
[Federal Register Volume 81, Number 65 (Tuesday, April 5, 2016)]
[Notices]
[Pages 19671-19678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07684]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77477; File No. SR-NYSE-2016-17]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1 Thereto, To Amend Rule 86 To Add Additional Order Types to the NYSE 
Bonds\SM\ Platform, Codify Functionality of Order Types Currently 
Available on NYSE Bonds, and Amend the Definition of Indicative Match 
Price in Current Rule 86(B)(2)(G) To Provide Greater Detail of How an 
IMP Is Established With Respect to Bond Auctions

March 30, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 16, 2016, 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. On March 29, 2016, the Exchange filed 
Amendment No. 1 to the proposal.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, 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.
    \4\ In Amendment No. 1, the Exchange proposed changes to amend 
the proposed rule text of Rule 86(j)(A)(ii) in Exhibit 5 and the 
purpose section of each of the Form 19b-4 and Exhibit 1 to clarify 
the effective time used to determine the priority of Timed Orders. 
The Exchange also amended the purpose section of each of the Form 
19b-4 and Exhibit 1 to add that all-or-none and minimum quantity 
contingencies are displayed.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 86 to add additional order 
types to the NYSE Bonds\SM\ platform and to codify functionality of 
order types currently available on NYSE Bonds. The Exchange also 
proposes to amend the

[[Page 19672]]

definition of Indicative Match Price (``IMP'') in current Rule 
86(b)(2)(G) to provide greater detail of how an IMP is established with 
respect to Bond Auctions.\5\ The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
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    \5\ As part of this proposal, the Exchange proposes to renumber 
the current rule to Rule 86(b)(2)(D).
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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 to amend Rule 86 to add NYSE Bonds Fill-or-
Kill Order, NYSE Bonds All-or-None Order and NYSE Bonds Minimum 
Quantity Order as new order types to the NYSE Bonds platform, and to 
codify the operation of NYSE Bonds Good 'Til Date Order and NYSE Bonds 
Timed Order that are currently available on NYSE Bonds platform. The 
Exchange also proposes to amend the definition of IMP to provide 
greater detail of how an IMP is established with respect to Bond 
Auctions.
    NYSE Bonds is the Exchange's electronic system for receiving, 
processing, executing and reporting bids, offers, and executions in 
bonds. Rule 86 prescribes how bonds are traded on the NYSE Bonds 
trading platform and sets forth available order types. NYSE Bonds 
currently allows Users \6\ to submit limit orders \7\ and reserve 
orders.\8\ Orders are displayed, matched and executed on a price-time 
priority basis.\9\ However, undisplayed reserve interest in NYSE Bonds 
always yields to displayed interest at a particular price.\10\ Orders 
are matched and executed if marketable at the time of entry, and if not 
marketable at the time of entry, would post to the NYSE Bonds order 
book.\11\ An order is marketable if contra side interest is available 
at that price or better price at the time the order is entered in NYSE 
Bonds. Further, orders that are marketable beyond the price collar 
established for the bond at the time of entry are rejected by NYSE 
Bonds to help avoid executions at erroneous prices.\12\
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    \6\ Current Rule 86(b)(2)(M) defines a User as any Member or 
Member Organization, Sponsored Participant, or Authorized Trader 
that is authorized to access NYSE Bonds. The Exchange proposes to 
renumber the current rule to Rule 86(b)(2)(I).
    \7\ A NYSE Bonds Limit Order is an order to buy or sell a stated 
amount of bonds at a specified price or at a better price. See 
current Rule 86(b)(2)(B). The Exchange proposes to renumber the 
current rule to Rule 86(b)(2)(B)(i).
    \8\ A NYSE Bonds Reserve Order is a NYSE Bonds Limit Order with 
a portion of the order's size designated for display and a portion 
of the order's size ``reserve size'' that is not to be displayed on 
NYSE Bonds. See current Rule 86(b)(2)(C). The Exchange proposes to 
renumber the current rule to Rule 86(b)(2)(B)(ii).
    \9\ See Rule 86(j)(A). The display and execution rules would 
also be applicable to the additional order types proposed herein.
    \10\ See Rule 86(j)(B).
    \11\ Timed Orders, as proposed herein, maybe [sic] matched and 
executed or posted at a time different from the time of entry. See 
Proposed Rule 86(b)(2)(B)(vi)(3)(a)-(c).
    \12\ See Rule 86(e). The price collar thresholds would also be 
applicable to the additional order types proposed herein.
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    The Exchange believes each of the order types described below is 
currently offered by alternative trading systems (``ATSs'') for bonds, 
such as Tradeweb's BondDesk Group, KCG Bondpoint, and TMC Bonds.\13\
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    \13\ Order types such as Good `Til Date, All-or-None, Fill-or-
Kill, and Minimum Quantity are available on various equity and 
options markets. See, e.g., NYSE Arca Equities Rule 7.31(b)(2) and 
International Securities Exchange (``ISE'') Rule 715.
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NYSE Bonds Fill-or-Kill Order
    A NYSE Bonds Fill-or-Kill Order (``NYSE Bonds FOK Order'') is a 
NYSE Bonds Limit Order that would be executed immediately in its 
entirety at the best price available against a single contra party and, 
if not executed immediately in its entirety, would be cancelled.\14\ A 
NYSE Bonds FOK Order would be eligible to participate in all trading 
sessions \15\ but can be executed only during the trading session in 
which the order is sent; otherwise the order would be rejected. A NYSE 
Bonds FOK Order cannot participate in either the Opening Bond Auction 
or the Core Bond Auction.
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    \14\ A NYSE Bonds FOK Order cannot be a NYSE Bonds Reserve 
Order. See proposed Rule 86(b)(2)(B)(ii).
    \15\ The Opening Bond Trading Session commences with the Opening 
Bond Auction at 4:00 a.m. ET and concludes at 8:00 a.m. ET. See Rule 
86(i)(1)(A). The Core Bond Trading Session commences with the Core 
Bond Auction at 8:00:00 a.m. ET and concludes at 5:00 p.m. ET. See 
Rule 86(i)(2)(A). The Late Bond Trading Session commences at 5:00 
p.m. ET and concludes at 8:00 p.m. ET. See Rule 86(i)(3)(A).
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    The following example illustrates the proposed functionality:
    Example 1--A NYSE Bonds FOK Order that gets executed when there is 
sufficient size and the order is at the top of the book.

