modifiers would be available to DMMs, including STP modifiers.
The Exchange proposes to amend Rule 104b3 to delete references to Floor broker agency interest files or reserve interest as such references are now obsolete. The Exchange no longer uses Floor broker agency interest files and no longer provides Floor brokers with reserve interest functionality that differs from the Reserve Orders available to all member organizations, as described in Rule 7.31.
The Exchange proposes to amend Rule 104b by deleting subparagraph 4, which provides that the DMM
units algorithm may place within Exchange systems trading interest to be known as a Capital Commitment Schedule. See Rule 1000 concerning the operation of the Capital Commitment Schedule. With the transition to Pillar, the Exchange has replaced the Capital Commitment Schedule with Capital Commitment Orders, as described in Rule 7.31d5, and has deleted Rule 1000. Accordingly, this current rule is obsolete. The Exchange proposes a non-substantive amendment to renumber Rule 104b5
as Rule 104b4.
The Exchange proposes to delete the text accompanying current Rules 104c, d, and e as obsolete now that the Exchange trades on Pillar.
Rule 104c currently provides: A
DMM unit may maintain reserve interest consistent with Exchange rules governing Reserve Orders. Such reserve interest is eligible for execution in manual transactions. Rule 7.31 now describes how Reserve Orders function.

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Rule 104d currently provides: A
DMM unit may provide algorithmicallygenerated price improvement to all or part of an incoming order that can be executed at or within the Exchange BBO
through the use of Capital Commitment Schedule interest see Rule 1000. Any orders eligible for execution in Exchange systems at the price of the DMM units interest will trade on parity with such interest, as will any displayed interest representing a d-Quote enabling such interest to trade at the same price as the DMM units interest. As noted above, with Pillar, the Exchange has deleted Rule 1000 and no longer offers the Capital Commitment Schedule to DMMs.
Rule 104e currently provides: DMM
units shall provide contra side liquidity as needed for the execution of odd-lot quantities that are eligible to be executed as part of the opening, reopening and closing transactions but remain unpaired after the DMM has paired all other eligible round lot sized interest. This requirement is obsolete.
With these proposed deletions, the Exchange proposes non-substantive amendments to renumber Rules 104f, g, h, i, and j as Rules 104c, d, e, f, and g and update crossreferences in proposed Rule 104eiii from subparagraph hii and iii to eii and iii.
The Exchange proposes to amend current Rule 104hii proposed Rule 104eii to delete reference to information that is no longer available to a DMM at the post. Specifically, the Exchange no longer provides DMMs at the post with the following information:
the price and size of any individual order or Floor broker agency interest file and the entering and clearing firm information for such order, except that the display shall exclude any order or portion thereof that a market participant has elected not to display to a DMM.
Accordingly, the Exchange proposes to amend Rule 104eii to delete that rule text.

The Exchange proposes that the nonsubstantive amendments to Rule 104
not including the proposed elimination of prohibited transactions would be operative immediately upon approval of this proposed rule change. Because of the technology changes associated with the proposed changes to the Closing Auction process and availability of Closing D Orders for DMMs, the Exchange proposes that, subject to approval of the proposed rule change, the Exchange will announce the implementation date of the remaining proposed rule changes, including the
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elimination of prohibited transactions, by Trader Update. Subject to approval of this proposed rule change, the Exchange anticipates that such changes will be implemented in the first half of 2022.
2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6b of the Act,48 in general, and furthers the objectives of Sections 6b5 of the Act,49 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.
Proposed Changes to Closing Auction Price. The Exchange believes that the proposed amendment to Rule 7.35Bg regarding how the Closing Auction Price would be determined would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote a more transparent and deterministic Closing Auction process.
Specifically, the proposed change would require that the DMM determine a Closing Auction Price that is at or between the last-published Imbalance Reference Price and Continuous Book Clearing Price. Accordingly, the Closing Auction Price must be within a predetermined range of prices that would have been disseminated via the Closing Auction Imbalance Information and that cannot be changed after the end of Core Trading Hours. The Exchange further believes that this proposed parameter is consistent with how Closing Auction Prices have been determined for the vast majority of Closing Auctions. For example, in the period January 1, 2021
to July 23, 2021, 96.5% of all Closing Auctions were priced at or between the last-published Imbalance Reference Price and Continuous Book Clearing Price. Similarly, during this same period, 94.9% of closing auction volume priced within these parameters.
Proposed Changes to How DMMs Would Participate in the Closing Auction. The Exchange believes that the proposed amendments to Rules 48 15
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