Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Rule 86 To Add Additional Order Types to the NYSE BondsSM, 19671-19678 [2016-07684]
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
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 from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 37 and Rule 19b–
4(f)(6) thereunder.38
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 39 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 40
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay. The Commission
believes that waiver of the operative
delay is consistent with the protection
of investors and the public interest
because it would allow the Exchange to
implement the proposed amendments
on April 4, 2016, the date upon which
the data collection requirements of the
Plan become effective.41 Therefore, the
Commission hereby waives the
operative delay and designates the
proposal operative on April 4, 2016.42
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
37 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
39 17 CFR 240.19b–4(f)(6).
40 17 CFR 240.19b–4(f)(6)(iii).
41 See Securities Exchange Act Release No. 76382
(November 6, 2015), 80 FR 70284 (File No. 4–657)
(Order Granting Exemption From Compliance With
the National Market System Plan To Implement a
Tick Size Pilot Program).
42 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2016–40 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2016–40. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2016–40, and should be
submitted on or before April 26, 2016.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–07685 Filed 4–4–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77477; File No. SR–NYSE–
2016–17]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
To Amend Rule 86 To Add Additional
Order Types to the NYSE BondsSM
Platform, Codify Functionality of Order
Types Currently Available on NYSE
Bonds, and Amend the Definition of
Indicative Match Price in Current Rule
86(B)(2)(G) To Provide Greater Detail of
How an IMP Is Established With
Respect to Bond Auctions
March 30, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
16, 2016, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. On March 29,
2016, the Exchange filed Amendment
No. 1 to the proposal.4 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 86 to add additional order types to
the NYSE BondsSM platform and to
codify functionality of order types
currently available on NYSE Bonds. The
Exchange also proposes to amend the
43 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 In Amendment No. 1, the Exchange proposed
changes to amend the proposed rule text of Rule
86(j)(A)(ii) in Exhibit 5 and the purpose section of
each of the Form 19b–4 and Exhibit 1 to clarify the
effective time used to determine the priority of
Timed Orders. The Exchange also amended the
purpose section of each of the Form 19b–4 and
Exhibit 1 to add that all-or-none and minimum
quantity contingencies are displayed.
1 15
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Federal Register / Vol. 81, No. 65 / Tuesday, April 5, 2016 / Notices
definition of Indicative Match Price
(‘‘IMP’’) in current Rule 86(b)(2)(G) to
provide greater detail of how an IMP is
established with respect to Bond
Auctions.5 The proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend
Rule 86 to add NYSE Bonds Fill-or-Kill
Order, NYSE Bonds All-or-None Order
and NYSE Bonds Minimum Quantity
Order as new order types to the NYSE
Bonds platform, and to codify the
operation of NYSE Bonds Good ’Til Date
Order and NYSE Bonds Timed Order
that are currently available on NYSE
Bonds platform. The Exchange also
proposes to amend the definition of IMP
to provide greater detail of how an IMP
is established with respect to Bond
Auctions.
NYSE Bonds is the Exchange’s
electronic system for receiving,
processing, executing and reporting
bids, offers, and executions in bonds.
Rule 86 prescribes how bonds are traded
on the NYSE Bonds trading platform
and sets forth available order types.
NYSE Bonds currently allows Users 6 to
submit limit orders 7 and reserve
orders.8 Orders are displayed, matched
5 As part of this proposal, the Exchange proposes
to renumber the current rule to Rule 86(b)(2)(D).
6 Current Rule 86(b)(2)(M) defines a User as any
Member or Member Organization, Sponsored
Participant, or Authorized Trader that is authorized
to access NYSE Bonds. The Exchange proposes to
renumber the current rule to Rule 86(b)(2)(I).
7 A NYSE Bonds Limit Order is an order to buy
or sell a stated amount of bonds at a specified price
or at a better price. See current Rule 86(b)(2)(B). The
Exchange proposes to renumber the current rule to
Rule 86(b)(2)(B)(i).
8 A NYSE Bonds Reserve Order is a NYSE Bonds
Limit Order with a portion of the order’s size
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and executed on a price-time priority
basis.9 However, undisplayed reserve
interest in NYSE Bonds always yields to
displayed interest at a particular price.10
Orders are matched and executed if
marketable at the time of entry, and if
not marketable at the time of entry,
would post to the NYSE Bonds order
book.11 An order is marketable if contra
side interest is available at that price or
better price at the time the order is
entered in NYSE Bonds. Further, orders
that are marketable beyond the price
collar established for the bond at the
time of entry are rejected by NYSE
Bonds to help avoid executions at
erroneous prices.12
The Exchange believes each of the
order types described below is currently
offered by alternative trading systems
(‘‘ATSs’’) for bonds, such as Tradeweb’s
BondDesk Group, KCG Bondpoint, and
TMC Bonds.13
NYSE Bonds Fill-or-Kill Order
A NYSE Bonds Fill-or-Kill Order
(‘‘NYSE Bonds FOK Order’’) is a NYSE
Bonds Limit Order that would be
executed immediately in its entirety at
the best price available against a single
contra party and, if not executed
immediately in its entirety, would be
cancelled.14 A NYSE Bonds FOK Order
would be eligible to participate in all
trading sessions 15 but can be executed
only during the trading session in which
the order is sent; otherwise the order
would be rejected. A NYSE Bonds FOK
Order cannot participate in either the
designated for display and a portion of the order’s
size ‘‘reserve size’’ that is not to be displayed on
NYSE Bonds. See current Rule 86(b)(2)(C). The
Exchange proposes to renumber the current rule to
Rule 86(b)(2)(B)(ii).
9 See Rule 86(j)(A). The display and execution
rules would also be applicable to the additional
order types proposed herein.
10 See Rule 86(j)(B).
11 Timed Orders, as proposed herein, maybe [sic]
matched and executed or posted at a time different
from the time of entry. See Proposed Rule
86(b)(2)(B)(vi)(3)(a)–(c).
12 See Rule 86(e). The price collar thresholds
would also be applicable to the additional order
types proposed herein.
13 Order types such as Good ‘Til Date, All-orNone, Fill-or-Kill, and Minimum Quantity are
available on various equity and options markets.
See, e.g., NYSE Arca Equities Rule 7.31(b)(2) and
International Securities Exchange (‘‘ISE’’) Rule 715.
14 A NYSE Bonds FOK Order cannot be a NYSE
Bonds Reserve Order. See proposed Rule
86(b)(2)(B)(ii).
15 The Opening Bond Trading Session
commences with the Opening Bond Auction at 4:00
a.m. ET and concludes at 8:00 a.m. ET. See Rule
86(i)(1)(A). The Core Bond Trading Session
commences with the Core Bond Auction at 8:00:00
a.m. ET and concludes at 5:00 p.m. ET. See Rule
86(i)(2)(A). The Late Bond Trading Session
commences at 5:00 p.m. ET and concludes at 8:00
p.m. ET. See Rule 86(i)(3)(A).
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Opening Bond Auction or the Core
Bond Auction.
The following example illustrates the
proposed functionality:
Example 1—A NYSE Bonds FOK
Order that gets executed when there is
sufficient size and the order is at the top
of the book.
• T1 submits a buy order for 200 bonds
@$101
• T2 submits a sell order for 150 bonds
@$102
Posted market on NYSE Bonds:
$101¥$102 (200 × 150)
• T3 enters a sell order for 50 bonds @
$101 FOK
Result: T3’s 50 bonds are traded at
$101 since the price is at the top of the
order book and quantity is fully
satisfied.
Example 2—A NYSE Bonds FOK
Order that does not get executed when
there is insufficient size and the order
is at the top of the book.
After the trade in Example 1, posted
market on NYSE Bonds:
$101¥$102 (150 × 150)
• T4 then enters a buy order for 75
bonds at $101.25
Posted market on NYSE bonds:
$101.25¥$102 (75 × 150)
• T5 enters a sell order for 100 bonds
@ $101.25 FOK
Result: T5’s order is cancelled
because there is not enough size at the
best price of 101.25.
Example 3—A NYSE Bonds FOK
Order that does not get executed when
interacting with a NYSE Bonds AON
Order.
After T5 is cancelled in Example 2,
posted market on NYSE Bonds
remains at $101.25¥$102 (75 ×
times; 150)
• T6 enters a sell order for 100 bonds
at $101.50 AON
Posted market on NYSE Bonds:
$101.25¥$101.50 (75 × 100).
• T7 enters a buy order for 75 bonds
at $101.50 FOK
Result: T7’s order is cancelled
because the order cannot satisfy T6’s
AON size, which is the top of the order
book.
Posted market on NYSE Bonds remains
at $101.25¥$101.50 (75 × 100).
NYSE Bonds All-or-None Order
A NYSE Bonds All-or-None Order
(‘‘NYSE Bonds AON Order’’) is a NYSE
Bonds Limit Order (whose AON
contingency would be displayed on the
order book) that would be executed in
its entirety against one or more contra
party, or not at all.16 If a NYSE Bonds
16 A NYSE Bonds AON Order cannot be a NYSE
Bonds Reserve Order. See proposed Rule
86(b)(2)(B)(ii).