 T1 submits a buy order for 200 bonds @$101
 T2 submits a sell order for 150 bonds @$102
Posted market on NYSE Bonds: $101-$102 (200 x 150)
 T3 enters a sell order for 50 bonds @$101 FOK

    Result: T3's 50 bonds are traded at $101 since the price is at the 
top of the order book and quantity is fully satisfied.
    Example 2--A NYSE Bonds FOK Order that does not get executed when 
there is insufficient size and the order is at the top of the book.

After the trade in Example 1, posted market on NYSE Bonds: $101-$102 
(150 x 150)
     T4 then enters a buy order for 75 bonds at $101.25
Posted market on NYSE bonds: $101.25-$102 (75 x 150)
     T5 enters a sell order for 100 bonds @ $101.25 FOK

    Result: T5's order is cancelled because there is not enough size at 
the best price of 101.25.
    Example 3--A NYSE Bonds FOK Order that does not get executed when 
interacting with a NYSE Bonds AON Order.

After T5 is cancelled in Example 2, posted market on NYSE Bonds remains 
at $101.25-$102 (75 x times; 150)
     T6 enters a sell order for 100 bonds at $101.50 AON
Posted market on NYSE Bonds: $101.25-$101.50 (75 x 100).
     T7 enters a buy order for 75 bonds at $101.50 FOK

    Result: T7's order is cancelled because the order cannot satisfy 
T6's AON size, which is the top of the order book.
Posted market on NYSE Bonds remains at $101.25-$101.50 (75 x 100).
NYSE Bonds All-or-None Order
    A NYSE Bonds All-or-None Order (``NYSE Bonds AON Order'') is a NYSE 
Bonds Limit Order (whose AON contingency would be displayed on the 
order book) that would be executed in its entirety against one or more 
contra party, or not at all.\16\ If a NYSE Bonds

[[Page 19673]]

AON Order is not executed in full, NYSE Bonds would post the order to 
the order book at its limit price until it is executed in full, or is 
cancelled. Incoming contra-side orders that cannot meet the AON 
quantity may trade at or bypass the price of the NYSE Bonds AON Order. 
A NYSE Bonds AON Order would not participate in either the Opening Bond 
Auction or the Core Bond Auction and the order is eligible for 
execution only during the trading session for which it is designated.
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    \16\ A NYSE Bonds AON Order cannot be a NYSE Bonds Reserve 
Order. See proposed Rule 86(b)(2)(B)(ii).
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    A NYSE Bonds AON Order must be designated as ``day,'' ``good 'til 
cancelled,'' or ``good 'til date.'' A NYSE Bonds AON Order designated 
as ``day'' can participate in all trading sessions. A NYSE bonds AON 
Order designated as ``day,'' if not executed or cancelled, would expire 
at the end of the trading session for which it was designated, on the 
day on which it was entered. A NYSE Bonds AON Order designated as 
``day'' and not designated for a particular trading session but entered 
during the Opening Bond Trading Session would participate in the 
Opening Bond Trading Session, and if not executed during the Opening 
Bond Trading Session or cancelled, would be eligible for execution in 
the Core Bond Trading Session. A NYSE Bonds AON Order designated as 
``day'' and not designated for a particular trading session but entered 
during the Core Bond Trading Session would participate in the Core Bond 
Trading Session only and if not executed in full, the order would be 
cancelled at the end of such trading session.
    A NYSE Bonds AON Order designated as ``good 'til cancelled'' may be 
entered during the Opening Bond Trading Session and the Core Bond 
Trading Session but can be executed in the Core Bond Trading Session 
only. A NYSE Bonds AON Order designated as ``good 'til cancelled'' and 
not designated for a particular trading session but entered during the 
Core Bond Trading Session would participate in the Core Bond Trading 
Session only and if not executed in full, the order would remain on 
NYSE Bonds until cancelled. Unless a NYSE Bonds AON Order that is 
designated as ``good 'til cancelled'' is executed or cancelled in full, 
the order would be placed on the order book for the following day in 
price-time priority for participation in the Core Bond Trading Session 
after the end of the Core Bond Auction.
    A NYSE Bonds AON Order designated as ``good `til date'' may be 
entered during the Opening Bond Trading Session and the Core Bond 
Trading Session but can be executed in the Core Bond Trading Session 
only. A NYSE Bonds AON Order designated as ``good 'til date'' and not 
designated for a particular trading session but entered during the Core 
Bond Trading Session would participate in the Core Bond Trading Session 
only and if not executed in full, would remain on NYSE Bonds until the 
end of the Core Bond Trading Session on the date specified. Unless a 
NYSE Bonds AON Order that is designated as ``good 'til date'' is 
executed or cancelled in full, the order would be placed on the order 
book for the following day in price-time priority for participation in 
the Core Bond Trading Session after the end of the Core Bond Auction.
    The following examples illustrate the proposed functionality:
    Example 1--A NYSE Bonds AON Order that gets executed when there is 
sufficient size.

