Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 3 to and Order Granting Accelerated Approval of Proposed Rule Change, as Amended, Relating to the Establishment of NYSE Bonds, 14631-14636 [E7-5610]

Download as PDF Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form http://www.sec.gov/ rules/sro.shtml; or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–ISE–2007–20 on the subject line. Paper Comments SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55496; File No. SR–NYSE– 2006–37] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 3 to and Order Granting Accelerated Approval of Proposed Rule Change, as Amended, Relating to the Establishment of NYSE Bonds March 20, 2007. I. Introduction On May 16, 2006, the New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to Section 19(b)(1) of the Securities All submissions should refer to File Exchange Act of 1934 (‘‘Exchange Number SR–ISE–2007–20. This file Act’’) 1 and Rule 19b–4 thereunder,2 to number should be included on the establish a new bond trading platform, subject line if e-mail is used. To help the NYSE Bonds, to replace its existing Commission process and review your bond trading system, the Automated comments more efficiently, please use Bond System (‘‘ABS’’). The Exchange only one method. The Commission will filed Amendments No. 1 and 2 to the post all comments on the Commission’s proposed rule change on August 4, 2006 Internet Web site (http://www.sec.gov/ and October 10, 2006, respectively. The rules/sro.shtml). Copies of the proposed rule change, as amended, was submission, all subsequent published for comment in the Federal amendments, all written statements Register on October 24, 2006.3 The Commission received two comments on with respect to the proposed rule the proposal.4 On March 15, 2007, the change that are filed with the Exchange filed Amendment No. 3 to the Commission, and all written proposal.5 On March 16, 2007, the communications relating to the NYSE submitted a response to the proposed rule change between the 6 Commission and any person, other than comment letters. This order provides notice of Amendment No. 3 to the those that may be withheld from the proposed rule change and approves the public in accordance with the proposed rule change as amended on an provisions of 5 U.S.C. 552, will be accelerated basis. available for inspection and copying in II. Description of the Proposal the Commission’s Public Reference Room. Copies of such filing also will be NYSE proposes to amend its Rule 86 available for inspection and copying at to replace its existing bond trading the principal office of the ISE. All system, ABS, with a bond trading comments received will be posted platform based on technology used to without change; the Commission does operate the NYSE Arca Marketplace.7 not edit personal identifying 1 15 U.S.C. 78s(b)(1). information from submissions. You 2 17 CFR 240.19b–4. should submit only information that 3 See Securities Exchange Act you wish to make available publicly. All (October 17, 2006), 71 FR 62338.Release No. 54615 submissions should refer to File 4 See Letters from Mary C.M. Kuan, Vice Number SR–ISE–2007–20 and should be President and Assistant General Counsel, Securities Industry and Financial Markets Association submitted on or before April 18, 2007. sroberts on PROD1PC70 with NOTICES • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.12 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5588 Filed 3–27–07; 8:45 am] BILLING CODE 8010–01–P 12 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 (‘‘SIFMA’’) to Nancy Morris, Secretary, Commission, dated November 14, 2006 (‘‘SIFMA Letter’’) and from Ron L. Klein, Chairman and CEO, General Associates, Inc., dated December 13, 2006 (‘‘Klein Letter’’). 5 For a discussion of Amendment No. 3, see Section V, infra. Amendment No. 3 replaced and superseded Amendment No. 2 in its entirety. 6 See Letter from Mary Yeager, Assistant Secretary, NYSE, to Nancy M. Morris, Secretary, Commission, dated March 16, 2007 (‘‘NYSE Response Letter’’). 7 The NYSE Arca Marketplace is the successor to the Archipelago Exchange. See Securities Exchange PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 14631 The new name of the NYSE bond trading platform would be ‘‘NYSE Bonds.’’ NYSE also proposes to amend other Exchange rules to conform to revised NYSE Rule 86. Any security traded on NYSE Bonds would have to be listed, or otherwise admitted to dealing, on the Exchange. NYSE has represented that all debt securities currently trading on ABS would be transferred to NYSE Bonds.8 Additional debt securities that meet the listing standards in NYSE Listed Company Manual Sections 102.03, 103.05, 703.19, or 703.21, or that are deemed ‘‘exempted securities’’ under Section 3(a)(12) of the Exchange Act,9 could trade on NYSE Bonds. In addition, NYSE intends to trade unregistered corporate bonds pursuant to an exemption from Section 12(a) of the Exchange Act and a related rule change recently approved by the Commission.10 NYSE Bonds would be an electronic order-driven matching system. Initially, the System would allow limit orders and reserve orders. Visible interest would be executed on a price/time priority basis. However, undisplayed reserve interest in NYSE Bonds would always yield to displayed interest at a particular price.11 Outside of an auction (described below), orders marketable at the time of entry would be matched and executed, except if the price exceeded the ‘‘price collar’’ established for the bond at the time of entry. An order that is priced beyond the price collar threshold would be rejected by the system; an order that is not marketable at the time of entry would post to the NYSE Bonds order ‘‘book.’’ 12 If an order were entered at a better price than the then-best priced contra-side order on the NYSE Bonds book, the system would match the incoming order against Act Release No. 53615 (April 7, 2006), 71 FR 19226 (April 13, 2006) (SR–PCX–2006–24). 8 Such debt securities include, but are not limited to the following: corporate bonds (including convertible bonds), international bank bonds, foreign government bonds, U.S. government bonds, government agency bonds, municipal bonds, and debt-based structured products. Any security that would trade on NYSE Bonds is referred to as a ‘‘bond’’ for the purposes of NYSE rules. 9 15 U.S.C. 78c(a)(12). 10 See Securities Exchange Act Release No. 54766 (November 16, 2006), 71 FR 67657 (November 22, 2006) (File No. S7–06–05) (permitting NYSE member organizations to trade bonds on the Exchange that are not registered under Section 12(b) of the Exchange Act, but are issued by NYSE-listed companies or their wholly owned subsidiaries and that meet other conditions); Securities Exchange Act Release No. 54767 (November 16, 2006), 71 FR 67680 (November 22, 2006) (SR–NYSE–2004–69) (collectively, the ‘‘Unlisted Corporate Bonds Orders’’). 11 See proposed NYSE Rule 86(j)(3)(B). 12 See proposed NYSE Rule 86(e). E:\FR\FM\28MRN1.SGM 28MRN1 14632 Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices sroberts on PROD1PC70 with NOTICES the booked order at the booked order’s price, thereby providing price improvement to the incoming order. Bonds generally would be traded in denominations of $1,000.13 NYSE Bonds would have three trading sessions: (1) The Opening Bond Trading Session (4 a.m. until 9:30 a.m. Eastern Time (‘‘ET’’)); (2) the Core Bond Trading Session (9:30 a.m. until 4 p.m. ET); and (3) the Late Bond Trading Session (4 p.m. until 8 p.m. ET). A User 14 entering an order into NYSE Bonds would be required to designate the time in force of the order. A day order, if not executed, would expire at the end of any of the three daily trading sessions for which it was designated. A good-‘til-cancelled order would remain in effect until it was either cancelled or executed, but would be available for execution only during the Core Bond Trading Session. Unless the User indicated otherwise, the system’s default assumption would be that all orders are day orders. At the commencement of both the Opening Bond Trading Session and the Core Bond Trading Session, the Exchange would conduct a bond auction. Users would be able to submit orders for execution Opening Bond Auction and the Core Bond Auction beginning at 3:30 a.m. ET. Orders designated for the Opening Bond Trading Session would queue until 4 a.m. ET, at which time the Opening Bond Auction would take place and orders designated for the Core Bond Trading Session would queue until 9:30 a.m. ET, at which time the Core Bond Auction would take place.15 During a bond auction, the system would attempt to match and execute orders at the Indicative Match Price (‘‘IMP’’). The IMP is defined as: (1) The price at which the maximum volume of bonds are executable; (2) if there are two or more prices at which the maximum volume of bonds are executable, the price that is closest to the closing price in that bond on the previous trading day, or if the bond did not trade on the previous day, the price that is closest to the closing price on the last day that the bond traded; (3) if bond orders to buy and bond orders to sell are not marketable, the highest priced bid; or (4) if there were no bids but only offers, the lowest 13 A User submitting an order priced in a denomination less than $1,000 would be required to specify the original principal amount of the bond. See proposed Rule 86(d). 14 See proposed NYSE Rule 86(b)(2)(M) (defining ‘‘User’’ as any Subscriber, Sponsored Participant, or Authorized Trader that is authorized to obtain access to NYSE Bonds). 