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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.’’ A NYSE
Bonds AON Order designated as ‘‘day’’
can participate in all trading sessions. A
NYSE bonds AON Order designated as
‘‘day,’’ if not executed or cancelled,
would expire at the end of the trading
session for which it was designated, on
the day on which it was entered. A
NYSE Bonds AON Order designated as
‘‘day’’ and not designated for a
particular trading session but entered
during the Opening Bond Trading
Session would participate in the
Opening Bond Trading Session, and if
not executed during the Opening Bond
Trading Session or cancelled, would be
eligible for execution in the Core Bond
Trading Session. A NYSE Bonds AON
Order designated as ‘‘day’’ and not
designated for a particular trading
session but entered during the Core
Bond Trading Session would participate
in the Core Bond Trading Session only
and if not executed in full, the order
would be cancelled at the end of such
trading session.
A NYSE Bonds AON Order
designated as ‘‘good ’til cancelled’’ may
be entered during the Opening Bond
Trading Session and the Core Bond
Trading Session but can be executed in
the Core Bond Trading Session only. A
NYSE Bonds AON Order designated as
‘‘good ’til cancelled’’ and not designated
for a particular trading session but
entered during the Core Bond Trading
Session would participate in the Core
Bond Trading Session only and if not
executed in full, the order would remain
on NYSE Bonds until cancelled. Unless
a NYSE Bonds AON Order that is
designated as ‘‘good ’til cancelled’’ is
executed or cancelled in full, the order
would be placed on the order book for
the following day in price-time priority
for participation in the Core Bond
Trading Session after the end of the
Core Bond Auction.
A NYSE Bonds AON Order
designated as ‘‘good ‘til date’’ may be
entered during the Opening Bond
Trading Session and the Core Bond
Trading Session but can be executed in
the Core Bond Trading Session only. A
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NYSE Bonds AON Order designated as
‘‘good ’til date’’ and not designated for
a particular trading session but entered
during the Core Bond Trading Session
would participate in the Core Bond
Trading Session only and if not
executed in full, would remain on NYSE
Bonds until the end of the Core Bond
Trading Session on the date specified.
Unless a NYSE Bonds AON Order that
is designated as ‘‘good ’til date’’ is
executed or cancelled in full, the order
would be placed on the order book for
the following day in price-time priority
for participation in the Core Bond
Trading Session after the end of the
Core Bond Auction.
The following examples illustrate the
proposed functionality:
Example 1—A NYSE Bonds AON
Order that gets executed when there is
sufficient size.
Posted Market on NYSE Bonds:
$102.50¥$103.50 (1000 × 1000)
• T1 enters a sell order for 500 bonds
@ $102.50 AON
Result: T1’s AON quantity is satisfied
and the order for 500 bonds is executed
at $102.50.
After the trade, posted market on NYSE
Bonds: $102.50¥$103.50 (500 ×
1000)
Example 2—A NYSE Bonds AON
Order that does not get executed and is
bypassed.
• T1 submits an order to buy 100
bonds @ $101.39
• T2 submits an order to sell 400
bonds @ $102.01
Posted Market on NYSE Bonds:
$101.39¥$102.01 (100 × 400)
• T3 enters a sell order for 500 bonds
@ $102 AON
Posted market on NYSE Bonds:
$101.39¥$102 (100 × 500).
• T4 enters an order to buy 400 bonds
@ $102.01.
Result: T4 trades 400 bonds with T2’s
$102.01 offer. T3’s $102 AON offer with
a quantity of 500 bonds would be
bypassed because the specified quantity
was not satisfied. T3 would remain on
the Exchange’s order book and continue
to be displayed on the quote display
feed with the AON quantity until it is
either executed in full or cancelled.
Example 3—A NYSE Bonds AON
Order that gets executed after
aggregating liquidity to satisfy size
requirement.
• T1 submits an order to buy 400
bonds @ $100
• T2 submits an order to sell 500
bonds @ $101
• T3 submits an order to sell 200
bonds @ $100.75
• T4 submits an order to sell 200
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bonds @ $100.50
Posted market on NYSE Bonds:
$100¥$100.50 (400 × 200)
• T5 submits an order to buy 500
bonds @ $101 AON
Result: Since there are no size
restrictions on any of the orders on the
book, T5 would execute against the best
price available and then trade at each
price level until the order is fully
executed. Therefore, T5 trades 200 @
100.50 with T4, 200 @ $100.75 with T3
and 100 @ $101 with T2.
NYSE Bonds Minimum Quantity Order
A NYSE Bonds Minimum Quantity
Order is a NYSE Bonds Limit Order
(whose minimum quantity contingency
would be displayed on the order book)
that would trade against one or more
contra side order(s), provided the
order’s quantity requirement is met.17 In
the event there is not enough contraside 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
there remains a balance after one or
more partial executions and such
balance is for less than the minimum
quantity specified on the order, such
balance would be treated as a regular
limit order and placed on the order book
in price-time priority. A NYSE Bonds
Minimum Quantity Order would not
participate in either the Opening Bond
Auction or the Core Bond Auction and
the order would be eligible for
execution only in the trading session
during which it was sent.
A NYSE Bonds Minimum Quantity
Order must be designated as ‘‘day,’’
‘‘good ’til cancelled,’’ or ‘‘good ’til
date.’’ A NYSE Bonds Minimum
Quantity Order designated as ‘‘day’’ is
eligible to participate in all three trading
sessions. A NYSE Bonds Minimum
Quantity Order designated as ‘‘day,’’ if
not executed or cancelled, would expire
at the end of the trading session for
which it was designated, on the day on
17 A NYSE Bonds Minimum Quantity Order
cannot be a NYSE Bonds Reserve Order. See
proposed Rule 86(b)(2)(B)(ii).
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which it was entered. A NYSE Bonds
Minimum Quantity Order designated as
‘‘day’’ and not designated for a
particular trading session but entered
during the Opening Bond Trading
Session would participate in the
Opening Bond Trading Session, and if
not executed during the Opening Bond
Trading Session or cancelled, would be
eligible for execution in the Core Bond
Trading Session. A NYSE Bonds
Minimum Quantity Order designated as
‘‘day’’ and not designated for a
particular trading session but entered
during the Core Bond Trading Session
would participate in the Core Bond
Trading Session only and if not
executed in full, the order would be
cancelled at the end of such trading
session.
A NYSE Bonds Minimum Quantity
Order designated as ‘‘good ’til
cancelled’’ may be entered during the
Opening Bond Trading Session and the
Core Bond Trading Session but would
be eligible to participate in the Core
Bond Trading Session only. Unless a
NYSE bonds Minimum Quantity Order
that is designated as ‘‘good ’til
cancelled’’ is executed in full, or is
cancelled, the order would be placed on
the order book for the following day in
price-time priority for participation in
the Core Bond Trading Session after the
end of the Core Bond Auction.
A NYSE Bonds Minimum Quantity
Order designated as ‘‘good ’til date’’
may be entered during the Opening
Bond Trading Session and the Core
Bond Trading Session but would be
eligible to participate in the Core Bond
Trading Session only. Unless a NYSE
bonds Minimum Quantity Order that is
designated as ‘‘good ’til date’’ is
executed in full, or is cancelled, the
order would be placed on the order
book for the following day in price-time
priority for participation in the Core
Bond Trading Session after the end of
the Core Bond Auction.
The following examples illustrate the
proposed functionality:
Example 1—A NYSE Bonds
Minimum Quantity Order that gets fully
executed after interacting with multiple
orders including with a NYSE Bonds
AON Order.
• T1 submits an order to buy 400
bonds @ $100
• T2 submits an order to sell 400
bonds @ $102
Posted market on NYSE Bonds:
$100¥$102 (400 × 400)
• T3 submits an order to sell 600
bonds @ $101 with a minimum
quantity of 100 bonds
• T4 submits an order to sell 200
bonds @ $101
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T3 moves ahead of T2 on the order book
(and T4 moves up and is now
behind T3).
Posted market on NYSE Bonds:
$100¥$101 (400 × 800).
• T5 submits an order to buy 100
bonds @ $101
Result: T5 executes with T3. T3 is
decremented by 100 bonds, leaving 500
bonds that remain to be executed.
Posted market on NYSE Bonds:
$100¥$101 (400 × 700)
• T6 submits an order to buy 500
bonds @ $101 AON
Result: T6 trades 500 @$101 with T3
since T3 has 500 bonds remaining and
T3’s minimum quantity requirement is
satisfied.
Posted market on NYSE Bonds:
$100¥$101 (400 × 200)
Example 2—A NYSE Bonds
Minimum Quantity Order that does not
get executed and is bypassed.
• T1 submits an order to buy 100
bonds @ $101.39
• T2 submits an order to sell 400
bonds @ $102.01
Posted market on NYSE Bonds:
$101.39¥$102.01 (100 × 400)
• T3 submits an order to sell 1000
bonds @ $102 with a minimum
quantity of 500 bonds. T3 moves
ahead of T2 on the order book.
Posted market on NYSE Bonds:
$101.39¥$102 (100 × 1000 (with a
minimum quantity of 500))
• T4 submits an order to buy 400
bonds @ $102.01
Result: T4 trades 400 @ $102.01 with
T2. T3’s $102 offer has a minimum
quantity of 500 and is bypassed because
the minimum quantity was not satisfied.
Example 3—Multiple NYSE Bonds
Minimum Quantity Orders where one
order does not get executed because the
order’s size requirement cannot be met
and the order is therefore bypassed, and
another order that is partially executed
and the remainder of the order is
converted to a limit order.