Posted Market on NYSE Bonds: $102.50-$103.50 (1000 x 1000)
     T1 enters a sell order for 500 bonds @ $102.50 AON

    Result: T1's AON quantity is satisfied and the order for 500 bonds 
is executed at $102.50.

After the trade, posted market on NYSE Bonds: $102.50-$103.50 (500 x 
1000)

    Example 2--A NYSE Bonds AON Order that does not get executed and is 
bypassed.

     T1 submits an order to buy 100 bonds @ $101.39
     T2 submits an order to sell 400 bonds @ $102.01
Posted Market on NYSE Bonds: $101.39-$102.01 (100 x 400)
     T3 enters a sell order for 500 bonds @ $102 AON
Posted market on NYSE Bonds: $101.39-$102 (100 x 500).
     T4 enters an order to buy 400 bonds @ $102.01.

    Result: T4 trades 400 bonds with T2's $102.01 offer. T3's $102 AON 
offer with a quantity of 500 bonds would be bypassed because the 
specified quantity was not satisfied. T3 would remain on the Exchange's 
order book and continue to be displayed on the quote display feed with 
the AON quantity until it is either executed in full or cancelled.
    Example 3--A NYSE Bonds AON Order that gets executed after 
aggregating liquidity to satisfy size requirement.

     T1 submits an order to buy 400 bonds @ $100
     T2 submits an order to sell 500 bonds @ $101
     T3 submits an order to sell 200 bonds @ $100.75
     T4 submits an order to sell 200 bonds @ $100.50
Posted market on NYSE Bonds: $100-$100.50 (400 x 200)
     T5 submits an order to buy 500 bonds @ $101 AON

    Result: Since there are no size restrictions on any of the orders 
on the book, T5 would execute against the best price available and then 
trade at each price level until the order is fully executed. Therefore, 
T5 trades 200 @ 100.50 with T4, 200 @ $100.75 with T3 and 100 @ $101 
with T2.
NYSE Bonds Minimum Quantity Order
    A NYSE Bonds Minimum Quantity Order is a NYSE Bonds Limit Order 
(whose minimum quantity contingency would be displayed on the order 
book) that would trade against one or more contra side order(s), 
provided the order's quantity requirement is met.\17\ In the event 
there is not enough contra-side liquidity available at the time a NYSE 
Bonds Minimum Quantity Order is submitted, NYSE Bonds would post the 
order on the order book at its limit price until it is executed in 
full, or is cancelled. Incoming contra-side orders that cannot meet the 
minimum quantity may trade at or bypass the price of a NYSE Bonds 
Minimum Quantity Order. A NYSE Bonds Minimum Quantity Order would be 
rejected if the minimum quantity entered on the order is greater than 
the total number of bonds of the order.
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    \17\ A NYSE Bonds Minimum Quantity Order cannot be a NYSE Bonds 
Reserve Order. See proposed Rule 86(b)(2)(B)(ii).
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    A NYSE Bonds Minimum Quantity Order may be partially executed as 
long as each partial execution is for the minimum number of bonds or 
greater. If there remains a balance after one or more partial 
executions and such balance is for less than the minimum quantity 
specified on the order, such balance would be treated as a regular 
limit order and placed on the order book in price-time priority. A NYSE 
Bonds Minimum Quantity Order would not participate in either the 
Opening Bond Auction or the Core Bond Auction and the order would be 
eligible for execution only in the trading session during which it was 
sent.
    A NYSE Bonds Minimum Quantity Order must be designated as ``day,'' 
``good 'til cancelled,'' or ``good 'til date.'' A NYSE Bonds Minimum 
Quantity Order designated as ``day'' is eligible to participate in all 
three trading sessions. A NYSE Bonds Minimum Quantity Order designated 
as ``day,'' if not executed or cancelled, would expire at the end of 
the trading session for which it was designated, on the day on

