
[Federal Register Volume 81, Number 102 (Thursday, May 26, 2016)]
[Notices]
[Pages 33563-33565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12388]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77880; File No. SR-NYSE-2016-17]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
To Add Additional Order Types to the NYSE Bonds\SM\ Platform, Codify 
Functionality of Order Types Currently Available on NYSE Bonds, and 
Provide Greater Detail as to How an Indicative Match Price Is 
Established With Respect to Bond Auctions

May 20, 2016.

I. Introduction

    On March 16, 2016, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rule 86 to add additional order types to 
the NYSE Bonds\SM\ platform, to codify functionality of order types 
currently available on NYSE Bonds, and to amend the definition of 
Indicative Match Price (``IMP'') in current Rule 86(b)(2)(G) to provide 
greater detail as to how an IMP is established with respect to Bond 
Auctions. On March 29, 2016, the Exchange filed Amendment No. 1 to the 
proposal.\3\ The proposed rule change was published for comment in the 
Federal Register on April 5, 2016.\4\ No comment letters were received 
in response to the Notice. This order approves the proposed rule 
change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 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.
    \4\ See Securities Exchange Act Release No. 77477 (March 30, 
2016), 81 FR 19671 (``Notice'').
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II. Description of the Proposed Rule Change

    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,\5\ and to 
codify the operation of NYSE Bonds Good `Til Date Order and NYSE Bonds 
Timed Order that, according to the Exchange, are currently available on 
the NYSE Bonds platform.\6\ The Exchange also proposes to amend the 
definition of IMP to provide greater detail as to how an IMP is 
established with respect to Bond Auctions.
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    \5\ NYSE Bonds is the Exchange's electronic system for 
receiving, processing, executing and reporting bids, offers, and 
executions in bonds. See Notice, supra note 4, at 19672. NYSE Bonds 
currently allows Users to submit limit orders and reserve orders. 
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. A NYSE Bonds Limit Order and a NYSE 
Bonds Reserve Order are defined in current Rules 86(b)(2)(B) and 
(C), respectively. The Exchange is also proposing non-substantive 
organizational changes to renumber sections of Rule 86.
    \6\ See Notice, supra note 4, at 19672.
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    The Exchange proposes to adopt the NYSE Bonds Fill-or-Kill Order 
(``NYSE Bonds FOK Order''), 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.\7\ A NYSE Bonds FOK Order would be 
eligible to participate in all trading sessions,\8\ but could 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.\9\
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    \7\ A NYSE Bonds FOK Order cannot be a NYSE Bonds Reserve Order. 
See proposed Rule 86(b)(2)(B)(ii).
    \8\ 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 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).
    \9\ The Notice provides additional details and examples related 
to the NYSE Bonds FOK Order. See Notice, supra note 4, at 19672. See 
also proposed Rule 86(b)(2)(B)(vii).
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    The Exchange proposes to adopt the NYSE Bonds All-or-None Order 
(``NYSE Bonds AON Order''), 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.\10\ If a NYSE Bonds 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. A NYSE Bonds AON Order must be designated as ``day,'' 
``good `til cancelled,'' or ``good `til date.'' \11\
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    \10\ A NYSE Bonds AON Order cannot be a NYSE Bonds Reserve 
Order. See proposed Rule 86(b)(2)(B)(ii).
    \11\ The Notice provides additional details and examples related 
to the NYSE Bonds AON Order. See Notice, supra note 4, at 19672-73. 
See also proposed Rule 86(b)(2)(B)(viii).
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    The Exchange also proposes to adopt the NYSE Bonds Minimum Quantity 
Order, 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 orders, provided the order's quantity requirement is 
met.\12\ 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. 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 a 
balance remains 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

[[Page 33564]]