• T1 submits an order to buy 400
bonds @ $100
• T2 submits an order to sell 400
bonds @ $102
Posted market on NYSE Bonds:
$100¥$102 (400 × 400)
• T3 submits an order to sell 600
bonds @ $101 with a minimum
quantity of 300 bonds
T3 provides a better market and
therefore moves ahead of T2
Posted market on NYSE Bonds:
$100¥$101 (400 × 600 (with a
minimum quantity of 300))
• T4 submits an order to sell 200
bonds @ $100.75
T4 provides a better market and
therefore moves ahead of T3
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Sfmt 4703
Posted market on NYSE Bonds’’
$100¥$100.75 (400 × 200)
• T5 submits an order to sell 100
bonds @ 101
T5 moves behind T3
• T6 submits an order to buy 250
bonds @ $101 with a minimum
quantity of 200 bonds
Result: T6 trades 200 with T4 @
$100.75. T6’s minimum quantity is
higher than the quantity remaining, so
the order becomes a regular limit order
to buy 50 bonds at $101. T3 does not get
executed because T3’s minimum
quantity cannot be satisfied. T6 then
trades 50 bonds @ $101 with T5 since
T5 has no size restrictions.
Posted market on NYSE Bonds:
$100¥$101 (400 × 600 (with a
minimum quantity of 300))
NYSE Bonds Good ’Til Date Order
A NYSE Bonds Good ’Til Date Order
(‘‘NYSE Bonds GTD Order’’) is a NYSE
Bonds Limit Order or a NYSE Bonds
Reserve Order, which if not executed or
cancelled, would expire at the end of
the Core Bond Trading Session on the
date specified on the order. A NYSE
Bonds GTD Order must include an
Expire Date or be designated for the
Core Bond Trading Session; otherwise,
the order would be rejected. A NYSE
Bonds GTD Order can participate in the
Core Bond Auction and the Core Bond
Trading Session only. A NYSE Bonds
GTD Order would participate in the
Core Bond Auction if it is entered before
commencement of the Core Bond
Auction, and if not executed in the Core
Bond Auction, would remain live on
NYSE Bonds and would be eligible for
execution in the Core Bond Trading
Session, unless the order is cancelled. A
NYSE Bonds GTD Order entered after
commencement of the Core Bond
Auction would participate in the Core
Bond Trading Session, unless the order
is cancelled.
A NYSE Bonds GTD Order can
participate only in the Core Bond
Trading Session, and such order
designated for any other trading session
would be rejected. A NYSE Bonds GTD
Order that is not executed or cancelled
in full at the end of the trading day
would be placed on the order book for
the following day in price-time priority
for participation in the Core Bond
Trading Session after the end of the
Core Bond Auction.
The following example illustrates
how a NYSE Bonds GTD Order would
be executed once it becomes effective:
Suppose on October 14, a NYSE
Bonds trading day, at 7:00 a.m. (during
the Early Bond Trading Session):
• T1 submits a Day order to buy 100
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bonds @ $100.20
• T2 submits a Day order to sell 20
bonds @ $100.25
• T3 submits a GTD order (October
15) to buy 100 bonds @ $100.30
• T4 submits an order to sell 50
bonds @ $100.35 for participation in
all three bond trading sessions
Posted market on NYSE Bonds: $100.20
× $100.25 (100 × 20)
T3’s GTD order not effective yet
(becomes effective at 8:00 a.m.)
On the same trading day, at 8:00 a.m.,
when the Core Bond Auction
commences, these orders would be
processed as follows:
• T3 becomes effective for the Core
Bond Auction;
• T1, T2 and T3 participate in the
Core Bond Auction;
• T2 and T3 overlap in price,
therefore 20 Bonds are matched at
$100.30 with an imbalance on the
buy side of 80 bonds.
T3’s GTD order becomes live for the
Core Bond Trading Session.
Posted market on NYSE Bonds: $100.30
× $100.35 (80 × 50)
On the same trading day, at 8:30 a.m.
(during the Core Bond Trading Session):
• T5 submits an order to sell 25
bonds @ $100.30
Result: T3 trades 25 bonds with T5.
Posted market on NYSE Bonds: $100.30
× $100.35 (55 × 50)
On the same trading day, at 5:01 p.m.
(during the Late Bond Trading Session),
the remaining orders would be
processed as follows:
• T1 expires (as Day orders expire at
the end of the Core Bond Trading
Session);
• T3 is a GTD order, which trades
only in the Core Bond Trading
Session. Since T3 has not been
executed in its entirety, the
remaining portion of the order
would be held and placed on the
order book for the start of the Core
Bond Trading Session the following
day in price-time priority.
• T4 remains effective and would
participate in the Late Bond
Trading Session.
Posted market on NYSE Bonds: $ 0.00
× $100.35 (0 × 50)
On the next trading day, October 15,
at 7:58 a.m. (during the Opening Bond
Trading Session):
• T1 submits a Day order to buy 50
bonds @ $100.20
• T2 submits a Day order to sell 50
bonds @ $100.45
Posted market on NYSE Bonds: $100.20
× $100.45 (50 × 50)
Result: T3 is placed on the order book
for the following day in price-time
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priority for participation in the Core
Bond Trading Session after the end of
the Core Bond Auction at 8:00 a.m.; no
prices overlap, auction imbalance of 50
on buy side and 50 on sell side. T3
becomes effective.
Posted market on NYSE Bonds: $100.30
× $100.45 (55 × 50)
On the same trading day, October 15,
at 5:00 p.m., when the Late Bond
Trading Session commences, the
remaining orders would be processed as
follows:
• T1 and T2 expire (as Day orders
expire at the end of the Core Bond
Trading Session);
• T3 also expires (T3 was submitted
with a good ’til date of 20151015
therefore, the order expires at the
end of the Core Bond Trading
Session on the date specified on the
order).
NYSE Bonds Timed Order
A NYSE Bonds Timed Order is a
NYSE Bonds Limit Order or a NYSE
Bonds Reserve Order that remains in
effect for a period of time specified on
the order (e.g., Effective Time and
Expire Time) for the day on which the
order is entered until the order is
executed or cancelled. A NYSE Bonds
Timed Order would be accepted, and
may be cancelled, during all trading
sessions, provided that the order is
submitted during the trading session in
which it is to become effective.
A NYSE Bonds Timed Order would
participate in the Core Bond Auction
and Core Bond Trading Session if the
order is entered before commencement
of the Core Bond Auction, and if the
order is not executed in the Core Bond
Auction, or not cancelled, it would be
eligible for execution in the Core Bond
Trading Session. A NYSE Bonds Timed
Order must include at least one of the
following: An Effective Time, an Expire
Time or a designated trading session,
otherwise the order would be rejected.
A NYSE Bonds Timed Order
submitted with an Effective Time alone
becomes effective at the Effective Time
and if not executed, the order would be
cancelled at the end of the Late Bond
Trading Session. A NYSE Bonds Timed
Order submitted with an Expire Time
alone becomes effective at the time it is
sent to the Exchange and if not
executed, the order would be cancelled
at the Expire Time designated on the
order. A NYSE Bonds Timed Order
submitted with a designated trading
session alone or with a designated
trading session and either an Effective
Time or an Expire Time would become
effective at the time the designated
trading session begins and if not
executed, the order would be cancelled
PO 00000
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Fmt 4703
Sfmt 4703
19675
at the end of the designated trading
session.18 NYSE Bonds would disregard
the Effective Time or Expire Time
submitted with a NYSE Bonds Timed
Order that is designated for a specific
trading session. Additionally, a NYSE
Bonds Timed Order submitted with a
time in force of Day during a trading
session without an Effective Time, an
Expire Time or a designated trading
session would be treated as a Day limit
order and, if not executed, would be
cancelled at the end of the Core Bond
Trading Session.
The following examples illustrate the
functionality:
Example 1—A NYSE Bonds Timed
Order submitted with an Effective Time
that does not get executed on the day
the order is submitted.
Suppose on October 14, a NYSE
Bonds trading day, at 8:05 a.m. (during
the Core Bond Trading Session):
• T1 submits a Day order to buy 50
bonds @ $100.25
• T2 submits a Day order to sell 50
bonds @ 100.45
• T3 submits a Timed Order to buy
100 bonds @ 100.30 with an
Effective Time of 8:45 a.m.
T3 waits to become effective until 8:45
a.m.; T1 and T2 remain effective
Posted market on NYSE Bonds: $100.25
× $100.45 (50 × 50)
On the same trading day, at 8:45 a.m.,
T3 becomes effective. T1 and T2
remain effective
Posted market on NYSE Bonds: $100.30
× $100.45 (100 × 50)
On the same trading day, October 15,
at 5:00 p.m., when the Late Bond
Trading Session commences, with no
executions occurring during the day, the
remaining orders would be processed as
follows:
• T1 and T2 expire (as Day orders
expire at the end of the Core Bond
Trading Session);
• T3 would also expire at the end of
the Core Bond Trading Session as
the order was submitted without an
Expire Time.
Example 2—A NYSE Bonds Timed
Order submitted with an Expire Time
that does not get executed on the day
the order is submitted.
Suppose on October 14, a NYSE
Bonds trading day, at 8:35 a.m. (during
the Core Bond Trading Session):
• T1 submits a Day order to buy 50
bonds @ $100.25
• T2 submits a Day order to sell 50
bonds @ $100.45
18 A NYSE Bonds Timed Order submitted during
a designated trading session becomes effective at
the time the order is received and, if not executed,
would be cancelled at the end of such designated
trading session.
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• T3 submits a Timed Order to buy
100 bonds @ $100.30 with an Expire
Time of 8:45 a.m.
Since T3 was submitted without an
Effective Time, the order becomes
effective upon order entry. T1 and
T2 remain effective.