15 See proposed NYSE Rule 86(i). VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 offer price.16 Beginning at 3:30 a.m. ET and various times thereafter, the IMP of the Opening Bond Auction and/or the Core Bond Auction and any Imbalance 17 associated therewith would be disseminated by the Exchange. A single order to sell coupled with a single order to buy would be sufficient to establish a bond auction, provided the orders were marketable.18 If no marketable orders were entered into the system prior to the commencement of a bond auction, the auction would not occur, and the existing orders would be available only for ordinary trading in the designated bond trading session(s). Orders that were designated for a particular bond trading session and eligible to participate in the related bond auction, but not executed in such bond auction, would also be available for ordinary trading in the trading session. Orders designated for but not executed in the Opening Bond Trading Session would be eligible to be matched and executed in the Core Bond Auction at the IMP. Orders eligible for the Opening Bond Auction or the Core Bond Auction could be cancelled at any point until two minutes prior to the commencement of the respective bond auction. To post an order on NYSE Bonds, a User would be required to enter the following information: CUSIP number; quantity; order type (i.e., limit or reserve); price (up to three decimals); account type indicator (‘‘P’’ for principle or ‘‘A’’ for agent); time in force; and whether the order is buy, sell, or sell/short.19 An order could not be modified but could be cancelled at any time before it is executed, except that a User could not cancel an order eligible for execution in a regularly scheduled bond auction inside of two minutes prior to the beginning of the bond auction. The proposal contemplates the halting, suspension, and closing of bond trading on NYSE Bonds (a ‘‘Bond Halt’’) 16 See proposed NYSE Rule (b)(2)(G). proposed NYSE Rule 86(b)(2)(F) (defining ‘‘Imbalance ’’ as the number of buy or sell orders that cannot be matched with other orders at the IMP at any given time). 18 See proposed NYSE Rule 86(l) (prescribing procedures NYSE Bonds Bond Auctions). 19 The staff of the Division of Market Regulation of the Commission previously has stated that it would not recommend that the Commission take enforcement action if short sales in exchange-listed bonds and debentures are effected without complying with Rule 10a–1 under the Exchange Act, 17 CFR 240.10a–1. See Securities Exchange Act Release No. 30772 (June 3, 1992), 57 FR 24415 (June 9, 1992) (File No. S7–13–92) (‘‘Bond Short Sale NoAction Position’’). The Exchange deems this determination by the Commission Staff to apply to Exchange Rule 440B (Short Sales). 17 See PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 in certain circumstances.20 During a Bond Halt, orders could enter the system and queue according to price/ time priority but would not execute. When the Bond Halt is concluded, trading would resume with a Bond Halt Auction, at which time orders would match and execute at the IMP under similar terms to the other bond auctions. Like the other bond auctions, no executions would occur unless marketable orders were available prior to the commencement of the Bond Halt Auction. Orders eligible for execution in the Bond Halt Auction could be cancelled at any point prior to the beginning of the Bond Halt Auction. At the conclusion of the Bond Halt Auction, ordinary trading would resume in the trading session in progress at the conclusion of the halt. A member organization wishing to trade on NYSE Bonds (‘‘Subscriber’’) would be required to enter into a written agreement with the Exchange.21 A non-member (‘‘Sponsored Participant’’) 22 could gain access to NYSE Bonds only by entering into a written agreement with a Subscriber (i.e., a ‘‘Sponsoring Member Organization’’) 23 and the Exchange. In the sponsorship agreement, the Sponsoring Member Organization would acknowledge, among other things, that any order entered by the Sponsored Participant and any execution resulting from such order would be binding in all respects on the Sponsoring Member Organization.24 The Sponsoring Member Organization would be responsible for any and all actions taken by its Sponsored Participant. The Sponsored Participant, in turn, would agree, among other things, to comply with the rules of the Exchange and the rules and procedures with regard to NYSE Bonds, as if it were a member of the Exchange.25 The Sponsored Participant also would be required to: (1) Take reasonable security precautions to prevent unauthorized access to NYSE Bonds; (2) establish and maintain an up-to-date list of persons permitted to access NYSE Bonds on behalf of the Sponsored Participant (i.e., ‘‘Authorized Traders’’) 26; and (3) provide that list to the Sponsoring Member Organization. Moreover, the Sponsoring Member Organization would be required to undertake certain responsibilities related to a Sponsored 20 See proposed NYSE Rule 86(k). proposed NYSE Rule 86(o)(a). 22 See proposed NYSE Rule 86(b)(2)(K). 23 See proposed NYSE Rule 86(b)(2)(J). 24 See proposed NYSE Rule 86(o)(b)(2)(B)(i). 25 See proposed NYSE Rule 86(o)(b)(2)(C). 26 See proposed NYSE Rule 86(b)(2)(L). 21 See E:\FR\FM\28MRN1.SGM 28MRN1 Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices Participant’s Authorized Traders, including: (1) Maintaining a list of Authorized Traders; (2) establishing procedures to ensure that Authorized Traders comply with Exchange rules and to ensure the safety of and access to the equipment used to access NYSE Bonds; and (3) suspending an individual’s status as an Authorized Trader when such individual’s action has caused the Sponsoring Member Organization to fail to comply with Exchange rules.27 The proposed NYSE Bonds rules also include provisions for the handling of a ‘‘Clearly Erroneous Execution,’’ defined as an execution involving an obvious error in any term of an order participating in such execution, such as price, unit of trading, or identification of the bond.28 Subject to the approval of the Exchange, a Clearly Erroneous Execution could be nullified if no party to the trade objects.29 The Exchange also has proposed to establish procedures for reviewing a transaction if one of the parties does not agree to the cancellation. A User could request a review via telephone, facsimile, or e-mail. Upon receipt of such request, the Exchange would notify the counterparty as soon as practicable. Any request for review would generally be required to be submitted within 30 minutes of the trade; however, the Exchange could consider a request after 30 minutes on a case-by-case basis in a manner that promotes a fair and orderly market and does not unfairly discriminate against Users of NYSE Bonds. Each party to the transaction would be required to provide, within 30 minutes of the request for review, any supporting written information as may be reasonably requested by the Exchange to aid in the resolution of the matter. Unless both parties to the disputed transaction agreed to withdraw the initial request for review, an Officer of the Exchange or a designee (the ‘‘Reviewer’’) would review the transaction and determine whether it were clearly erroneous, with a view towards maintaining a fair and orderly market and the protection of investors and the public interest. In Amendment No. 3, the Exchange proposed factors that the Reviewer could consider in the determination of a Clearly Erroneous Execution.30 If the Reviewer determines 27 See proposed NYSE Rule 86(o)(b)(4). proposed NYSE Rule 86(b)(2)(H). 29 See proposed NYSE Rule 86(m)(1). 30 Such factors include execution price(s); volume and volatility of a bond; news released for the issuer or the bond and/or the related security; the existence of trading halts; corporate action(s); general market conditions; rating of the bond; interest and or coupon rate; maturity date; yield sroberts on PROD1PC70 with NOTICES 28 See VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 that the transaction in dispute is erroneous, the transaction would be declared null and void, or one or more of the terms of the transaction would be modified. The parties would be promptly notified of the determination. A request for review of the initial determination by the Clearly Erroneous Execution Panel (‘‘CEE Panel’’) 31 may be made within 30 minutes after the party making the appeal is given notice of the determination. However, the CEE Panel would not review a determination of the Reviewer if the Reviewer determined that the number of affected transactions was such that immediate finality would be necessary to maintain a fair and orderly market and to protect investors and the public interest. All determinations by the CEE Panel would constitute final action by the Exchange. In addition, the proposal would allow the Exchange to review transactions affected by a system disruption, system malfunction, or equipment changeover to decide if any such transactions were erroneous.32 In the event of any system disruption, system malfunction, or equipment changeover in the use or operation of any electronic communications and trading facilities of the Exchange, an Officer of the Exchange or a designee, on his or her own initiative, could review a transaction arising out of the use or operation of such facilities during such period and declare it unchanged, nullify it, or modify the terms of the trade. Absent extraordinary circumstances, any such action of the Exchange would need to be taken within 30 minutes of detection of the system disruption, system malfunction, equipment changeover, or an erroneous transaction resulting from such system problem. If an erroneous transaction occurred as a result of a system problem and the Exchange determines to revise the trade, the counterparties to the erroneous transaction would be notified of the curves; last sale, if available within a reasonable time frame; executions inconsistent with the trading pattern of a bond; current day’s trading high/low; recent day’s and week’s trading high/low; executions outside the 52 week high/low; effect of a single large order creating several prints at various prices; and quotes and executions of other market centers. See proposed NYSE Rule 86(m)(2)(E). 31 The CEE Panel would be comprised of the Chief Executive Officer of NYSE Regulation or a designee, and representatives from two Subscribers to NYSE Bonds. The Exchange would designate at least ten Subscribers to NYSE Bonds to act as representatives to be called upon to serve on the CEE Panel, as needed. In no case would a CEE Panel include a person related to a party to the trade in question. To the extent reasonably possible, the Exchange would call upon the designated representatives to participate on a CEE Panel on an equally frequent basis. See proposed NYSE Rule 86(m)(4)(A) and (B). 