NYSE Bonds Minimum Quantity Order must be designated as ``day,'' ``good 
'til cancelled,'' or ``good 'til date.'' \13\
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    \12\ A NYSE Bonds Minimum Quantity Order cannot be a NYSE Bonds 
Reserve Order. See proposed Rule 86(b)(2)(B)(ii).
    \13\ The Notice provides additional details and examples related 
to the NYSE Bonds Minimum Quantity Order. See Notice, supra note 4, 
at 19673-74. See also proposed Rule 86(b)(2)(B)(ix).
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    The Exchange proposes to codify the operation of the NYSE Bonds 
Good 'Til Date Order (``NYSE Bonds GTD Order''), 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.\14\
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    \14\ The Notice provides additional details and examples related 
to the NYSE Bonds GTD Order. See Notice, supra note 4, at 19674-75. 
See also proposed Rule 86(b)(2)(B)(v).
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    The Exchange proposes to codify the operation of the NYSE Bonds 
Timed Order, a NYSE Bonds Limit Order or a NYSE Bonds Reserve Order 
that remains in effect for a period of time specified on the order 
(i.e., 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 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.\15\ 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.\16\
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    \15\ 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. See Notice, supra note 4, at 19675 n.18.
    \16\ The Notice provides additional details and examples related 
to the NYSE Bonds Timed Order. See Notice, supra note 4, at 19675-
76. See also proposed Rule 86(b)(2)(B)(vi).
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    Finally, the Exchange proposes to amend the definition of IMP in 
current Rule 86(b)(2)(G) to provide greater detail as to how an IMP is 
established with respect to Bond Auctions. Specifically, the Exchange 
proposes to define the IMP in a particular bond as 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.\17\ 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. Current Rules 
86(l)(3)(A) and 86(n)(2)(E) provide that a Bond Auction or a Bond Halt 
Auction, respectively, would not occur in the event of a failure to 
establish an IMP. The Exchange proposes to amend these rules 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 or Bond Halt Auction would 
not occur.\18\
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    \17\ 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. See proposed Rule 86(b)(2)(D)(i)(a).
    \18\ The Notice provides additional details and examples related 
to the calculation of the IMP. See Notice, supra note 4, at 19676-
77. See also proposed Rule 86(b)(2)(D).
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    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.\19\
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    \19\ See Notice, supra note 4, at 19677.
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    Additionally, Rule 86(j) currently states that buy and sell orders 
in NYSE Bonds are displayed, matched and

[[Page 33565]]

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 
differences with an amendment to Rule 86(j)(A)(ii).\20\
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    \20\ See id.
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    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).

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\21\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\22\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \21\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the Exchange believes that the proposed 
rule 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 its Users additional order types and therefore 
affording them greater opportunities to execute their bond orders on 
the Exchange.\23\ The Exchange further states that its proposal to 
adopt new order types on NYSE Bonds, including All-or-None, Fill-or-
Kill, and Minimum Quantity orders, is consistent with order types 
available on other ATSs and exchanges.\24\ The Commission notes that, 
according to the Exchange, the proposal to codify Good `Til Date Orders 
and Timed Orders does not add any new functionality but instead 
provides additional clarity and transparency regarding current 
functionality offered by the Exchange.\25\ Finally, the Commission 
notes that the Exchange's proposal relating to the calculation of the 
IMP is intended to provide additional detail, clarity, and transparency 
to the rule.\26\
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    \23\ See Notice, supra note 4, at 19677.
    \24\ See id. at 19672 & n.13, 19677. The Exchange states that, 
because fixed income securities are not subject to Regulation NMS, 
it 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, unlike 
similar All-or-None and Minimum Quantity order types on equity 
exchanges. See id. at 19677.
    \25\ See Notice, supra note 4, at 19677.
    \26\ See id. at 19672, 77.
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    The Commission believes that the proposed rules to adopt new order 
types on NYSE Bonds would provide Users with additional options for 
trading in fixed income securities on the Exchange. Based on the 
Exchange's representations, the Commission believes that the proposed 
rules regarding Good `Til Date and Timed Orders do not raise any novel 
regulatory considerations and should provide greater specificity, 
clarity, and transparency with respect to the functionality available 
on the Exchange. The Commission similarly believes that the proposal 
relating to the IMP calculation and the organizational changes to the 
rule text should provide additional clarity and transparency to the 
Exchange's rules. For these reasons, the Commission believes that the 
proposed rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NYSE-2016-17), as modified 
by Amendment No. 1, be, and hereby is, approved.
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    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12388 Filed 5-25-16; 8:45 am]
 BILLING CODE 8011-01-P