Posted market on NYSE Bonds: $100.30
× $100.45 (100 × 50)
On the same trading day, October 14, at
8:45 a.m.: T3 expires as the order
was submitted with an Expire Time
of 8:45 a.m. T1 and T2 remain
effective during the Core Bond
Trading Session
Posted market on NYSE Bonds: $100.25
× $100.45 (50 × 50)
Example 3—A NYSE Bonds Timed
Order submitted with an Effective Time
and an Expire Time that does not get
executed on the day the order is
submitted.
Suppose on October 14, a NYSE
Bonds trading day, at 8:35 a.m. (during
the Core Bond Trading Session):
• T1 submits a Day order to buy 50
bonds @ $100.25
• T2 submits a Day order to sell 50
bonds @ $100.45
• T3 submits a Timed Order to buy
100 bonds @ $100.30 with an
Effective Time of 8:45 a.m. and an
Expire Time of 8:55 a.m.
T3 waits to become effective until 8:45
a.m.; T1 and T2 remain effective
Posted market on NYSE Bonds: $100.25
× $100.45 (50 × 50)
On the same trading day, October 14, at
8:45 a.m.: T1 and T2 remain
effective. T3 becomes effective
Posted market on NYSE Bonds: $100.30
× $100.45 (100 × 50)
On the same trading day, October 14, at
8:55 a.m.: T3 expires as the order
was submitted with an Expire Time
of 8:55 a.m. T1 and T2 remain
effective during the Core Bond
Trading Session.
Posted market on NYSE Bonds: $100.25
× $100.45 (50 × 50)
Indicative Match Price
Finally, the Exchange proposes to
amend the definition of Indicative
Match Price (‘‘IMP’’) in current Rule
86(b)(2)(G) to provide greater detail of
how an IMP is established with respect
to Bond Auctions. Specifically, the IMP
in a particular bond means a single
price at which the maximum number of
bonds is executable. If there are two or
more prices at which the maximum
number of bonds is executable, the IMP
would be the price that is closest to the
Reference Price provided that the IMP
cannot be lower (higher) than any
unmatched top of book order to buy
(sell) that was eligible to participate in
an auction at the IMP. For the Opening
Bond Auction, the Reference Price is the
closing price in a bond on the previous
trading day or if the bond did not trade
on the previous trading day, the closing
price on the last day that the bond
traded.19 For the Core Bond Auction
and the Bond Halt Auction, the
Reference Price is the last price of a
bond on the trading day prior to the
applicable auction, and if none, the
previous trading day’s closing price, and
if none, the closing price on the last day
Order
Buy volume
Sell volume
T1 .............................................................
T2 .............................................................
T3 .............................................................
300
........................
........................
........................
200
500
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Result: No match. The buy order (300
@ $101.00) and sell order (500 @
$101.75) do not overlap. Per proposed
Rule 86(d)(ii) which states that if orders
to buy and orders to sell are not
marketable (i.e., the price of a bond
order to buy is not equal to or greater
than the price of a bond order to sell),
then the IMP would be determined by
Order price
Buy volume
Sell volume
T1 .............................................................
T2 .............................................................
T3 .............................................................
500
500
........................
........................
........................
500
19 The Exchange proposes to delete the words
‘‘the price that is closest to’’ from the current rule
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Order price
Frm 00128
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Imbalance
0
0
0
300
300
500
Indicative
match price
$101.00
101.00
101.75
there is overlapping interest for a trade
to occur:
Suppose that the previous closing
price of a bond is $101.50 and the order
book just prior to a Bond Auction is as
follows:
• T1—Buy 500 @ $102.00
• T2—Buy 500 @ $101.75
• T3—Sell 500 @ $101.00
Matchable
volume
$102.00
101.75
101.00
to more precisely reflect the price that would be
PO 00000
Matchable
volume
$101.00
102.00
101.75
the side and volume at the top of book,
with the price of the side with the
greater volume establishing the IMP.
Thus, the maximum size that could
have been matched is T3, and T3
therefore establishes the IMP at $101.75.
The following example illustrates
how an IMP would be established and
Order
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 Rule 86(l)(3)(A) provides that
a Bond Auction would not occur in the
event of a failure to establish an IMP.
The Exchange proposes to amend the
current rule to provide that, for nonmarketable buy and sell orders entered
in NYSE Bonds where the size of the
best bid and best offer are the same, an
IMP would not be established and a
Bond Auction would not occur.
Current Rule 86(n)(2)(E) provides that
a Bond Halt Auction would not occur in
the event of a failure to establish an
IMP. The Exchange proposes to amend
the current rule to provide that, for nonmarketable buy and sell orders entered
in NYSE Bonds where the size of the
best bid and best offer are the same, an
IMP would not be established and a
Bond Halt Auction would not occur.
The following example illustrates
how an IMP would be established and
there is no overlapping interest for a
trade to occur:
Suppose that the previous closing
price of a bond is $101.50 and the order
book just prior to a Bond Auction is as
follows:
• T1—Buy 300 @ $101.00
• T2—Sell 200 @ $102.00
• T3—Sell 500 @ $101.75
0
0
500
Imbalance
500
500
500
Indicative
match price
$102.00
102.00
101.75
used to determine the Reference Price on the last
day that a bond traded.
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Result: Considering there are two or
more prices at which the maximum
number of bonds is executable (i.e., all
three orders on the order book), a match
can occur between $101.00 and $102.00.
To establish the IMP, NYSE Bonds
would select a price closest to the
Reference Price (i.e., previous close of
$101.50) without such price being lower
than the unmatched buy order price of
$101.75 (T2). Therefore, the auction
would occur at $101.75 with T1 and T2
participating in the auction for 500
bonds. In another words, the IMP would
be established at $101.75 because that
price is closest to the previous close
price of $101.50 and not lower that the
price of the unmatched buy order, T2.
Other Changes
In addition to adding order types to
the NYSE Bonds platform and codifying
functionality of order types currently
available on NYSE Bonds, the Exchange
also proposes to amend other parts of
Rule 86 that are impacted by this
proposed rule change. Rule 86(h)
currently states that orders can only be
designated for Bond Trading Sessions
and cannot be designated for
participation in Bond Auctions. The
rule further states that participation in
Bond Auctions is automatic if an order
is designated for participation in a
particular Bond trading Session and is
entered prior to the commencement of
the related Bond Auction . Given that
not all of the new order types are
eligible to participate in Bond Auctions,
the Exchange proposes to amend the
current rule to clarify that participation
in Bond Auctions is not automatic if an
order is designated for participation in
a particular Bond Trading Session.
Additionally, Rule 86(j) currently
states that buy and sell orders in NYSE
Bonds are displayed, matched and
executed according to price, with the
highest bid price and the lowest offer
price receiving highest priority and
within each price, according to the time
of order entry. For Timed Orders,
priority within each price is determined
based on the effective time of the order,
as provided in proposed Rule
86(b)(2)(B)(vi)(3)(a)–(c). Timed Orders
submitted with an Effective Time
become effective at the time designated
on the order. i.e., at the Effective Time,
whereas Timed Orders submitted with
an Expire Time become effective at the
time such order is submitted.
Additionally, Timed Orders submitted
with a designated trading session alone
or with a designated trading session and
either an Effective Time or an Expire
Time become effective at the time the
designated trading session begins,
whereas Timed Orders submitted during
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a designated trading session become
effective at the time such order is
received. The Exchange proposes to
reflect these difference with an
amendment to Rule 86(j)(A)(ii).
Finally, the Exchange proposes to
make non-substantive organizational
changes to the rule text in order to make
the rule easier to read and understand.
Specifically, the Exchange is proposing
to renumber each of paragraphs (C), (D)
and (E) to (B)(ii), (B)(iii) and (B)(iv) and
to renumber each of paragraphs (F)
through (O) to (C) through (K).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,20 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,21 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to, and perfect the
mechanisms of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest and because it is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that the
proposed change would protect
investors and remove impediments to,
and perfect the mechanisms of, a free
and open market and a national market
system by offering Users additional
order types and therefore afford them
greater opportunities to execute their
bond orders on the Exchange.
The proposal to adopt All-or-None,
Fill-or-Kill and Minimum Quantity
order types would allow Users the
discretion to utilize specifically
designed order execution strategies.
These new order types would be
substantially the same as other All-orNone, Fill-or-Kill or Minimum Quantity
order types that have been available on
debt and equity markets and ATSs.22
The Exchange notes that because fixed
income securities are not subject to
Regulation NMS, unlike similar All-orNone and Minimum Quantity order
types on equity exchanges, the
Exchange proposes to display the All-orNone and Minimum Quantity and
permit executions that bypass an All-orNone order or Minimum Quantity order
20 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22 See supra note 13.
21 15
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19677
if the terms of such orders cannot be
met.
The proposed rule change to codify
Good ’Til Date Orders and Timed
Orders is designed to add clarity and
transparency regarding current
functionality without substantively
modifying such functionality.
Specifically, the Exchange believes that
the proposed rule change will provide
additional clarity and specificity
regarding the functionality of NYSE
Bonds and thus would promote just and
equitable principles of trade and remove
impediments to a free and open market.
The Exchange also believes that the
proposed amendments will contribute
to the protection of investors and the
public interest by making the
Exchange’s rules easier to understand
and would provide Users greater
flexibility in how they quote and trade
bonds on the NYSE Bonds platform,
while also enhancing the overall market
quality for bonds traded on the
Exchange.