32 See proposed NYSE Rule 86(m)(5). PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 14633 action as soon as practicable. A User aggrieved by such action could appeal such action to the CEE Panel in accordance with the provisions described above. Most orders matched on NYSE Bonds would be locked-in trades and would be submitted to a registered clearing agency with accrued interest calculated according to the defined eligibility characteristics of the particular bond.33 Settlement of corporate bond trades would be ‘‘regular way,’’ i.e., three-day settlement. At a later date, the Exchange intends to publish a real-time bond data feed, and intends to make such data available for purchase by nonsubscribing market participants, thirdparty data vendors, and other interested parties who agree to the Exchange’s terms. In addition to disseminating the NYSE Bonds order book, the data feed would also include the last sale price and size as executions occur. The Exchange also proposed several technical changes to other NYSE rules to remove certain obsolete references and otherwise conform the terms of certain other rules to revised NYSE Rule 86. III. Summary of Comments and NYSE’s Response As noted above, the Commission received two comment letters on the proposal. The Klein Letter expressed support for the NYSE’s proposal. The other commenter, SIFMA, expressed some support for NYSE’s proposal but also raised certain concerns. The Exchange responded to the concerns raised in the SIFMA Letter. SIFMA questioned whether the Exchange’s plans to assess a fee for the market data generated by NYSE Bonds would confer an unfair competitive 33 The Exchange submits completed trades to one of the subsidiaries of the Depository Trust Clearing Corporation (‘‘DTCC’’) for clearance and settlement. The National Securities Clearing Corporation (‘‘NSCC’’), a subsidiary of DTCC, provides clearance and settlement services for government agency, corporate, and municipal bonds that trade on ABS. While the Government Securities Division of the Fixed Income Clearing Corporation (‘‘FICC’’), another subsidiary of DTCC, provides clearance and settlement services for transactions in U.S. government bonds, the Exchange does not currently have an agreement with FICC for such settlement and clearance. Presently, U.S. government bonds that trade on ABS are traded ex-clearing (i.e., the parties to the transaction arrange for manual clearing and settlement). The Exchange plans to submit trades on a locked-in basis to FICC for clearance and settlement in 2007. Until such time as the Exchange has established such an agreement with the FICC, the U.S. government bonds that trade on NYSE Bonds would continue to trade exclearing as they do today on ABS. Trades that would not be locked-in would be those in bonds that are not set up for the Exchange’s registered clearing agency, or bonds having a face value other than $1,000. E:\FR\FM\28MRN1.SGM 28MRN1 14634 Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices advantage as the exclusive processor of quote and trade data of NYSE Bonds, which it believed may lead to unreasonable prices for such data.34 In addition, SIFMA raised concern regarding the Exchange’s intention to limit the use and redistribution of its market data.35 NYSE responded that SIFMA’s concerns were premature in that the Exchange has not yet filed a proposal with the Commission under Rule 19b–4 under the Exchange Act to modify the fees that it charges for NYSE Bonds data.36 SIFMA also expressed concerns relating to the jurisdiction of NASD for transactions on NYSE Bonds.37 Specifically, SIFMA requested clarity on whether Users of NYSE Bonds would have any trade reporting obligations to NASD for bonds that trade on NYSE pursuant to Exchange Rules 1400 and 1401. SIFMA also raised a more general concern that NASD may assert jurisdiction over trading activities effected on a national securities exchange, including NYSE Bonds. NYSE argued that the concerns were without merit because NASD recently established a two-year pilot program 38 that exempted unlisted bonds trading on the NYSE subject to the Exchange’s trade reporting requirements from TRACE reporting requirements.39 Moreover, NYSE clarified that NYSE Regulation will undertake primary responsibility for regulating NYSE Bonds and that NASD will retain responsibility for regulating the overthe-counter corporate bond market. Finally, SIFMA expressed concern about the lack of definitive quantitative standards in the proposed trade nullification rule for NYSE Bonds.40 The Exchange included in Amendment No. 3 relevant factors that may be considered when the Exchange determines whether an execution is clearly erroneous.41 Commission finds that approval of the proposal is consistent with Section 6(b)(5) of the Exchange Act 43 in that it is designed to facilitate transactions in securities; 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 mechanism of a free and open market and a national market system; and, in general, to protect investors and the public interest. NYSE Bonds will replace ABS as the facility for trading bonds on the Exchange. The Commission believes that an exchange’s determination to implement new trading technology is generally consistent with the Exchange Act. As described above, the proposal includes provisions regarding order entry, priority, trading sessions and auctions, manner of execution, clearing, trade halt procedures, and trade nullification. The Commission finds that these provisions are reasonably designed to promote the efficient functioning of NYSE Bonds and are generally consistent with the Exchange Act.44 Other aspects of the proposal are described in more detail below. IV. Discussion After careful review, the Commission finds that the proposed rule change is consistent with the Exchange Act and the rules and regulations promulgated thereunder applicable to a national securities exchange.42 Specifically, the Price Collars The Exchange would reject an incoming order that is otherwise 34 See SIFMA Letter at 2–3. 35 Id. 36 See NYSE Response Letter at 2. SIFMA Letter at 3–4. 38 See Securities Exchange Act Release No. 54678 (November 16, 2006), 71 FR 67673 (November 22, 2006) (SR–NASD–2006–110). 39 See NYSE Response Letter at 3. 40 See SIFMA Letter at 4. 41 See proposed NYSE Rule 86(m)(2)(E). 42 In approving this proposal, the Commission has considered the proposed rule’s impact on sroberts on PROD1PC70 with NOTICES 37 See VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 Sponsored Access to NYSE Bonds Only members that enter into a service agreement with the Exchange may access NYSE Bonds. In addition, the Exchange would permit a nonmember that enters into an agreement with a subscribing member and the Exchange to access NYSE Bonds as a ‘‘Sponsored Participant.’’ These sponsored access provisions are substantially similar to those that have been adopted by other national securities exchanges and previously approved by the Commission.45 efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 43 15 U.S.C. 78f(b)(5). 44 However, the Commission notes that the Exchange did not in this filing propose any fee changes in connection with the NYSE Bonds system. Therefore, the Commission in this order is not making any findings regarding any fee that the Exchange charges or may in the future propose to charge in connection with the use of the NYSE Bonds system. 45 See NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’) Rule 7.29(b); Securities Exchange Act Release No. 44983 (October 25, 2001), 66 FR 55225 (November 1, 2001) (SR–PCX–00–25) (establishing sponsored participant provision for equity trading on the NYSE Arca Marketplace). PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 marketable if the price of the order violated the price collar for that bond. The Commission believes that the proposed price collars are reasonably designed to protect investors and promote the public interest by preventing executions that are substantially away from the prevailing market price. These provisions are similar to others employed by NYSE Arca and Nasdaq, which previously have been approved by the Commission.46 Applicability of Section 11(a) and (b) of the Exchange Act Section 11(a) of the Exchange Act 47 prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises investment discretion, unless an exception applies. The Commission notes that this general prohibition would not generally impact trading on NYSE Bonds because Rule 11a1–4(T) under the Exchange Act 48 deems transactions in bonds on a national securities exchange for a member’s own account to be consistent with Section 11(a). However, for those securities trading on NYSE Bonds for which this exemption may not be available, such as certain structured products, the Exchange has represented that transactions effected on NYSE Bonds meet the requirements of Rule 11a2– 2(T) under the Exchange Act.49 Similarly, the Commission notes that Section 11(b) of the Exchange Act 50 and Rule 11b–1 thereunder,51 which pertain to specialists and market-makers, would not be implicated because there would be no specialists or market makers on NYSE Bonds. 46 See, e.g., NYSE Arca Equities Rule 1.1(r)(A) (NYSE Arca Market Order Auction and Closing Auction), Securities Exchange Act Release No. 52361 (August 30, 2005), 70 FR 53704 (September 9, 2005) (SR–PCX–2005–58); Nasdaq Rule 4752(d)(2)(E) (Nasdaq Opening Process), Securities Exchange Act Release No. 50405 (September 16, 2004), 69 FR 57118 (September 23, 2004) (SR– NASD–2004–071); and Nasdaq Rule 4754(b)(2)(E) (Nasdaq Closing Cross), Securities Exchange Act Release No. 49406 (March 11, 2004), 69 FR 12879 (March 18, 2004) (SR–NASD–2003–173). 47 15 U.S.C. 78k(a). 48 17 CFR 240.11a1–4(T). 49 The Commission notes that, to the extent that any security trading on NYSE Bonds is an NMS security, see 17 CFR 242.600(b)(46), the Commission is not making any finding herein as to whether NYSE Bonds is compliant with the requirements of Regulation NMS under the Exchange Act. 50 15 U.S.C. 78k(b). 