[[Page 19674]]

which it was entered. A NYSE Bonds Minimum Quantity Order designated as 
``day'' and not designated for a particular trading session but entered 
during the Opening Bond Trading Session would participate in the 
Opening Bond Trading Session, and if not executed during the Opening 
Bond Trading Session or cancelled, would be eligible for execution in 
the Core Bond Trading Session. A NYSE Bonds Minimum Quantity Order 
designated as ``day'' and not designated for a particular trading 
session but entered during the Core Bond Trading Session would 
participate in the Core Bond Trading Session only and if not executed 
in full, the order would be cancelled at the end of such trading 
session.
    A NYSE Bonds Minimum Quantity Order designated as ``good 'til 
cancelled'' may be entered during the Opening Bond Trading Session and 
the Core Bond Trading Session but would be eligible to participate in 
the Core Bond Trading Session only. Unless a NYSE bonds Minimum 
Quantity Order that is designated as ``good 'til cancelled'' is 
executed in full, or is cancelled, the order would be placed on the 
order book for the following day in price-time priority for 
participation in the Core Bond Trading Session after the end of the 
Core Bond Auction.
    A NYSE Bonds Minimum Quantity Order designated as ``good 'til 
date'' may be entered during the Opening Bond Trading Session and the 
Core Bond Trading Session but would be eligible to participate in the 
Core Bond Trading Session only. Unless a NYSE bonds Minimum Quantity 
Order that is designated as ``good 'til date'' is executed in full, or 
is cancelled, the order would be placed on the order book for the 
following day in price-time priority for participation in the Core Bond 
Trading Session after the end of the Core Bond Auction.
    The following examples illustrate the proposed functionality:
    Example 1--A NYSE Bonds Minimum Quantity Order that gets fully 
executed after interacting with multiple orders including with a NYSE 
Bonds AON Order.

     T1 submits an order to buy 400 bonds @ $100
     T2 submits an order to sell 400 bonds @ $102
    Posted market on NYSE Bonds: $100-$102 (400 x 400)
     T3 submits an order to sell 600 bonds @ $101 with a 
minimum quantity of 100 bonds
     T4 submits an order to sell 200 bonds @ $101
T3 moves ahead of T2 on the order book (and T4 moves up and is now 
behind T3).
Posted market on NYSE Bonds: $100-$101 (400 x 800).
     T5 submits an order to buy 100 bonds @ $101
    Result: T5 executes with T3. T3 is decremented by 100 bonds, 
leaving 500 bonds that remain to be executed.

Posted market on NYSE Bonds: $100-$101 (400 x 700)
     T6 submits an order to buy 500 bonds @ $101 AON

    Result: T6 trades 500 @$101 with T3 since T3 has 500 bonds 
remaining and T3's minimum quantity requirement is satisfied.

Posted market on NYSE Bonds: $100-$101 (400 x 200)

    Example 2--A NYSE Bonds Minimum Quantity Order that does not get 
executed and is bypassed.

     T1 submits an order to buy 100 bonds @ $101.39
     T2 submits an order to sell 400 bonds @ $102.01
Posted market on NYSE Bonds: $101.39-$102.01 (100 x 400)
     T3 submits an order to sell 1000 bonds @ $102 with a 
minimum quantity of 500 bonds. T3 moves ahead of T2 on the order book.
Posted market on NYSE Bonds: $101.39-$102 (100 x 1000 (with a minimum 
quantity of 500))
     T4 submits an order to buy 400 bonds @ $102.01

    Result: T4 trades 400 @ $102.01 with T2. T3's $102 offer has a 
minimum quantity of 500 and is bypassed because the minimum quantity 
was not satisfied.
    Example 3--Multiple NYSE Bonds Minimum Quantity Orders where one 
order does not get executed because the order's size requirement cannot 
be met and the order is therefore bypassed, and another order that is 
partially executed and the remainder of the order is converted to a 
limit order.

     T1 submits an order to buy 400 bonds @ $100
     T2 submits an order to sell 400 bonds @ $102
Posted market on NYSE Bonds: $100-$102 (400 x 400)
     T3 submits an order to sell 600 bonds @ $101 with a 
minimum quantity of 300 bonds
T3 provides a better market and therefore moves ahead of T2
Posted market on NYSE Bonds: $100-$101 (400 x 600 (with a minimum 
quantity of 300))
     T4 submits an order to sell 200 bonds @ $100.75
T4 provides a better market and therefore moves ahead of T3
Posted market on NYSE Bonds'' $100-$100.75 (400 x 200)
     T5 submits an order to sell 100 bonds @ 101
T5 moves behind T3
     T6 submits an order to buy 250 bonds @ $101 with a minimum 
quantity of 200 bonds
    Result: T6 trades 200 with T4 @ $100.75. T6's minimum quantity is 
higher than the quantity remaining, so the order becomes a regular 
limit order to buy 50 bonds at $101. T3 does not get executed because 
T3's minimum quantity cannot be satisfied. T6 then trades 50 bonds @ 
$101 with T5 since T5 has no size restrictions.