The Exchange believes the proposed
rule change would perfect the
mechanism of a free and open market
and a national market system by
aligning the Exchange’s offerings of
order type functionality for bonds with
those available for over-the-counter
trading of bonds. The Exchange believes
that the proposed rule change is not
unfairly discriminatory because the new
order types would be available to all
Users.
The determination of the IMP is
essential to executing the greatest
number of bonds during a Bond Auction
and the Exchange believes providing the
level of detail, as proposed in the
revised definition, will promote
transparency and provide clarity to the
rule, which serves to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The proposed amendments to current
Rules 86(h) and (j) reflect the addition
of new order types and the codification
of existing order types and provide
clarity and transparency to Exchange
rules, which serves to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange also
believes that the proposed nonsubstantive organizational changes are
reasonable, fair, and equitable because
they are designed to make the rule
easier to comprehend. The proposed
amendments to Rules 86(h) and (j) and
the organizational changes to Rule 86
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are intended to make the rules clearer
and less confusing for participants and
investors and to eliminate potential
confusion, thereby removing
impediments to and perfecting the
mechanism of a free and open market
and a national market system, and, in
general, protecting investors and the
public interest.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
For these reasons, the Exchange
believes that the proposal is consistent
with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,23 the Exchange believes that the
proposed rule change would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Instead, the
Exchange believes that the proposed
change would contribute to competition
because it would expand investor
choices on NYSE Bonds and allow the
Exchange to compete better with ATSs
that already offer similar order types.
The proposed rule change also could
encourage additional bond transactions
on a public exchange, which would
contribute to greater price
transparency.24
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
asabaliauskas on DSK3SPTVN1PROD with NOTICES
23 15
U.S.C. 78f(b)(8).
were traded almost exclusively via
private telephone negotiations until about 10 years
ago, when regulatory changes and technological
advances prompted more electronic trading, which
now makes up about half of U.S. government-bond
trading and 20 percent of corporate, agency and
municipal issues according to industry estimates.
See ‘‘Bond ‘Electronification’: Catalyst Needed,’’
(June 5, 2014), available at https://
marketsmedia.com/bond-electronification-catalystneeded/.
24 Bonds
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Jkt 238001
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
[FR Doc. 2016–07684 Filed 4–4–16; 8:45 am]
IV. Solicitation of Comments
BILLING CODE 8011–01–P
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2016–17 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2016–17. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2016–17 and should be submitted on or
before April 26, 2016.
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Robert W. Errett,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77481; File No. SR–
NASDAQ–2016–013]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Require Listed Companies to Publicly
Disclose Compensation or Other
Payments by Third Parties to Board of
Director’s Members or Nominees
March 30, 2016.
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 15,
2016, The Nasdaq Stock Market LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to require
listed companies to publicly disclose
compensation or other payments by
third parties to any nominee for director
or sitting director in connection with
their candidacy for or service on the
companies’ Board of Directors.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
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
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\05APN1.SGM
05APN1
]]>Agencies
[Federal Register Volume 81, Number 65 (Tuesday, April 5, 2016)]
[Notices]
[Pages 19671-19678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07684]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77477; File No. SR-NYSE-2016-17]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1 Thereto, To Amend Rule 86 To Add Additional Order Types to the NYSE
Bonds\SM\ Platform, Codify Functionality of Order Types Currently
Available on NYSE Bonds, and Amend the Definition of Indicative Match
Price in Current Rule 86(B)(2)(G) To Provide Greater Detail of How an
IMP Is Established With Respect to Bond Auctions
March 30, 2016.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on March 16, 2016, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. On March 29, 2016, the Exchange filed
Amendment No. 1 to the proposal.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change, as modified by
Amendment No. 1, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, the Exchange proposed changes to amend
the proposed rule text of Rule 86(j)(A)(ii) in Exhibit 5 and the
purpose section of each of the Form 19b-4 and Exhibit 1 to clarify
the effective time used to determine the priority of Timed Orders.
The Exchange also amended the purpose section of each of the Form
19b-4 and Exhibit 1 to add that all-or-none and minimum quantity
contingencies are displayed.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 86 to add additional order
types to the NYSE Bonds\SM\ platform and to codify functionality of
order types currently available on NYSE Bonds. The Exchange also
proposes to amend the
[[Page 19672]]
definition of Indicative Match Price (``IMP'') in current Rule
86(b)(2)(G) to provide greater detail of how an IMP is established with
respect to Bond Auctions.\5\ The proposed rule change is available on
the Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\5\ As part of this proposal, the Exchange proposes to renumber
the current rule to Rule 86(b)(2)(D).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 86 to add NYSE Bonds Fill-or-
Kill Order, NYSE Bonds All-or-None Order and NYSE Bonds Minimum
Quantity Order as new order types to the NYSE Bonds platform, and to
codify the operation of NYSE Bonds Good 'Til Date Order and NYSE Bonds
Timed Order that are currently available on NYSE Bonds platform. The
Exchange also proposes to amend the definition of IMP to provide
greater detail of how an IMP is established with respect to Bond
Auctions.
NYSE Bonds is the Exchange's electronic system for receiving,
processing, executing and reporting bids, offers, and executions in
bonds. Rule 86 prescribes how bonds are traded on the NYSE Bonds
trading platform and sets forth available order types. NYSE Bonds
currently allows Users \6\ to submit limit orders \7\ and reserve
orders.\8\ Orders are displayed, matched and executed on a price-time
priority basis.\9\ However, undisplayed reserve interest in NYSE Bonds
always yields to displayed interest at a particular price.\10\ Orders
are matched and executed if marketable at the time of entry, and if not
marketable at the time of entry, would post to the NYSE Bonds order
book.\11\ An order is marketable if contra side interest is available
at that price or better price at the time the order is entered in NYSE
Bonds. Further, orders that are marketable beyond the price collar
established for the bond at the time of entry are rejected by NYSE
Bonds to help avoid executions at erroneous prices.\12\
---------------------------------------------------------------------------
\6\ Current Rule 86(b)(2)(M) defines a User as any Member or
Member Organization, Sponsored Participant, or Authorized Trader
that is authorized to access NYSE Bonds. The Exchange proposes to
renumber the current rule to Rule 86(b)(2)(I).
\7\ A NYSE Bonds Limit Order is an order to buy or sell a stated
amount of bonds at a specified price or at a better price. See
current Rule 86(b)(2)(B). The Exchange proposes to renumber the
current rule to Rule 86(b)(2)(B)(i).
\8\ A NYSE Bonds Reserve Order is a NYSE Bonds Limit Order with
a portion of the order's size designated for display and a portion
of the order's size ``reserve size'' that is not to be displayed on
NYSE Bonds. See current Rule 86(b)(2)(C). The Exchange proposes to
renumber the current rule to Rule 86(b)(2)(B)(ii).
\9\ See Rule 86(j)(A). The display and execution rules would
also be applicable to the additional order types proposed herein.
\10\ See Rule 86(j)(B).
\11\ Timed Orders, as proposed herein, maybe [sic] matched and
executed or posted at a time different from the time of entry. See
Proposed Rule 86(b)(2)(B)(vi)(3)(a)-(c).
\12\ See Rule 86(e). The price collar thresholds would also be
applicable to the additional order types proposed herein.
---------------------------------------------------------------------------
The Exchange believes each of the order types described below is
currently offered by alternative trading systems (``ATSs'') for bonds,
such as Tradeweb's BondDesk Group, KCG Bondpoint, and TMC Bonds.\13\
---------------------------------------------------------------------------
\13\ Order types such as Good `Til Date, All-or-None, Fill-or-
Kill, and Minimum Quantity are available on various equity and
options markets. See, e.g., NYSE Arca Equities Rule 7.31(b)(2) and
International Securities Exchange (``ISE'') Rule 715.
---------------------------------------------------------------------------
NYSE Bonds Fill-or-Kill Order
A NYSE Bonds Fill-or-Kill Order (``NYSE Bonds FOK Order'') is a
NYSE Bonds Limit Order that would be executed immediately in its
entirety at the best price available against a single contra party and,
if not executed immediately in its entirety, would be cancelled.\14\ A
NYSE Bonds FOK Order would be eligible to participate in all trading
sessions \15\ but can be executed only during the trading session in
which the order is sent; otherwise the order would be rejected. A NYSE
Bonds FOK Order cannot participate in either the Opening Bond Auction
or the Core Bond Auction.
---------------------------------------------------------------------------
\14\ A NYSE Bonds FOK Order cannot be a NYSE Bonds Reserve
Order. See proposed Rule 86(b)(2)(B)(ii).
\15\ The Opening Bond Trading Session commences with the Opening
Bond Auction at 4:00 a.m. ET and concludes at 8:00 a.m. ET. See Rule
86(i)(1)(A). The Core Bond Trading Session commences with the Core
Bond Auction at 8:00:00 a.m. ET and concludes at 5:00 p.m. ET. See
Rule 86(i)(2)(A). The Late Bond Trading Session commences at 5:00
p.m. ET and concludes at 8:00 p.m. ET. See Rule 86(i)(3)(A).
---------------------------------------------------------------------------
The following example illustrates the proposed functionality:
Example 1--A NYSE Bonds FOK Order that gets executed when there is
sufficient size and the order is at the top of the book.
T1 submits a buy order for 200 bonds @$101
T2 submits a sell order for 150 bonds @$102
Posted market on NYSE Bonds: $101-$102 (200 x 150)
T3 enters a sell order for 50 bonds @$101 FOK
Result: T3's 50 bonds are traded at $101 since the price is at the
top of the order book and quantity is fully satisfied.