51 17 CFR 240.11b–1. E:\FR\FM\28MRN1.SGM 28MRN1 Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices Applicability of Rule 10a–1 Under the Exchange Act In its filing, NYSE states that: ‘‘The staff of the Division of Market Regulation of the Securities and Exchange Commission has stated that it would not recommend that the Commission take enforcement action if short sales in exchange-listed bonds and debentures are effected without complying with SEC Rule 10a–1.’’ 52 By this filing, the Exchange seeks continued effect of this position. The staff maintains this position. However, the Commission notes that the staff’s position does not apply to convertible bonds.53 Accordingly, convertible bonds would continue to be excluded from applicability of this position. sroberts on PROD1PC70 with NOTICES V. Accelerated Approval Pursuant to Section 19(b)(2) of the Exchange Act,54 the Commission may not approve any proposed rule change prior to the 30th day after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding. In Amendment No. 3, the Exchange, among other things: • Revised proposed NYSE Rule 86(b) to indicate that, if other NYSE rules relating to bonds conflict with the provisions of proposed NYSE Rule 86, Rule 86 would control; • Eliminated references to the ‘‘Floor’’ of the Exchange to make clear that NYSE Bonds is a fully electronic trading platform; • Noted that dealers trading municipal bonds must report such transactions to the Municipal Securities Rulemaking Board (‘‘MSRB’’) in accordance with MSRB Rule G–14; • Revised proposed NYSE Rule 86(b)(2)(E) to indicate that, unless otherwise designated, an order will be treated as a day order; • Revised proposed NYSE Rule 86(b)(2)(G) to indicate that, if no bids are submitted to a Bond Auction, the 52 See Bond Short Sale No-Action Position, supra note 19 (footnote omitted) (stating that, ‘‘From and after the date of this release until the Commission takes final action on the proposed amendment to Rule 10a–1(b), the staff of the Division will not recommend that the Commission take enforcement action under Rule 10a–1 if short sales in exchangelisted bonds and debentures are effected without complying with the Rule’’). 53 See id. (noting that convertible bonds are defined as ‘‘equity securities’’ in the Exchange Act and that ‘‘Exchange Act Section 3(a)(11), 15 U.S.C. 78c(a)(11), defines the term ‘equity security’ to include ‘any stock or similar security, or any security convertible, with or without consideration, into such a security * * *.’ Short selling of convertible bonds * * * may have an impact on the price of related exchange-traded equity securities’’). 54 15 U.S.C. 78s(b)(2). VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 Indicative Match Price will be the lowest offer price; • Revised proposed NYSE Rule 86(e) to clarify that the price collars will only apply during ordinary trading and not during the queuing of bond orders or during bond auctions; • Revised proposed NYSE Rule 86(h) to clarify that orders designated only for the Opening Bond Trading Session that do not execute in the Opening Bond Auction or Opening Bond Trading Session will be eligible to participate in the Core Bond Auction and would be cancelled if not executed in the Core Bond Auction; • Modified proposed NYSE Rule 86(i) to clarify that orders may be entered into NYSE Bonds until 8 p.m. ET and to otherwise clarify the operation of the three proposed bond trading sessions; • Revised proposed NYSE Rule 86(l) to indicate that, beginning at 3:30 a.m. ET, the IMP for the Opening Bond Auction and the Core Bond Auction, and any associated Imbalance, will be published by the Exchange. In addition, the changes to proposed NYSE Rule 86(l) further explain the functionalities of the Bond Auctions; • Clarified in proposed NYSE Rule 86(m) the possible outcomes after review of potentially erroneous transactions by the Reviewer and by the Clearly Erroneous Execution Panel. In addition, the Exchange added factors that may be considered in the determination of a Clearly Erroneous Execution; • Revised proposed NYSE Rule 86(n)(2)(G) to indicate that orders that are eligible for execution in the Bond Halt Auction may be cancelled at any time; • Revised portions of proposed NYSE Rule 86(o) related to a sponsored access to NYSE Bonds to conform substantially to related provisions of other national securities exchanges, including NYSE Arca; 55 • Represented that transactions effected on NYSE Bonds meet the requirements of Rule 11a2–2(T) under the Exchange Act and included an accompanying discussion; • Represented that NYSE Regulation can effectively regulate NYSE Bonds; and • Made other minor clarifying and technical changes to the proposal. The Commission believes that these changes do not raise any significant or novel regulatory issues. Accordingly, the Commission hereby finds good cause for approving the proposed rule change, as modified by Amendment No. 3, prior to the 30th day after publishing 55 See PO 00000 notice of the amended proposal in the Federal Register. VI. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3, including whether Amendment No. 3 is consistent with the Exchange 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 e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2006–37 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2006–37. This file number should be included on the subject line if e-mail 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 inspection and copying in the Commission’s Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of NYSE. 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–2006–37 and should be submitted on or before April 18, 2007. NYSE Arca Equities Rule 7.29. Frm 00121 Fmt 4703 Sfmt 4703 14635 E:\FR\FM\28MRN1.SGM 28MRN1 14636 Federal Register / Vol. 72, No. 59 / Wednesday, March 28, 2007 / Notices VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,56 that the proposed rule change (SR– NYSE–2006–37), as amended, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.57 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5610 Filed 3–27–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55513; File No. SR–Phlx– 2007–28] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Dissemination of Currency Spot Values March 22, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 22, 2007, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and Rule 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. sroberts on PROD1PC70 with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to disseminate a modified spot rate for its U.S. dollarsettled foreign currency options (‘‘FCOs’’). The text of the proposed rule change is available on the Phlx’s Web site (http://www.phlx.com), at the principal office of Phlx, and at the Commission’s Public Reference Room. 56 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 57 17 VerDate Aug<31>2005 17:09 Mar 27, 2007 Jkt 211001 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 Exchange 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 these 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 aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to permit the Exchange to disseminate over the facilities of the Consolidated Tape Association a modified spot rate for U.S. dollar-settled FCOs on the British pound and the euro, which the Exchange has listed since January 8, 2007.5 The modified spot rate will be calculated by the Exchange, based on spot prices (bids and asks) it receives from Thomson Financial LLC (‘‘Thomson’’).6 For each currency, the Exchange will determine the midpoint between the bid and the ask and will modify that rate by multiplying it by 100. For example, if 1.3200 U.S. dollars buys 1 euro, a modifier of 100 would be used so that the modified spot rate would become 132.00. If 1.3358 U.S. dollars buys 1 euro, the modified spot rate, using the same 100 modifier, would become 133.58. This proposed rule change is merely for purposes of dissemination of the modified spot rate over the facilities of the Consolidated Tape Association and does not amend or affect the Exchange’s existing rules governing U.S. dollar-settled FCOs. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) 5 See Securities Exchange Act Release No. 54989 (December 21, 2006), 71 FR 78506 (December 29, 2006) (approving File No. SR-Phlx-2006–34). 6 Currently, the Thomson spot prices are based on the bid/ask prices supplied to its agent Tenfore System Ltd. (‘‘Tenfore’’) by contributors reporting to Tenfore. Tenfore contributors comprise 19 different banks, brokers and FX real time dealing portals. Contributors provide bid/ask prices to Tenfore which, in turn, forwards them to Thomson upon receipt. Thomson forwards those bid/ask prices to Phlx upon receipt from Tenfore. At any given time the Thomson spot rate consists of the most current bid/ask prices provided by any contributor to Tenfore and forwarded by Tenfore to Thomson. PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 of the Act 7 in general, and furthers the objectives of Section 6(b)(5) of the Act 8 in particular, in that it is designed to promote just and equitable principles of trade, 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, by providing investors in U.S. dollarsettled FCOs the ability to more easily track the value of the underlying currencies in the spot market and therefore make informed trading decisions. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of filing (or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest), the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and subparagraph (f)(6) of Rule 19b–4 thereunder.10 A proposed rule change filed under Rule 19b–4(f)(6) normally may not become operative prior to 30 days after the date of filing.11 However, Rule 19b– 4(f)(6)(iii) 12 permits the Commission to designate a shorter time if such action is consistent with the protection of 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. Phlx has satisfied the five-day prefiling requirement. 12 Id. 8 15 E:\FR\FM\28MRN1.SGM 28MRN1