Posted market on NYSE Bonds: $100-$101 (400 x 600 (with a minimum 
quantity of 300))
NYSE Bonds Good 'Til Date Order
    A NYSE Bonds Good 'Til Date Order (``NYSE Bonds GTD Order'') is a 
NYSE Bonds Limit Order or a NYSE Bonds Reserve Order, which if not 
executed or cancelled, would expire at the end of the Core Bond Trading 
Session on the date specified on the order. A NYSE Bonds GTD Order must 
include an Expire Date or be designated for the Core Bond Trading 
Session; otherwise, the order would be rejected. A NYSE Bonds GTD Order 
can participate in the Core Bond Auction and the Core Bond Trading 
Session only. A NYSE Bonds GTD Order would participate in the Core Bond 
Auction if it is entered before commencement of the Core Bond Auction, 
and if not executed in the Core Bond Auction, would remain live on NYSE 
Bonds and would be eligible for execution in the Core Bond Trading 
Session, unless the order is cancelled. A NYSE Bonds GTD Order entered 
after commencement of the Core Bond Auction would participate in the 
Core Bond Trading Session, unless the order is cancelled.
    A NYSE Bonds GTD Order can participate only in the Core Bond 
Trading Session, and such order designated for any other trading 
session would be rejected. A NYSE Bonds GTD Order that is not executed 
or cancelled in full at the end of the trading day would be placed on 
the order book for the following day in price-time priority for 
participation in the Core Bond Trading Session after the end of the 
Core Bond Auction.
    The following example illustrates how a NYSE Bonds GTD Order would 
be executed once it becomes effective:
    Suppose on October 14, a NYSE Bonds trading day, at 7:00 a.m. 
(during the Early Bond Trading Session):

     T1 submits a Day order to buy 100

[[Page 19675]]

bonds @ $100.20
     T2 submits a Day order to sell 20 bonds @ $100.25
     T3 submits a GTD order (October 15) to buy 100 bonds @ 
$100.30
     T4 submits an order to sell 50 bonds @ $100.35 for 
participation in all three bond trading sessions
Posted market on NYSE Bonds: $100.20 x $100.25 (100 x 20)
T3's GTD order not effective yet (becomes effective at 8:00 a.m.)

    On the same trading day, at 8:00 a.m., when the Core Bond Auction 
commences, these orders would be processed as follows:
     T3 becomes effective for the Core Bond Auction;
     T1, T2 and T3 participate in the Core Bond Auction;
     T2 and T3 overlap in price, therefore 20 Bonds are matched 
at $100.30 with an imbalance on the buy side of 80 bonds.
T3's GTD order becomes live for the Core Bond Trading Session.
Posted market on NYSE Bonds: $100.30 x $100.35 (80 x 50)

    On the same trading day, at 8:30 a.m. (during the Core Bond Trading 
Session):

     T5 submits an order to sell 25 bonds @ $100.30

    Result: T3 trades 25 bonds with T5.
Posted market on NYSE Bonds: $100.30 x $100.35 (55 x 50)

    On the same trading day, at 5:01 p.m. (during the Late Bond Trading 
Session), the remaining orders would be processed as follows:
     T1 expires (as Day orders expire at the end of the Core 
Bond Trading Session);
     T3 is a GTD order, which trades only in the Core Bond 
Trading Session. Since T3 has not been executed in its entirety, the 
remaining portion of the order would be held and placed on the order 
book for the start of the Core Bond Trading Session the following day 
in price-time priority.
     T4 remains effective and would participate in the Late 
Bond Trading Session.
Posted market on NYSE Bonds: $ 0.00 x $100.35 (0 x 50)

    On the next trading day, October 15, at 7:58 a.m. (during the 
Opening Bond Trading Session):

     T1 submits a Day order to buy 50 bonds @ $100.20
     T2 submits a Day order to sell 50 bonds @ $100.45
Posted market on NYSE Bonds: $100.20 x $100.45 (50 x 50)

    Result: T3 is placed on the order book for the following day in 
price-time priority for participation in the Core Bond Trading Session 
after the end of the Core Bond Auction at 8:00 a.m.; no prices overlap, 
auction imbalance of 50 on buy side and 50 on sell side. T3 becomes 
effective.
Posted market on NYSE Bonds: $100.30 x $100.45 (55 x 50)
    On the same trading day, October 15, at 5:00 p.m., when the Late 
Bond Trading Session commences, the remaining orders would be processed 
as follows:

     T1 and T2 expire (as Day orders expire at the end of the 
Core Bond Trading Session);
     T3 also expires (T3 was submitted with a good 'til date of 
20151015 therefore, the order expires at the end of the Core Bond 
Trading Session on the date specified on the order).
NYSE Bonds Timed Order
    A NYSE Bonds Timed Order is a NYSE Bonds Limit Order or a NYSE 
Bonds Reserve Order that remains in effect for a period of time 
specified on the order (e.g., Effective Time and Expire Time) for the 
day on which the order is entered until the order is executed or 
cancelled. A NYSE Bonds Timed Order would be accepted, and may be 
cancelled, during all trading sessions, provided that the order is 
submitted during the trading session in which it is to become 
effective.
    A NYSE Bonds Timed Order would participate in the Core Bond Auction 
and Core Bond Trading Session if the order is entered before 
commencement of the Core Bond Auction, and if the order is not executed 
in the Core Bond Auction, or not cancelled, it would be eligible for 
execution in the Core Bond Trading Session. A NYSE Bonds Timed Order 
must include at least one of the following: An Effective Time, an 
Expire Time or a designated trading session, otherwise the order would 
be rejected.
    A NYSE Bonds Timed Order submitted with an Effective Time alone 
becomes effective at the Effective Time and if not executed, the order 
would be cancelled at the end of the Late Bond Trading Session. A NYSE 
Bonds Timed Order submitted with an Expire Time alone becomes effective 
at the time it is sent to the Exchange and if not executed, the order 
would be cancelled at the Expire Time designated on the order. A NYSE 
Bonds Timed Order submitted with a designated trading session alone or 
with a designated trading session and either an Effective Time or an 
Expire Time would become effective at the time the designated trading 
session begins and if not executed, the order would be cancelled at the 
end of the designated trading session.\18\ NYSE Bonds would disregard 
the Effective Time or Expire Time submitted with a NYSE Bonds Timed 
Order that is designated for a specific trading session. Additionally, 
a NYSE Bonds Timed Order submitted with a time in force of Day during a 
trading session without an Effective Time, an Expire Time or a 
designated trading session would be treated as a Day limit order and, 
if not executed, would be cancelled at the end of the Core Bond Trading 
Session.
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    \18\ A NYSE Bonds Timed Order submitted during a designated 
trading session becomes effective at the time the order is received 
and, if not executed, would be cancelled at the end of such 
designated trading session.
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    The following examples illustrate the functionality:
    Example 1--A NYSE Bonds Timed Order submitted with an Effective 
Time that does not get executed on the day the order is submitted.
    Suppose on October 14, a NYSE Bonds trading day, at 8:05 a.m. 
(during the Core Bond Trading Session):

     T1 submits a Day order to buy 50 bonds @ $100.25
     T2 submits a Day order to sell 50 bonds @ 100.45
     T3 submits a Timed Order to buy 100 bonds @ 100.30 with an 
Effective Time of 8:45 a.m.
T3 waits to become effective until 8:45 a.m.; T1 and T2 remain 
effective
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
On the same trading day, at 8:45 a.m., T3 becomes effective. T1 and T2 
remain effective
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)

    On the same trading day, October 15, at 5:00 p.m., when the Late 
Bond Trading Session commences, with no executions occurring during the 
day, the remaining orders would be processed as follows:

     T1 and T2 expire (as Day orders expire at the end of the 
Core Bond Trading Session);
     T3 would also expire at the end of the Core Bond Trading 
Session as the order was submitted without an Expire Time.
    Example 2--A NYSE Bonds Timed Order submitted with an Expire Time 
that does not get executed on the day the order is submitted.
    Suppose on October 14, a NYSE Bonds trading day, at 8:35 a.m. 
(during the Core Bond Trading Session):

     T1 submits a Day order to buy 50 bonds @ $100.25
     T2 submits a Day order to sell 50 bonds @ $100.45

[[Page 19676]]

     T3 submits a Timed Order to buy 100 bonds @ $100.30 with 
an Expire Time of 8:45 a.m.

Since T3 was submitted without an Effective Time, the order becomes 
effective upon order entry. T1 and T2 remain effective.
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)
On the same trading day, October 14, at 8:45 a.m.: T3 expires as the 
order was submitted with an Expire Time of 8:45 a.m. T1 and T2 remain 
effective during the Core Bond Trading Session
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)

    Example 3--A NYSE Bonds Timed Order submitted with an Effective 
Time and an Expire Time that does not get executed on the day the order 
is submitted.
    Suppose on October 14, a NYSE Bonds trading day, at 8:35 a.m. 
(during the Core Bond Trading Session):
     T1 submits a Day order to buy 50 bonds @ $100.25
     T2 submits a Day order to sell 50 bonds @ $100.45
     T3 submits a Timed Order to buy 100 bonds @ $100.30 with 
an Effective Time of 8:45 a.m. and an Expire Time of 8:55 a.m.
T3 waits to become effective until 8:45 a.m.; T1 and T2 remain 
effective
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
On the same trading day, October 14, at 8:45 a.m.: T1 and T2 remain 
effective. T3 becomes effective
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)
On the same trading day, October 14, at 8:55 a.m.: T3 expires as the 
order was submitted with an Expire Time of 8:55 a.m. T1 and T2 remain 
effective during the Core Bond Trading Session.
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
Indicative Match Price
    Finally, the Exchange proposes to amend the definition of 
Indicative Match Price (``IMP'') in current Rule 86(b)(2)(G) to provide 
greater detail of how an IMP is established with respect to Bond 
Auctions. Specifically, the IMP in a particular bond means a single 
price at which the maximum number of bonds is executable. If there are 
two or more prices at which the maximum number of bonds is executable, 
the IMP would be the price that is closest to the Reference Price 
provided that the IMP cannot be lower (higher) than any unmatched top 
of book order to buy (sell) that was eligible to participate in an 
auction at the IMP. For the Opening Bond Auction, the Reference Price 
is the closing price in a bond on the previous trading day or if the 
bond did not trade on the previous trading day, the closing price on 
the last day that the bond traded.\19\ For the Core Bond Auction and 
the Bond Halt Auction, the Reference Price is the last price of a bond 
on the trading day prior to the applicable auction, and if none, the 
previous trading day's closing price, and if none, the closing price on 
the last day that the bond traded. If orders to buy and orders to sell 
are not marketable (i.e., the price of a bond order to buy is not equal 
to or greater than the price of a bond order to sell), then the IMP 
would be determined by the side and volume at the top of book, with the 
price of the side with the greater volume establishing the IMP.
---------------------------------------------------------------------------