Example 2--A NYSE Bonds FOK Order that does not get executed when
there is insufficient size and the order is at the top of the book.
After the trade in Example 1, posted market on NYSE Bonds: $101-$102
(150 x 150)
T4 then enters a buy order for 75 bonds at $101.25
Posted market on NYSE bonds: $101.25-$102 (75 x 150)
T5 enters a sell order for 100 bonds @ $101.25 FOK
Result: T5's order is cancelled because there is not enough size at
the best price of 101.25.
Example 3--A NYSE Bonds FOK Order that does not get executed when
interacting with a NYSE Bonds AON Order.
After T5 is cancelled in Example 2, posted market on NYSE Bonds remains
at $101.25-$102 (75 x times; 150)
T6 enters a sell order for 100 bonds at $101.50 AON
Posted market on NYSE Bonds: $101.25-$101.50 (75 x 100).
T7 enters a buy order for 75 bonds at $101.50 FOK
Result: T7's order is cancelled because the order cannot satisfy
T6's AON size, which is the top of the order book.
Posted market on NYSE Bonds remains at $101.25-$101.50 (75 x 100).
NYSE Bonds All-or-None Order
A NYSE Bonds All-or-None Order (``NYSE Bonds AON Order'') is a NYSE
Bonds Limit Order (whose AON contingency would be displayed on the
order book) that would be executed in its entirety against one or more
contra party, or not at all.\16\ If a NYSE Bonds
[[Page 19673]]
AON Order is not executed in full, NYSE Bonds would post the order to
the order book at its limit price until it is executed in full, or is
cancelled. Incoming contra-side orders that cannot meet the AON
quantity may trade at or bypass the price of the NYSE Bonds AON Order.
A NYSE Bonds AON Order would not participate in either the Opening Bond
Auction or the Core Bond Auction and the order is eligible for
execution only during the trading session for which it is designated.
---------------------------------------------------------------------------
\16\ A NYSE Bonds AON Order cannot be a NYSE Bonds Reserve
Order. See proposed Rule 86(b)(2)(B)(ii).
---------------------------------------------------------------------------
A NYSE Bonds AON Order must be designated as ``day,'' ``good 'til
cancelled,'' or ``good 'til date.'' A NYSE Bonds AON Order designated
as ``day'' can participate in all trading sessions. A NYSE bonds AON
Order designated as ``day,'' if not executed or cancelled, would expire
at the end of the trading session for which it was designated, on the
day on which it was entered. A NYSE Bonds AON Order designated as
``day'' and not designated for a particular trading session but entered
during the Opening Bond Trading Session would participate in the
Opening Bond Trading Session, and if not executed during the Opening
Bond Trading Session or cancelled, would be eligible for execution in
the Core Bond Trading Session. A NYSE Bonds AON Order designated as
``day'' and not designated for a particular trading session but entered
during the Core Bond Trading Session would participate in the Core Bond
Trading Session only and if not executed in full, the order would be
cancelled at the end of such trading session.
A NYSE Bonds AON Order designated as ``good 'til cancelled'' may be
entered during the Opening Bond Trading Session and the Core Bond
Trading Session but can be executed in the Core Bond Trading Session
only. A NYSE Bonds AON Order designated as ``good 'til cancelled'' and
not designated for a particular trading session but entered during the
Core Bond Trading Session would participate in the Core Bond Trading
Session only and if not executed in full, the order would remain on
NYSE Bonds until cancelled. Unless a NYSE Bonds AON Order that is
designated as ``good 'til cancelled'' is executed or cancelled in full,
the order would be placed on the order book for the following day in
price-time priority for participation in the Core Bond Trading Session
after the end of the Core Bond Auction.
A NYSE Bonds AON Order designated as ``good `til date'' may be
entered during the Opening Bond Trading Session and the Core Bond
Trading Session but can be executed in the Core Bond Trading Session
only. A NYSE Bonds AON Order designated as ``good 'til date'' and not
designated for a particular trading session but entered during the Core
Bond Trading Session would participate in the Core Bond Trading Session
only and if not executed in full, would remain on NYSE Bonds until the
end of the Core Bond Trading Session on the date specified. Unless a
NYSE Bonds AON Order that is designated as ``good 'til date'' is
executed or cancelled in full, the order would be placed on the order
book for the following day in price-time priority for participation in
the Core Bond Trading Session after the end of the Core Bond Auction.
The following examples illustrate the proposed functionality:
Example 1--A NYSE Bonds AON Order that gets executed when there is
sufficient size.
Posted Market on NYSE Bonds: $102.50-$103.50 (1000 x 1000)
T1 enters a sell order for 500 bonds @ $102.50 AON
Result: T1's AON quantity is satisfied and the order for 500 bonds
is executed at $102.50.
After the trade, posted market on NYSE Bonds: $102.50-$103.50 (500 x
1000)
Example 2--A NYSE Bonds AON Order that does not get executed and is
bypassed.
T1 submits an order to buy 100 bonds @ $101.39
T2 submits an order to sell 400 bonds @ $102.01
Posted Market on NYSE Bonds: $101.39-$102.01 (100 x 400)
T3 enters a sell order for 500 bonds @ $102 AON
Posted market on NYSE Bonds: $101.39-$102 (100 x 500).
T4 enters an order to buy 400 bonds @ $102.01.
Result: T4 trades 400 bonds with T2's $102.01 offer. T3's $102 AON
offer with a quantity of 500 bonds would be bypassed because the
specified quantity was not satisfied. T3 would remain on the Exchange's
order book and continue to be displayed on the quote display feed with
the AON quantity until it is either executed in full or cancelled.
Example 3--A NYSE Bonds AON Order that gets executed after
aggregating liquidity to satisfy size requirement.
T1 submits an order to buy 400 bonds @ $100
T2 submits an order to sell 500 bonds @ $101
T3 submits an order to sell 200 bonds @ $100.75
T4 submits an order to sell 200 bonds @ $100.50
Posted market on NYSE Bonds: $100-$100.50 (400 x 200)
T5 submits an order to buy 500 bonds @ $101 AON
Result: Since there are no size restrictions on any of the orders
on the book, T5 would execute against the best price available and then
trade at each price level until the order is fully executed. Therefore,
T5 trades 200 @ 100.50 with T4, 200 @ $100.75 with T3 and 100 @ $101
with T2.
NYSE Bonds Minimum Quantity Order
A NYSE Bonds Minimum Quantity Order is a NYSE Bonds Limit Order
(whose minimum quantity contingency would be displayed on the order
book) that would trade against one or more contra side order(s),
provided the order's quantity requirement is met.\17\ In the event
there is not enough contra-side liquidity available at the time a NYSE
Bonds Minimum Quantity Order is submitted, NYSE Bonds would post the
order on the order book at its limit price until it is executed in
full, or is cancelled. Incoming contra-side orders that cannot meet the
minimum quantity may trade at or bypass the price of a NYSE Bonds
Minimum Quantity Order. A NYSE Bonds Minimum Quantity Order would be
rejected if the minimum quantity entered on the order is greater than
the total number of bonds of the order.
---------------------------------------------------------------------------
\17\ A NYSE Bonds Minimum Quantity Order cannot be a NYSE Bonds
Reserve Order. See proposed Rule 86(b)(2)(B)(ii).
---------------------------------------------------------------------------
A NYSE Bonds Minimum Quantity Order may be partially executed as
long as each partial execution is for the minimum number of bonds or
greater. If there remains a balance after one or more partial
executions and such balance is for less than the minimum quantity
specified on the order, such balance would be treated as a regular
limit order and placed on the order book in price-time priority. A NYSE
Bonds Minimum Quantity Order would not participate in either the
Opening Bond Auction or the Core Bond Auction and the order would be
eligible for execution only in the trading session during which it was
sent.
A NYSE Bonds Minimum Quantity Order must be designated as ``day,''
``good 'til cancelled,'' or ``good 'til date.'' A NYSE Bonds Minimum
Quantity Order designated as ``day'' is eligible to participate in all
three trading sessions. A NYSE Bonds Minimum Quantity Order designated
as ``day,'' if not executed or cancelled, would expire at the end of
the trading session for which it was designated, on the day on
[[Page 19674]]
which it was entered. A NYSE Bonds Minimum Quantity Order designated as
``day'' and not designated for a particular trading session but entered
during the Opening Bond Trading Session would participate in the
Opening Bond Trading Session, and if not executed during the Opening
Bond Trading Session or cancelled, would be eligible for execution in
the Core Bond Trading Session. A NYSE Bonds Minimum Quantity Order
designated as ``day'' and not designated for a particular trading
session but entered during the Core Bond Trading Session would
participate in the Core Bond Trading Session only and if not executed
in full, the order would be cancelled at the end of such trading
session.
A NYSE Bonds Minimum Quantity Order designated as ``good 'til
cancelled'' may be entered during the Opening Bond Trading Session and
the Core Bond Trading Session but would be eligible to participate in
the Core Bond Trading Session only. Unless a NYSE bonds Minimum
Quantity Order that is designated as ``good 'til cancelled'' is
executed in full, or is cancelled, the order would be placed on the
order book for the following day in price-time priority for
participation in the Core Bond Trading Session after the end of the
Core Bond Auction.