Agencies

[Federal Register Volume 72, Number 59 (Wednesday, March 28, 2007)]
[Notices]
[Pages 14631-14636]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5610]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55496; File No. SR-NYSE-2006-37]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 3 to and Order Granting Accelerated 
Approval of Proposed Rule Change, as Amended, Relating to the 
Establishment of NYSE Bonds

March 20, 2007.

I. Introduction

    On May 16, 2006, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 
19b-4 thereunder,\2\ to establish a new bond trading platform, NYSE 
Bonds, to replace its existing bond trading system, the Automated Bond 
System (``ABS''). The Exchange filed Amendments No. 1 and 2 to the 
proposed rule change on August 4, 2006 and October 10, 2006, 
respectively. The proposed rule change, as amended, was published for 
comment in the Federal Register on October 24, 2006.\3\ The Commission 
received two comments on the proposal.\4\ On March 15, 2007, the 
Exchange filed Amendment No. 3 to the proposal.\5\ On March 16, 2007, 
the NYSE submitted a response to the comment letters.\6\ This order 
provides notice of Amendment No. 3 to the proposed rule change and 
approves the proposed rule change as amended on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 54615 (October 17, 
2006), 71 FR 62338.
    \4\ See Letters from Mary C.M. Kuan, Vice President and 
Assistant General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA'') to Nancy Morris, Secretary, Commission, 
dated November 14, 2006 (``SIFMA Letter'') and from Ron L. Klein, 
Chairman and CEO, General Associates, Inc., dated December 13, 2006 
(``Klein Letter'').
    \5\ For a discussion of Amendment No. 3, see Section V, infra. 
Amendment No. 3 replaced and superseded Amendment No. 2 in its 
entirety.
    \6\ See Letter from Mary Yeager, Assistant Secretary, NYSE, to 
Nancy M. Morris, Secretary, Commission, dated March 16, 2007 (``NYSE 
Response Letter'').
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II. Description of the Proposal

    NYSE proposes to amend its Rule 86 to replace its existing bond 
trading system, ABS, with a bond trading platform based on technology 
used to operate the NYSE Arca Marketplace.\7\ The new name of the NYSE 
bond trading platform would be ``NYSE Bonds.'' NYSE also proposes to 
amend other Exchange rules to conform to revised NYSE Rule 86.
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    \7\ The NYSE Arca Marketplace is the successor to the 
Archipelago Exchange. See Securities Exchange Act Release No. 53615 
(April 7, 2006), 71 FR 19226 (April 13, 2006) (SR-PCX-2006-24).
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    Any security traded on NYSE Bonds would have to be listed, or 
otherwise admitted to dealing, on the Exchange. NYSE has represented 
that all debt securities currently trading on ABS would be transferred 
to NYSE Bonds.\8\ Additional debt securities that meet the listing 
standards in NYSE Listed Company Manual Sections 102.03, 103.05, 
703.19, or 703.21, or that are deemed ``exempted securities'' under 
Section 3(a)(12) of the Exchange Act,\9\ could trade on NYSE Bonds. In 
addition, NYSE intends to trade unregistered corporate bonds pursuant 
to an exemption from Section 12(a) of the Exchange Act and a related 
rule change recently approved by the Commission.\10\
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    \8\ Such debt securities include, but are not limited to the 
following: corporate bonds (including convertible bonds), 
international bank bonds, foreign government bonds, U.S. government 
bonds, government agency bonds, municipal bonds, and debt-based 
structured products. Any security that would trade on NYSE Bonds is 
referred to as a ``bond'' for the purposes of NYSE rules.
    \9\ 15 U.S.C. 78c(a)(12).
    \10\ See Securities Exchange Act Release No. 54766 (November 16, 
2006), 71 FR 67657 (November 22, 2006) (File No. S7-06-05) 
(permitting NYSE member organizations to trade bonds on the Exchange 
that are not registered under Section 12(b) of the Exchange Act, but 
are issued by NYSE-listed companies or their wholly owned 
subsidiaries and that meet other conditions); Securities Exchange 
Act Release No. 54767 (November 16, 2006), 71 FR 67680 (November 22, 
2006) (SR-NYSE-2004-69) (collectively, the ``Unlisted Corporate 
Bonds Orders'').
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    NYSE Bonds would be an electronic order-driven matching system. 
Initially, the System would allow limit orders and reserve orders. 
Visible interest would be executed on a price/time priority basis. 
However, undisplayed reserve interest in NYSE Bonds would always yield 
to displayed interest at a particular price.\11\ Outside of an auction 
(described below), orders marketable at the time of entry would be 
matched and executed, except if the price exceeded the ``price collar'' 
established for the bond at the time of entry. An order that is priced 
beyond the price collar threshold would be rejected by the system; an 
order that is not marketable at the time of entry would post to the 
NYSE Bonds order ``book.'' \12\ If an order were entered at a better 
price than the then-best priced contra-side order on the NYSE Bonds 
book, the system would match the incoming order against

[[Page 14632]]