    \19\ The Exchange proposes to delete the words ``the price that 
is closest to'' from the current rule to more precisely reflect the 
price that would be used to determine the Reference Price on the 
last day that a bond traded.
---------------------------------------------------------------------------

    Current Rule 86(l)(3)(A) provides that a Bond Auction would not 
occur in the event of a failure to establish an IMP. The Exchange 
proposes to amend the current rule to provide that, for non-marketable 
buy and sell orders entered in NYSE Bonds where the size of the best 
bid and best offer are the same, an IMP would not be established and a 
Bond Auction would not occur.
    Current Rule 86(n)(2)(E) provides that a Bond Halt Auction would 
not occur in the event of a failure to establish an IMP. The Exchange 
proposes to amend the current rule to provide that, for non-marketable 
buy and sell orders entered in NYSE Bonds where the size of the best 
bid and best offer are the same, an IMP would not be established and a 
Bond Halt Auction would not occur.
    The following example illustrates how an IMP would be established 
and there is no overlapping interest for a trade to occur:
    Suppose that the previous closing price of a bond is $101.50 and 
the order book just prior to a Bond Auction is as follows:
     T1--Buy 300 @ $101.00
     T2--Sell 200 @ $102.00
     T3--Sell 500 @ $101.75

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Matchable                      Indicative
                          Order                             Buy volume      Sell volume     Order price       volume         Imbalance      match price
--------------------------------------------------------------------------------------------------------------------------------------------------------
T1......................................................             300  ..............         $101.00               0             300         $101.00
T2......................................................  ..............             200          102.00               0             300          101.00
T3......................................................  ..............             500          101.75               0             500          101.75
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Result: No match. The buy order (300 @ $101.00) and sell order (500 
@ $101.75) do not overlap. Per proposed Rule 86(d)(ii) which states 
that if orders to buy and orders to sell are not marketable (i.e., the 
price of a bond order to buy is not equal to or greater than the price 
of a bond order to sell), then the IMP would be determined by the side 
and volume at the top of book, with the price of the side with the 
greater volume establishing the IMP. Thus, the maximum size that could 
have been matched is T3, and T3 therefore establishes the IMP at 
$101.75.
    The following example illustrates how an IMP would be established 
and there is overlapping interest for a trade to occur:
    Suppose that the previous closing price of a bond is $101.50 and 
the order book just prior to a Bond Auction is as follows:

     T1--Buy 500 @ $102.00
     T2--Buy 500 @ $101.75
     T3--Sell 500 @ $101.00

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Matchable                      Indicative
                          Order                             Buy volume      Sell volume     Order price       volume         Imbalance      match price
--------------------------------------------------------------------------------------------------------------------------------------------------------
T1......................................................             500  ..............         $102.00               0             500         $102.00
T2......................................................             500  ..............          101.75               0             500          102.00
T3......................................................  ..............             500          101.00             500             500          101.75
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 19677]]