A NYSE Bonds Minimum Quantity Order designated as ``good 'til
date'' may be entered during the Opening Bond Trading Session and the
Core Bond Trading Session but would be eligible to participate in the
Core Bond Trading Session only. Unless a NYSE bonds Minimum Quantity
Order that is designated as ``good 'til date'' is executed in full, or
is cancelled, the order would be placed on the order book for the
following day in price-time priority for participation in the Core Bond
Trading Session after the end of the Core Bond Auction.
The following examples illustrate the proposed functionality:
Example 1--A NYSE Bonds Minimum Quantity Order that gets fully
executed after interacting with multiple orders including with a NYSE
Bonds AON Order.
T1 submits an order to buy 400 bonds @ $100
T2 submits an order to sell 400 bonds @ $102
Posted market on NYSE Bonds: $100-$102 (400 x 400)
T3 submits an order to sell 600 bonds @ $101 with a
minimum quantity of 100 bonds
T4 submits an order to sell 200 bonds @ $101
T3 moves ahead of T2 on the order book (and T4 moves up and is now
behind T3).
Posted market on NYSE Bonds: $100-$101 (400 x 800).
T5 submits an order to buy 100 bonds @ $101
Result: T5 executes with T3. T3 is decremented by 100 bonds,
leaving 500 bonds that remain to be executed.
Posted market on NYSE Bonds: $100-$101 (400 x 700)
T6 submits an order to buy 500 bonds @ $101 AON
Result: T6 trades 500 @$101 with T3 since T3 has 500 bonds
remaining and T3's minimum quantity requirement is satisfied.
Posted market on NYSE Bonds: $100-$101 (400 x 200)
Example 2--A NYSE Bonds Minimum Quantity Order that does not get
executed and is bypassed.
T1 submits an order to buy 100 bonds @ $101.39
T2 submits an order to sell 400 bonds @ $102.01
Posted market on NYSE Bonds: $101.39-$102.01 (100 x 400)
T3 submits an order to sell 1000 bonds @ $102 with a
minimum quantity of 500 bonds. T3 moves ahead of T2 on the order book.
Posted market on NYSE Bonds: $101.39-$102 (100 x 1000 (with a minimum
quantity of 500))
T4 submits an order to buy 400 bonds @ $102.01
Result: T4 trades 400 @ $102.01 with T2. T3's $102 offer has a
minimum quantity of 500 and is bypassed because the minimum quantity
was not satisfied.
Example 3--Multiple NYSE Bonds Minimum Quantity Orders where one
order does not get executed because the order's size requirement cannot
be met and the order is therefore bypassed, and another order that is
partially executed and the remainder of the order is converted to a
limit order.
T1 submits an order to buy 400 bonds @ $100
T2 submits an order to sell 400 bonds @ $102
Posted market on NYSE Bonds: $100-$102 (400 x 400)
T3 submits an order to sell 600 bonds @ $101 with a
minimum quantity of 300 bonds
T3 provides a better market and therefore moves ahead of T2
Posted market on NYSE Bonds: $100-$101 (400 x 600 (with a minimum
quantity of 300))
T4 submits an order to sell 200 bonds @ $100.75
T4 provides a better market and therefore moves ahead of T3
Posted market on NYSE Bonds'' $100-$100.75 (400 x 200)
T5 submits an order to sell 100 bonds @ 101
T5 moves behind T3
T6 submits an order to buy 250 bonds @ $101 with a minimum
quantity of 200 bonds
Result: T6 trades 200 with T4 @ $100.75. T6's minimum quantity is
higher than the quantity remaining, so the order becomes a regular
limit order to buy 50 bonds at $101. T3 does not get executed because
T3's minimum quantity cannot be satisfied. T6 then trades 50 bonds @
$101 with T5 since T5 has no size restrictions.
Posted market on NYSE Bonds: $100-$101 (400 x 600 (with a minimum
quantity of 300))
NYSE Bonds Good 'Til Date Order
A NYSE Bonds Good 'Til Date Order (``NYSE Bonds GTD Order'') is a
NYSE Bonds Limit Order or a NYSE Bonds Reserve Order, which if not
executed or cancelled, would expire at the end of the Core Bond Trading
Session on the date specified on the order. A NYSE Bonds GTD Order must
include an Expire Date or be designated for the Core Bond Trading
Session; otherwise, the order would be rejected. A NYSE Bonds GTD Order
can participate in the Core Bond Auction and the Core Bond Trading
Session only. A NYSE Bonds GTD Order would participate in the Core Bond
Auction if it is entered before commencement of the Core Bond Auction,
and if not executed in the Core Bond Auction, would remain live on NYSE
Bonds and would be eligible for execution in the Core Bond Trading
Session, unless the order is cancelled. A NYSE Bonds GTD Order entered
after commencement of the Core Bond Auction would participate in the
Core Bond Trading Session, unless the order is cancelled.
A NYSE Bonds GTD Order can participate only in the Core Bond
Trading Session, and such order designated for any other trading
session would be rejected. A NYSE Bonds GTD Order that is not executed
or cancelled in full at the end of the trading day would be placed on
the order book for the following day in price-time priority for
participation in the Core Bond Trading Session after the end of the
Core Bond Auction.
The following example illustrates how a NYSE Bonds GTD Order would
be executed once it becomes effective:
Suppose on October 14, a NYSE Bonds trading day, at 7:00 a.m.
(during the Early Bond Trading Session):
T1 submits a Day order to buy 100
[[Page 19675]]
bonds @ $100.20
T2 submits a Day order to sell 20 bonds @ $100.25
T3 submits a GTD order (October 15) to buy 100 bonds @
$100.30
T4 submits an order to sell 50 bonds @ $100.35 for
participation in all three bond trading sessions
Posted market on NYSE Bonds: $100.20 x $100.25 (100 x 20)
T3's GTD order not effective yet (becomes effective at 8:00 a.m.)
On the same trading day, at 8:00 a.m., when the Core Bond Auction
commences, these orders would be processed as follows:
T3 becomes effective for the Core Bond Auction;
T1, T2 and T3 participate in the Core Bond Auction;
T2 and T3 overlap in price, therefore 20 Bonds are matched
at $100.30 with an imbalance on the buy side of 80 bonds.
T3's GTD order becomes live for the Core Bond Trading Session.
Posted market on NYSE Bonds: $100.30 x $100.35 (80 x 50)
On the same trading day, at 8:30 a.m. (during the Core Bond Trading
Session):
T5 submits an order to sell 25 bonds @ $100.30
Result: T3 trades 25 bonds with T5.
Posted market on NYSE Bonds: $100.30 x $100.35 (55 x 50)
On the same trading day, at 5:01 p.m. (during the Late Bond Trading
Session), the remaining orders would be processed as follows:
T1 expires (as Day orders expire at the end of the Core
Bond Trading Session);
T3 is a GTD order, which trades only in the Core Bond
Trading Session. Since T3 has not been executed in its entirety, the
remaining portion of the order would be held and placed on the order
book for the start of the Core Bond Trading Session the following day
in price-time priority.
T4 remains effective and would participate in the Late
Bond Trading Session.
Posted market on NYSE Bonds: $ 0.00 x $100.35 (0 x 50)
On the next trading day, October 15, at 7:58 a.m. (during the
Opening Bond Trading Session):
T1 submits a Day order to buy 50 bonds @ $100.20
T2 submits a Day order to sell 50 bonds @ $100.45
Posted market on NYSE Bonds: $100.20 x $100.45 (50 x 50)
Result: T3 is placed on the order book for the following day in
price-time priority for participation in the Core Bond Trading Session
after the end of the Core Bond Auction at 8:00 a.m.; no prices overlap,
auction imbalance of 50 on buy side and 50 on sell side. T3 becomes
effective.
Posted market on NYSE Bonds: $100.30 x $100.45 (55 x 50)
On the same trading day, October 15, at 5:00 p.m., when the Late
Bond Trading Session commences, the remaining orders would be processed
as follows:
T1 and T2 expire (as Day orders expire at the end of the
Core Bond Trading Session);
T3 also expires (T3 was submitted with a good 'til date of
20151015 therefore, the order expires at the end of the Core Bond
Trading Session on the date specified on the order).
NYSE Bonds Timed Order
A NYSE Bonds Timed Order is a NYSE Bonds Limit Order or a NYSE
Bonds Reserve Order that remains in effect for a period of time
specified on the order (e.g., Effective Time and Expire Time) for the
day on which the order is entered until the order is executed or
cancelled. A NYSE Bonds Timed Order would be accepted, and may be
cancelled, during all trading sessions, provided that the order is
submitted during the trading session in which it is to become
effective.
A NYSE Bonds Timed Order would participate in the Core Bond Auction
and Core Bond Trading Session if the order is entered before
commencement of the Core Bond Auction, and if the order is not executed
in the Core Bond Auction, or not cancelled, it would be eligible for
execution in the Core Bond Trading Session. A NYSE Bonds Timed Order
must include at least one of the following: An Effective Time, an
Expire Time or a designated trading session, otherwise the order would
be rejected.
A NYSE Bonds Timed Order submitted with an Effective Time alone
becomes effective at the Effective Time and if not executed, the order
would be cancelled at the end of the Late Bond Trading Session. A NYSE
Bonds Timed Order submitted with an Expire Time alone becomes effective
at the time it is sent to the Exchange and if not executed, the order
would be cancelled at the Expire Time designated on the order. A NYSE
Bonds Timed Order submitted with a designated trading session alone or
with a designated trading session and either an Effective Time or an
Expire Time would become effective at the time the designated trading
session begins and if not executed, the order would be cancelled at the
end of the designated trading session.\18\ NYSE Bonds would disregard
the Effective Time or Expire Time submitted with a NYSE Bonds Timed
Order that is designated for a specific trading session. Additionally,
a NYSE Bonds Timed Order submitted with a time in force of Day during a
trading session without an Effective Time, an Expire Time or a
designated trading session would be treated as a Day limit order and,
if not executed, would be cancelled at the end of the Core Bond Trading
Session.