the booked order at the booked order's price, thereby providing price 
improvement to the incoming order. Bonds generally would be traded in 
denominations of $1,000.\13\
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    \11\ See proposed NYSE Rule 86(j)(3)(B).
    \12\ See proposed NYSE Rule 86(e).
    \13\ A User submitting an order priced in a denomination less 
than $1,000 would be required to specify the original principal 
amount of the bond. See proposed Rule 86(d).
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    NYSE Bonds would have three trading sessions: (1) The Opening Bond 
Trading Session (4 a.m. until 9:30 a.m. Eastern Time (``ET'')); (2) the 
Core Bond Trading Session (9:30 a.m. until 4 p.m. ET); and (3) the Late 
Bond Trading Session (4 p.m. until 8 p.m. ET). A User \14\ entering an 
order into NYSE Bonds would be required to designate the time in force 
of the order. A day order, if not executed, would expire at the end of 
any of the three daily trading sessions for which it was designated. A 
good-`til-cancelled order would remain in effect until it was either 
cancelled or executed, but would be available for execution only during 
the Core Bond Trading Session. Unless the User indicated otherwise, the 
system's default assumption would be that all orders are day orders.
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    \14\ See proposed NYSE Rule 86(b)(2)(M) (defining ``User'' as 
any Subscriber, Sponsored Participant, or Authorized Trader that is 
authorized to obtain access to NYSE Bonds).
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    At the commencement of both the Opening Bond Trading Session and 
the Core Bond Trading Session, the Exchange would conduct a bond 
auction. Users would be able to submit orders for execution Opening 
Bond Auction and the Core Bond Auction beginning at 3:30 a.m. ET. 
Orders designated for the Opening Bond Trading Session would queue 
until 4 a.m. ET, at which time the Opening Bond Auction would take 
place and orders designated for the Core Bond Trading Session would 
queue until 9:30 a.m. ET, at which time the Core Bond Auction would 
take place.\15\ During a bond auction, the system would attempt to 
match and execute orders at the Indicative Match Price (``IMP''). The 
IMP is defined as: (1) The price at which the maximum volume of bonds 
are executable; (2) if there are two or more prices at which the 
maximum volume of bonds are executable, the price that is closest to 
the closing price in that bond on the previous trading day, or if the 
bond did not trade on the previous day, the price that is closest to 
the closing price on the last day that the bond traded; (3) if bond 
orders to buy and bond orders to sell are not marketable, the highest 
priced bid; or (4) if there were no bids but only offers, the lowest 
offer price.\16\ Beginning at 3:30 a.m. ET and various times 
thereafter, the IMP of the Opening Bond Auction and/or the Core Bond 
Auction and any Imbalance \17\ associated therewith would be 
disseminated by the Exchange.
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    \15\ See proposed NYSE Rule 86(i).
    \16\ See proposed NYSE Rule (b)(2)(G).
    \17\ See proposed NYSE Rule 86(b)(2)(F) (defining ``Imbalance '' 
as the number of buy or sell orders that cannot be matched with 
other orders at the IMP at any given time).
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    A single order to sell coupled with a single order to buy would be 
sufficient to establish a bond auction, provided the orders were 
marketable.\18\ If no marketable orders were entered into the system 
prior to the commencement of a bond auction, the auction would not 
occur, and the existing orders would be available only for ordinary 
trading in the designated bond trading session(s). Orders that were 
designated for a particular bond trading session and eligible to 
participate in the related bond auction, but not executed in such bond 
auction, would also be available for ordinary trading in the trading 
session. Orders designated for but not executed in the Opening Bond 
Trading Session would be eligible to be matched and executed in the 
Core Bond Auction at the IMP. Orders eligible for the Opening Bond 
Auction or the Core Bond Auction could be cancelled at any point until 
two minutes prior to the commencement of the respective bond auction.
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    \18\ See proposed NYSE Rule 86(l) (prescribing procedures NYSE 
Bonds Bond Auctions).
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    To post an order on NYSE Bonds, a User would be required to enter 
the following information: CUSIP number; quantity; order type (i.e., 
limit or reserve); price (up to three decimals); account type indicator 
(``P'' for principle or ``A'' for agent); time in force; and whether 
the order is buy, sell, or sell/short.\19\ An order could not be 
modified but could be cancelled at any time before it is executed, 
except that a User could not cancel an order eligible for execution in 
a regularly scheduled bond auction inside of two minutes prior to the 
beginning of the bond auction.
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    \19\ The staff of the Division of Market Regulation of the 
Commission previously has stated that it would not recommend that 
the Commission take enforcement action if short sales in exchange-
listed bonds and debentures are effected without complying with Rule 
10a-1 under the Exchange Act, 17 CFR 240.10a-1. See Securities 
Exchange Act Release No. 30772 (June 3, 1992), 57 FR 24415 (June 9, 
1992) (File No. S7-13-92) (``Bond Short Sale No-Action Position''). 
The Exchange deems this determination by the Commission Staff to 
apply to Exchange Rule 440B (Short Sales).
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    The proposal contemplates the halting, suspension, and closing of 
bond trading on NYSE Bonds (a ``Bond Halt'') in certain 
circumstances.\20\ During a Bond Halt, orders could enter the system 
and queue according to price/time priority but would not execute. When 
the Bond Halt is concluded, trading would resume with a Bond Halt 
Auction, at which time orders would match and execute at the IMP under 
similar terms to the other bond auctions. Like the other bond auctions, 
no executions would occur unless marketable orders were available prior 
to the commencement of the Bond Halt Auction. Orders eligible for 
execution in the Bond Halt Auction could be cancelled at any point 
prior to the beginning of the Bond Halt Auction. At the conclusion of 
the Bond Halt Auction, ordinary trading would resume in the trading 
session in progress at the conclusion of the halt.
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    \20\ See proposed NYSE Rule 86(k).
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    A member organization wishing to trade on NYSE Bonds 
(``Subscriber'') would be required to enter into a written agreement 
with the Exchange.\21\ A non-member (``Sponsored Participant'') \22\ 
could gain access to NYSE Bonds only by entering into a written 
agreement with a Subscriber (i.e., a ``Sponsoring Member 
Organization'') \23\ and the Exchange. In the sponsorship agreement, 
the Sponsoring Member Organization would acknowledge, among other 
things, that any order entered by the Sponsored Participant and any 
execution resulting from such order would be binding in all respects on 
the Sponsoring Member Organization.\24\ The Sponsoring Member 
Organization would be responsible for any and all actions taken by its 
Sponsored Participant. The Sponsored Participant, in turn, would agree, 
among other things, to comply with the rules of the Exchange and the 
rules and procedures with regard to NYSE Bonds, as if it were a member 
of the Exchange.\25\ The Sponsored Participant also would be required 
to: (1) Take reasonable security precautions to prevent unauthorized 
access to NYSE Bonds; (2) establish and maintain an up-to-date list of 
persons permitted to access NYSE Bonds on behalf of the Sponsored 
Participant (i.e., ``Authorized Traders'') \26\; and (3) provide that 
list to the Sponsoring Member Organization. Moreover, the Sponsoring 
Member Organization would be required to undertake certain 
responsibilities related to a Sponsored

[[Page 14633]]

Participant's Authorized Traders, including: (1) Maintaining a list of 
Authorized Traders; (2) establishing procedures to ensure that 
Authorized Traders comply with Exchange rules and to ensure the safety 
of and access to the equipment used to access NYSE Bonds; and (3) 
suspending an individual's status as an Authorized Trader when such 
individual's action has caused the Sponsoring Member Organization to 
fail to comply with Exchange rules.\27\
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    \21\ See proposed NYSE Rule 86(o)(a).
    \22\ See proposed NYSE Rule 86(b)(2)(K).
    \23\ See proposed NYSE Rule 86(b)(2)(J).
    \24\ See proposed NYSE Rule 86(o)(b)(2)(B)(i).
    \25\ See proposed NYSE Rule 86(o)(b)(2)(C).
    \26\ See proposed NYSE Rule 86(b)(2)(L).
    \27\ See proposed NYSE Rule 86(o)(b)(4).
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    The proposed NYSE Bonds rules also include provisions for the 
handling of a ``Clearly Erroneous Execution,'' defined as an execution 
involving an obvious error in any term of an order participating in 
such execution, such as price, unit of trading, or identification of 
the bond.\28\ Subject to the approval of the Exchange, a Clearly 
Erroneous Execution could be nullified if no party to the trade 
objects.\29\ The Exchange also has proposed to establish procedures for 
reviewing a transaction if one of the parties does not agree to the 
cancellation. A User could request a review via telephone, facsimile, 
or e-mail. Upon receipt of such request, the Exchange would notify the 
counterparty as soon as practicable. Any request for review would 
generally be required to be submitted within 30 minutes of the trade; 
however, the Exchange could consider a request after 30 minutes on a 
case-by-case basis in a manner that promotes a fair and orderly market 
and does not unfairly discriminate against Users of NYSE Bonds. Each 
party to the transaction would be required to provide, within 30 
minutes of the request for review, any supporting written information 
as may be reasonably requested by the Exchange to aid in the resolution 
of the matter.
---------------------------------------------------------------------------

    \28\ See proposed NYSE Rule 86(b)(2)(H).
    \29\ See proposed NYSE Rule 86(m)(1).
---------------------------------------------------------------------------

    Unless both parties to the disputed transaction agreed to withdraw 
the initial request for review, an Officer of the Exchange or a 
designee (the ``Reviewer'') would review the transaction and determine 
whether it were clearly erroneous, with a view towards maintaining a 
fair and orderly market and the protection of investors and the public 
interest. In Amendment No. 3, the Exchange proposed factors that the 
Reviewer could consider in the determination of a Clearly Erroneous 
Execution.\30\ If the Reviewer determines that the transaction in 
dispute is erroneous, the transaction would be declared null and void, 
or one or more of the terms of the transaction would be modified. The 
parties would be promptly notified of the determination.
---------------------------------------------------------------------------