    Result: Considering there are two or more prices at which the 
maximum number of bonds is executable (i.e., all three orders on the 
order book), a match can occur between $101.00 and $102.00. To 
establish the IMP, NYSE Bonds would select a price closest to the 
Reference Price (i.e., previous close of $101.50) without such price 
being lower than the unmatched buy order price of $101.75 (T2). 
Therefore, the auction would occur at $101.75 with T1 and T2 
participating in the auction for 500 bonds. In another words, the IMP 
would be established at $101.75 because that price is closest to the 
previous close price of $101.50 and not lower that the price of the 
unmatched buy order, T2.
Other Changes
    In addition to adding order types to the NYSE Bonds platform and 
codifying functionality of order types currently available on NYSE 
Bonds, the Exchange also proposes to amend other parts of Rule 86 that 
are impacted by this proposed rule change. Rule 86(h) currently states 
that orders can only be designated for Bond Trading Sessions and cannot 
be designated for participation in Bond Auctions. The rule further 
states that participation in Bond Auctions is automatic if an order is 
designated for participation in a particular Bond trading Session and 
is entered prior to the commencement of the related Bond Auction . 
Given that not all of the new order types are eligible to participate 
in Bond Auctions, the Exchange proposes to amend the current rule to 
clarify that participation in Bond Auctions is not automatic if an 
order is designated for participation in a particular Bond Trading 
Session.
    Additionally, Rule 86(j) currently states that buy and sell orders 
in NYSE Bonds are displayed, matched and executed according to price, 
with the highest bid price and the lowest offer price receiving highest 
priority and within each price, according to the time of order entry. 
For Timed Orders, priority within each price is determined based on the 
effective time of the order, as provided in proposed Rule 
86(b)(2)(B)(vi)(3)(a)-(c). Timed Orders submitted with an Effective 
Time become effective at the time designated on the order. i.e., at the 
Effective Time, whereas Timed Orders submitted with an Expire Time 
become effective at the time such order is submitted. Additionally, 
Timed Orders submitted with a designated trading session alone or with 
a designated trading session and either an Effective Time or an Expire 
Time become effective at the time the designated trading session 
begins, whereas Timed Orders submitted during a designated trading 
session become effective at the time such order is received. The 
Exchange proposes to reflect these difference with an amendment to Rule 
86(j)(A)(ii).
    Finally, the Exchange proposes to make non-substantive 
organizational changes to the rule text in order to make the rule 
easier to read and understand. Specifically, the Exchange is proposing 
to renumber each of paragraphs (C), (D) and (E) to (B)(ii), (B)(iii) 
and (B)(iv) and to renumber each of paragraphs (F) through (O) to (C) 
through (K).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\20\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\21\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would protect 
investors and remove impediments to, and perfect the mechanisms of, a 
free and open market and a national market system by offering Users 
additional order types and therefore afford them greater opportunities 
to execute their bond orders on the Exchange.
    The proposal to adopt All-or-None, Fill-or-Kill and Minimum 
Quantity order types would allow Users the discretion to utilize 
specifically designed order execution strategies. These new order types 
would be substantially the same as other All-or-None, Fill-or-Kill or 
Minimum Quantity order types that have been available on debt and 
equity markets and ATSs.\22\ The Exchange notes that because fixed 
income securities are not subject to Regulation NMS, unlike similar 
All-or-None and Minimum Quantity order types on equity exchanges, the 
Exchange proposes to display the All-or-None and Minimum Quantity and 
permit executions that bypass an All-or-None order or Minimum Quantity 
order if the terms of such orders cannot be met.
---------------------------------------------------------------------------

    \22\ See supra note 13.
---------------------------------------------------------------------------

    The proposed rule change to codify Good 'Til Date Orders and Timed 
Orders is designed to add clarity and transparency regarding current 
functionality without substantively modifying such functionality. 
Specifically, the Exchange believes that the proposed rule change will 
provide additional clarity and specificity regarding the functionality 
of NYSE Bonds and thus would promote just and equitable principles of 
trade and remove impediments to a free and open market. The Exchange 
also believes that the proposed amendments will contribute to the 
protection of investors and the public interest by making the 
Exchange's rules easier to understand and would provide Users greater 
flexibility in how they quote and trade bonds on the NYSE Bonds 
platform, while also enhancing the overall market quality for bonds 
traded on the Exchange.
    The Exchange believes the proposed rule change would perfect the 
mechanism of a free and open market and a national market system by 
aligning the Exchange's offerings of order type functionality for bonds 
with those available for over-the-counter trading of bonds. The 
Exchange believes that the proposed rule change is not unfairly 
discriminatory because the new order types would be available to all 
Users.
    The determination of the IMP is essential to executing the greatest 
number of bonds during a Bond Auction and the Exchange believes 
providing the level of detail, as proposed in the revised definition, 
will promote transparency and provide clarity to the rule, which serves 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
    The proposed amendments to current Rules 86(h) and (j) reflect the 
addition of new order types and the codification of existing order 
types and provide clarity and transparency to Exchange rules, which 
serves to remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general, to protect 
investors and the public interest. The Exchange also believes that the 
proposed non-substantive organizational changes are reasonable, fair, 
and equitable because they are designed to make the rule easier to 
comprehend. The proposed amendments to Rules 86(h) and (j) and the 
organizational changes to Rule 86

[[Page 19678]]

are intended to make the rules clearer and less confusing for 
participants and investors and to eliminate potential confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\23\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposed 
change would contribute to competition because it would expand investor 
choices on NYSE Bonds and allow the Exchange to compete better with 
ATSs that already offer similar order types. The proposed rule change 
also could encourage additional bond transactions on a public exchange, 
which would contribute to greater price transparency.\24\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(8).
    \24\ Bonds were traded almost exclusively via private telephone 
negotiations until about 10 years ago, when regulatory changes and 
technological advances prompted more electronic trading, which now 
makes up about half of U.S. government-bond trading and 20 percent 
of corporate, agency and municipal issues according to industry 
estimates. See ``Bond `Electronification': Catalyst Needed,'' (June 
5, 2014), available at http://marketsmedia.com/bond-electronification-catalyst-needed/.
---------------------------------------------------------------------------

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

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

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2016-17 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2016-17. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2016-17 and should be 
submitted on or before April 26, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07684 Filed 4-4-16; 8:45 am]
 BILLING CODE 8011-01-P