    \30\ Such factors include execution price(s); volume and 
volatility of a bond; news released for the issuer or the bond and/
or the related security; the existence of trading halts; corporate 
action(s); general market conditions; rating of the bond; interest 
and or coupon rate; maturity date; yield curves; last sale, if 
available within a reasonable time frame; executions inconsistent 
with the trading pattern of a bond; current day's trading high/low; 
recent day's and week's trading high/low; executions outside the 52 
week high/low; effect of a single large order creating several 
prints at various prices; and quotes and executions of other market 
centers. See proposed NYSE Rule 86(m)(2)(E).
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    A request for review of the initial determination by the Clearly 
Erroneous Execution Panel (``CEE Panel'') \31\ may be made within 30 
minutes after the party making the appeal is given notice of the 
determination. However, the CEE Panel would not review a determination 
of the Reviewer if the Reviewer determined that the number of affected 
transactions was such that immediate finality would be necessary to 
maintain a fair and orderly market and to protect investors and the 
public interest. All determinations by the CEE Panel would constitute 
final action by the Exchange.
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    \31\ The CEE Panel would be comprised of the Chief Executive 
Officer of NYSE Regulation or a designee, and representatives from 
two Subscribers to NYSE Bonds. The Exchange would designate at least 
ten Subscribers to NYSE Bonds to act as representatives to be called 
upon to serve on the CEE Panel, as needed. In no case would a CEE 
Panel include a person related to a party to the trade in question. 
To the extent reasonably possible, the Exchange would call upon the 
designated representatives to participate on a CEE Panel on an 
equally frequent basis. See proposed NYSE Rule 86(m)(4)(A) and (B).
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    In addition, the proposal would allow the Exchange to review 
transactions affected by a system disruption, system malfunction, or 
equipment changeover to decide if any such transactions were 
erroneous.\32\ In the event of any system disruption, system 
malfunction, or equipment changeover in the use or operation of any 
electronic communications and trading facilities of the Exchange, an 
Officer of the Exchange or a designee, on his or her own initiative, 
could review a transaction arising out of the use or operation of such 
facilities during such period and declare it unchanged, nullify it, or 
modify the terms of the trade. Absent extraordinary circumstances, any 
such action of the Exchange would need to be taken within 30 minutes of 
detection of the system disruption, system malfunction, equipment 
changeover, or an erroneous transaction resulting from such system 
problem. If an erroneous transaction occurred as a result of a system 
problem and the Exchange determines to revise the trade, the 
counterparties to the erroneous transaction would be notified of the 
action as soon as practicable. A User aggrieved by such action could 
appeal such action to the CEE Panel in accordance with the provisions 
described above.
---------------------------------------------------------------------------

    \32\ See proposed NYSE Rule 86(m)(5).
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    Most orders matched on NYSE Bonds would be locked-in trades and 
would be submitted to a registered clearing agency with accrued 
interest calculated according to the defined eligibility 
characteristics of the particular bond.\33\ Settlement of corporate 
bond trades would be ``regular way,'' i.e., three-day settlement. At a 
later date, the Exchange intends to publish a real-time bond data feed, 
and intends to make such data available for purchase by non-subscribing 
market participants, third-party data vendors, and other interested 
parties who agree to the Exchange's terms. In addition to disseminating 
the NYSE Bonds order book, the data feed would also include the last 
sale price and size as executions occur. The Exchange also proposed 
several technical changes to other NYSE rules to remove certain 
obsolete references and otherwise conform the terms of certain other 
rules to revised NYSE Rule 86.
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    \33\ The Exchange submits completed trades to one of the 
subsidiaries of the Depository Trust Clearing Corporation (``DTCC'') 
for clearance and settlement. The National Securities Clearing 
Corporation (``NSCC''), a subsidiary of DTCC, provides clearance and 
settlement services for government agency, corporate, and municipal 
bonds that trade on ABS. While the Government Securities Division of 
the Fixed Income Clearing Corporation (``FICC''), another subsidiary 
of DTCC, provides clearance and settlement services for transactions 
in U.S. government bonds, the Exchange does not currently have an 
agreement with FICC for such settlement and clearance. Presently, 
U.S. government bonds that trade on ABS are traded ex-clearing 
(i.e., the parties to the transaction arrange for manual clearing 
and settlement). The Exchange plans to submit trades on a locked-in 
basis to FICC for clearance and settlement in 2007. Until such time 
as the Exchange has established such an agreement with the FICC, the 
U.S. government bonds that trade on NYSE Bonds would continue to 
trade ex-clearing as they do today on ABS. Trades that would not be 
locked-in would be those in bonds that are not set up for the 
Exchange's registered clearing agency, or bonds having a face value 
other than $1,000.
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III. Summary of Comments and NYSE's Response

    As noted above, the Commission received two comment letters on the 
proposal. The Klein Letter expressed support for the NYSE's proposal. 
The other commenter, SIFMA, expressed some support for NYSE's proposal 
but also raised certain concerns. The Exchange responded to the 
concerns raised in the SIFMA Letter.
    SIFMA questioned whether the Exchange's plans to assess a fee for 
the market data generated by NYSE Bonds would confer an unfair 
competitive

[[Page 14634]]

advantage as the exclusive processor of quote and trade data of NYSE 
Bonds, which it believed may lead to unreasonable prices for such 
data.\34\ In addition, SIFMA raised concern regarding the Exchange's 
intention to limit the use and redistribution of its market data.\35\ 
NYSE responded that SIFMA's concerns were premature in that the 
Exchange has not yet filed a proposal with the Commission under Rule 
19b-4 under the Exchange Act to modify the fees that it charges for 
NYSE Bonds data.\36\
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    \34\ See SIFMA Letter at 2-3.
    \35\ Id.
    \36\ See NYSE Response Letter at 2.
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    SIFMA also expressed concerns relating to the jurisdiction of NASD 
for transactions on NYSE Bonds.\37\ Specifically, SIFMA requested 
clarity on whether Users of NYSE Bonds would have any trade reporting 
obligations to NASD for bonds that trade on NYSE pursuant to Exchange 
Rules 1400 and 1401. SIFMA also raised a more general concern that NASD 
may assert jurisdiction over trading activities effected on a national 
securities exchange, including NYSE Bonds. NYSE argued that the 
concerns were without merit because NASD recently established a two-
year pilot program \38\ that exempted unlisted bonds trading on the 
NYSE subject to the Exchange's trade reporting requirements from TRACE 
reporting requirements.\39\ Moreover, NYSE clarified that NYSE 
Regulation will undertake primary responsibility for regulating NYSE 
Bonds and that NASD will retain responsibility for regulating the over-
the-counter corporate bond market.
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    \37\ See SIFMA Letter at 3-4.
    \38\ See Securities Exchange Act Release No. 54678 (November 16, 
2006), 71 FR 67673 (November 22, 2006) (SR-NASD-2006-110).
    \39\ See NYSE Response Letter at 3.
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    Finally, SIFMA expressed concern about the lack of definitive 
quantitative standards in the proposed trade nullification rule for 
NYSE Bonds.\40\ The Exchange included in Amendment No. 3 relevant 
factors that may be considered when the Exchange determines whether an 
execution is clearly erroneous.\41\
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    \40\ See SIFMA Letter at 4.
    \41\ See proposed NYSE Rule 86(m)(2)(E).
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IV. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Exchange Act and the rules and 
regulations promulgated thereunder applicable to a national securities 
exchange.\42\ Specifically, the Commission finds that approval of the 
proposal is consistent with Section 6(b)(5) of the Exchange Act \43\ in 
that it is designed to facilitate transactions in securities; 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 mechanism of a 
free and open market and a national market system; and, in general, to 
protect investors and the public interest.
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    \42\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \43\ 15 U.S.C. 78f(b)(5).
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    NYSE Bonds will replace ABS as the facility for trading bonds on 
the Exchange. The Commission believes that an exchange's determination 
to implement new trading technology is generally consistent with the 
Exchange Act. As described above, the proposal includes provisions 
regarding order entry, priority, trading sessions and auctions, manner 
of execution, clearing, trade halt procedures, and trade nullification. 
The Commission finds that these provisions are reasonably designed to 
promote the efficient functioning of NYSE Bonds and are generally 
consistent with the Exchange Act.\44\ Other aspects of the proposal are 
described in more detail below.
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    \44\ However, the Commission notes that the Exchange did not in 
this filing propose any fee changes in connection with the NYSE 
Bonds system. Therefore, the Commission in this order is not making 
any findings regarding any fee that the Exchange charges or may in 
the future propose to charge in connection with the use of the NYSE 
Bonds system.
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Sponsored Access to NYSE Bonds
    Only members that enter into a service agreement with the Exchange 
may access NYSE Bonds. In addition, the Exchange would permit a non-
member that enters into an agreement with a subscribing member and the 
Exchange to access NYSE Bonds as a ``Sponsored Participant.'' These 
sponsored access provisions are substantially similar to those that 
have been adopted by other national securities exchanges and previously 
approved by the Commission.\45\
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    \45\ See NYSE Arca Equities, Inc. (``NYSE Arca Equities'') Rule 
7.29(b); Securities Exchange Act Release No. 44983 (October 25, 
2001), 66 FR 55225 (November 1, 2001) (SR-PCX-00-25) (establishing 
sponsored participant provision for equity trading on the NYSE Arca 
Marketplace).
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Price Collars
    The Exchange would reject an incoming order that is otherwise 
marketable if the price of the order violated the price collar for that 
bond. The Commission believes that the proposed price collars are 
reasonably designed to protect investors and promote the public 
interest by preventing executions that are substantially away from the 
prevailing market price. These provisions are similar to others 
employed by NYSE Arca and Nasdaq, which previously have been approved 
by the Commission.\46\
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    \46\ See, e.g., NYSE Arca Equities Rule 1.1(r)(A) (NYSE Arca 
Market Order Auction and Closing Auction), Securities Exchange Act 
Release No. 52361 (August 30, 2005), 70 FR 53704 (September 9, 2005) 
(SR-PCX-2005-58); Nasdaq Rule 4752(d)(2)(E) (Nasdaq Opening 
Process), Securities Exchange Act Release No. 50405 (September 16, 
2004), 69 FR 57118 (September 23, 2004) (SR-NASD-2004-071); and 
Nasdaq Rule 4754(b)(2)(E) (Nasdaq Closing Cross), Securities 
Exchange Act Release No. 49406 (March 11, 2004), 69 FR 12879 (March 
18, 2004) (SR-NASD-2003-173).
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Applicability of Section 11(a) and (b) of the Exchange Act

    Section 11(a) of the Exchange Act \47\ prohibits a member of a 
national securities exchange from effecting transactions on that 
exchange for its own account, the account of an associated person, or 
an account over which it or its associated person exercises investment 
discretion, unless an exception applies. The Commission notes that this 
general prohibition would not generally impact trading on NYSE Bonds 
because Rule 11a1-4(T) under the Exchange Act \48\ deems transactions 
in bonds on a national securities exchange for a member's own account 
to be consistent with Section 11(a). However, for those securities 
trading on NYSE Bonds for which this exemption may not be available, 
such as certain structured products, the Exchange has represented that 
transactions effected on NYSE Bonds meet the requirements of Rule 11a2-
2(T) under the Exchange Act.\49\ Similarly, the Commission notes that 
Section 11(b) of the Exchange Act \50\ and Rule 11b-1 thereunder,\51\ 
which pertain to specialists and market-makers, would not be implicated 
because there would be no specialists or market makers on NYSE Bonds.
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    \47\ 15 U.S.C. 78k(a).
    \48\ 17 CFR 240.11a1-4(T).
    \49\ The Commission notes that, to the extent that any security 
trading on NYSE Bonds is an NMS security, see 17 CFR 242.600(b)(46), 
the Commission is not making any finding herein as to whether NYSE 
Bonds is compliant with the requirements of Regulation NMS under the 
Exchange Act.
    \50\ 15 U.S.C. 78k(b).
    \51\ 17 CFR 240.11b-1.

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[[Page 14635]]

Applicability of Rule 10a-1 Under the Exchange Act

    In its filing, NYSE states that: ``The staff of the Division of 
Market Regulation of the Securities and Exchange Commission has stated 
that it would not recommend that the Commission take enforcement action 
if short sales in exchange-listed bonds and debentures are effected 
without complying with SEC Rule 10a-1.'' \52\ By this filing, the 
Exchange seeks continued effect of this position. The staff maintains 
this position. However, the Commission notes that the staff's position 
does not apply to convertible bonds.\53\ Accordingly, convertible bonds 
would continue to be excluded from applicability of this position.
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    \52\ See Bond Short Sale No-Action Position, supra note 19 
(footnote omitted) (stating that, ``From and after the date of this 
release until the Commission takes final action on the proposed 
amendment to Rule 10a-1(b), the staff of the Division will not 
recommend that the Commission take enforcement action under Rule 
10a-1 if short sales in exchange-listed bonds and debentures are 
effected without complying with the Rule'').
    \53\ See id. (noting that convertible bonds are defined as 
``equity securities'' in the Exchange Act and that ``Exchange Act 
Section 3(a)(11), 15 U.S.C. 78c(a)(11), defines the term `equity 
security' to include `any stock or similar security, or any security 
convertible, with or without consideration, into such a security * * 
*.' Short selling of convertible bonds * * * may have an impact on 
the price of related exchange-traded equity securities'').
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V. Accelerated Approval

    Pursuant to Section 19(b)(2) of the Exchange Act,\54\ the 
Commission may not approve any proposed rule change prior to the 30th 
day after the date of publication of notice of the filing thereof, 
unless the Commission finds good cause for so doing and publishes its 
reasons for so finding. In Amendment No. 3, the Exchange, among other 
things:
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

     Revised proposed NYSE Rule 86(b) to indicate that, if 
other NYSE rules relating to bonds conflict with the provisions of 
proposed NYSE Rule 86, Rule 86 would control;
     Eliminated references to the ``Floor'' of the Exchange to 
make clear that NYSE Bonds is a fully electronic trading platform;
     Noted that dealers trading municipal bonds must report 
such transactions to the Municipal Securities Rulemaking Board 
(``MSRB'') in accordance with MSRB Rule G-14;
     Revised proposed NYSE Rule 86(b)(2)(E) to indicate that, 
unless otherwise designated, an order will be treated as a day order;
     Revised proposed NYSE Rule 86(b)(2)(G) to indicate that, 
if no bids are submitted to a Bond Auction, the Indicative Match Price 
will be the lowest offer price;
     Revised proposed NYSE Rule 86(e) to clarify that the price 
collars will only apply during ordinary trading and not during the 
queuing of bond orders or during bond auctions;
     Revised proposed NYSE Rule 86(h) to clarify that orders 
designated only for the Opening Bond Trading Session that do not 
execute in the Opening Bond Auction or Opening Bond Trading Session 
will be eligible to participate in the Core Bond Auction and would be 
cancelled if not executed in the Core Bond Auction;
     Modified proposed NYSE Rule 86(i) to clarify that orders 
may be entered into NYSE Bonds until 8 p.m. ET and to otherwise clarify 
the operation of the three proposed bond trading sessions;
     Revised proposed NYSE Rule 86(l) to indicate that, 
beginning at 3:30 a.m. ET, the IMP for the Opening Bond Auction and the 
Core Bond Auction, and any associated Imbalance, will be published by 
the Exchange. In addition, the changes to proposed NYSE Rule 86(l) 
further explain the functionalities of the Bond Auctions;
     Clarified in proposed NYSE Rule 86(m) the possible 
outcomes after review of potentially erroneous transactions by the 
Reviewer and by the Clearly Erroneous Execution Panel. In addition, the 
Exchange added factors that may be considered in the determination of a 
Clearly Erroneous Execution;
     Revised proposed NYSE Rule 86(n)(2)(G) to indicate that 
orders that are eligible for execution in the Bond Halt Auction may be 
cancelled at any time;
     Revised portions of proposed NYSE Rule 86(o) related to a 
sponsored access to NYSE Bonds to conform substantially to related 
provisions of other national securities exchanges, including NYSE Arca; 
\55\
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    \55\ See NYSE Arca Equities Rule 7.29.
---------------------------------------------------------------------------

     Represented that transactions effected on NYSE Bonds meet 
the requirements of Rule 11a2-2(T) under the Exchange Act and included 
an accompanying discussion;
     Represented that NYSE Regulation can effectively regulate 
NYSE Bonds; and
     Made other minor clarifying and technical changes to the 
proposal.
    The Commission believes that these changes do not raise any 
significant or novel regulatory issues. Accordingly, the Commission 
hereby finds good cause for approving the proposed rule change, as 
modified by Amendment No. 3, prior to the 30th day after publishing 
notice of the amended proposal in the Federal Register.

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3, including whether Amendment No. 3 
is consistent with the Exchange 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2006-37 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2006-37. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room. Copies of the filing 
also will be available for inspection and copying at the principal 
office of NYSE. 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-2006-37 and should be submitted on or before April 18, 2007.

[[Page 14636]]

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\56\ that the proposed rule change (SR-NYSE-2006-37), as 
amended, be, and it hereby is, approved on an accelerated basis.
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    \56\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\57\
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    \57\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-5610 Filed 3-27-07; 8:45 am]
BILLING CODE 8010-01-P