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\18\ A NYSE Bonds Timed Order submitted during a designated
trading session becomes effective at the time the order is received
and, if not executed, would be cancelled at the end of such
designated trading session.
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The following examples illustrate the functionality:
Example 1--A NYSE Bonds Timed Order submitted with an Effective
Time that does not get executed on the day the order is submitted.
Suppose on October 14, a NYSE Bonds trading day, at 8:05 a.m.
(during the Core Bond Trading Session):
T1 submits a Day order to buy 50 bonds @ $100.25
T2 submits a Day order to sell 50 bonds @ 100.45
T3 submits a Timed Order to buy 100 bonds @ 100.30 with an
Effective Time of 8:45 a.m.
T3 waits to become effective until 8:45 a.m.; T1 and T2 remain
effective
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
On the same trading day, at 8:45 a.m., T3 becomes effective. T1 and T2
remain effective
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)
On the same trading day, October 15, at 5:00 p.m., when the Late
Bond Trading Session commences, with no executions occurring during the
day, the remaining orders would be processed as follows:
T1 and T2 expire (as Day orders expire at the end of the
Core Bond Trading Session);
T3 would also expire at the end of the Core Bond Trading
Session as the order was submitted without an Expire Time.
Example 2--A NYSE Bonds Timed Order submitted with an Expire Time
that does not get executed on the day the order is submitted.
Suppose on October 14, a NYSE Bonds trading day, at 8:35 a.m.
(during the Core Bond Trading Session):
T1 submits a Day order to buy 50 bonds @ $100.25
T2 submits a Day order to sell 50 bonds @ $100.45
[[Page 19676]]
T3 submits a Timed Order to buy 100 bonds @ $100.30 with
an Expire Time of 8:45 a.m.
Since T3 was submitted without an Effective Time, the order becomes
effective upon order entry. T1 and T2 remain effective.
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)
On the same trading day, October 14, at 8:45 a.m.: T3 expires as the
order was submitted with an Expire Time of 8:45 a.m. T1 and T2 remain
effective during the Core Bond Trading Session
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
Example 3--A NYSE Bonds Timed Order submitted with an Effective
Time and an Expire Time that does not get executed on the day the order
is submitted.
Suppose on October 14, a NYSE Bonds trading day, at 8:35 a.m.
(during the Core Bond Trading Session):
T1 submits a Day order to buy 50 bonds @ $100.25
T2 submits a Day order to sell 50 bonds @ $100.45
T3 submits a Timed Order to buy 100 bonds @ $100.30 with
an Effective Time of 8:45 a.m. and an Expire Time of 8:55 a.m.
T3 waits to become effective until 8:45 a.m.; T1 and T2 remain
effective
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
On the same trading day, October 14, at 8:45 a.m.: T1 and T2 remain
effective. T3 becomes effective
Posted market on NYSE Bonds: $100.30 x $100.45 (100 x 50)
On the same trading day, October 14, at 8:55 a.m.: T3 expires as the
order was submitted with an Expire Time of 8:55 a.m. T1 and T2 remain
effective during the Core Bond Trading Session.
Posted market on NYSE Bonds: $100.25 x $100.45 (50 x 50)
Indicative Match Price
Finally, the Exchange proposes to amend the definition of
Indicative Match Price (``IMP'') in current Rule 86(b)(2)(G) to provide
greater detail of how an IMP is established with respect to Bond
Auctions. Specifically, the IMP in a particular bond means a single
price at which the maximum number of bonds is executable. If there are
two or more prices at which the maximum number of bonds is executable,
the IMP would be the price that is closest to the Reference Price
provided that the IMP cannot be lower (higher) than any unmatched top
of book order to buy (sell) that was eligible to participate in an
auction at the IMP. For the Opening Bond Auction, the Reference Price
is the closing price in a bond on the previous trading day or if the
bond did not trade on the previous trading day, the closing price on
the last day that the bond traded.\19\ For the Core Bond Auction and
the Bond Halt Auction, the Reference Price is the last price of a bond
on the trading day prior to the applicable auction, and if none, the
previous trading day's closing price, and if none, the closing price on
the last day that the bond traded. If orders to buy and orders to sell
are not marketable (i.e., the price of a bond order to buy is not equal
to or greater than the price of a bond order to sell), then the IMP
would be determined by the side and volume at the top of book, with the
price of the side with the greater volume establishing the IMP.
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\19\ The Exchange proposes to delete the words ``the price that
is closest to'' from the current rule to more precisely reflect the
price that would be used to determine the Reference Price on the
last day that a bond traded.
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Current Rule 86(l)(3)(A) provides that a Bond Auction would not
occur in the event of a failure to establish an IMP. The Exchange
proposes to amend the current rule to provide that, for non-marketable
buy and sell orders entered in NYSE Bonds where the size of the best
bid and best offer are the same, an IMP would not be established and a
Bond Auction would not occur.
Current Rule 86(n)(2)(E) provides that a Bond Halt Auction would
not occur in the event of a failure to establish an IMP. The Exchange
proposes to amend the current rule to provide that, for non-marketable
buy and sell orders entered in NYSE Bonds where the size of the best
bid and best offer are the same, an IMP would not be established and a
Bond Halt Auction would not occur.
The following example illustrates how an IMP would be established
and there is no overlapping interest for a trade to occur:
Suppose that the previous closing price of a bond is $101.50 and
the order book just prior to a Bond Auction is as follows:
T1--Buy 300 @ $101.00
T2--Sell 200 @ $102.00
T3--Sell 500 @ $101.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
Matchable Indicative
Order Buy volume Sell volume Order price volume Imbalance match price
--------------------------------------------------------------------------------------------------------------------------------------------------------
T1...................................................... 300 .............. $101.00 0 300 $101.00
T2...................................................... .............. 200 102.00 0 300 101.00
T3...................................................... .............. 500 101.75 0 500 101.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result: No match. The buy order (300 @ $101.00) and sell order (500
@ $101.75) do not overlap. Per proposed Rule 86(d)(ii) which states
that if orders to buy and orders to sell are not marketable (i.e., the
price of a bond order to buy is not equal to or greater than the price
of a bond order to sell), then the IMP would be determined by the side
and volume at the top of book, with the price of the side with the
greater volume establishing the IMP. Thus, the maximum size that could
have been matched is T3, and T3 therefore establishes the IMP at
$101.75.
The following example illustrates how an IMP would be established
and there is overlapping interest for a trade to occur:
Suppose that the previous closing price of a bond is $101.50 and
the order book just prior to a Bond Auction is as follows:
T1--Buy 500 @ $102.00
T2--Buy 500 @ $101.75
T3--Sell 500 @ $101.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Matchable Indicative
Order Buy volume Sell volume Order price volume Imbalance match price
--------------------------------------------------------------------------------------------------------------------------------------------------------
T1...................................................... 500 .............. $102.00 0 500 $102.00
T2...................................................... 500 .............. 101.75 0 500 102.00
T3...................................................... .............. 500 101.00 500 500 101.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 19677]]
Result: Considering there are two or more prices at which the
maximum number of bonds is executable (i.e., all three orders on the
order book), a match can occur between $101.00 and $102.00. To
establish the IMP, NYSE Bonds would select a price closest to the
Reference Price (i.e., previous close of $101.50) without such price
being lower than the unmatched buy order price of $101.75 (T2).
Therefore, the auction would occur at $101.75 with T1 and T2
participating in the auction for 500 bonds. In another words, the IMP
would be established at $101.75 because that price is closest to the
previous close price of $101.50 and not lower that the price of the
unmatched buy order, T2.
Other Changes
In addition to adding order types to the NYSE Bonds platform and
codifying functionality of order types currently available on NYSE
Bonds, the Exchange also proposes to amend other parts of Rule 86 that
are impacted by this proposed rule change. Rule 86(h) currently states
that orders can only be designated for Bond Trading Sessions and cannot
be designated for participation in Bond Auctions. The rule further
states that participation in Bond Auctions is automatic if an order is
designated for participation in a particular Bond trading Session and
is entered prior to the commencement of the related Bond Auction .
Given that not all of the new order types are eligible to participate
in Bond Auctions, the Exchange proposes to amend the current rule to
clarify that participation in Bond Auctions is not automatic if an
order is designated for participation in a particular Bond Trading
Session.
Additionally, Rule 86(j) currently states that buy and sell orders
in NYSE Bonds are displayed, matched and executed according to price,
with the highest bid price and the lowest offer price receiving highest
priority and within each price, according to the time of order entry.
For Timed Orders, priority within each price is determined based on the
effective time of the order, as provided in proposed Rule
86(b)(2)(B)(vi)(3)(a)-(c). Timed Orders submitted with an Effective
Time become effective at the time designated on the order. i.e., at the
Effective Time, whereas Timed Orders submitted with an Expire Time
become effective at the time such order is submitted. Additionally,
Timed Orders submitted with a designated trading session alone or with
a designated trading session and either an Effective Time or an Expire
Time become effective at the time the designated trading session
begins, whereas Timed Orders submitted during a designated trading
session become effective at the time such order is received. The
Exchange proposes to reflect these difference with an amendment to Rule
86(j)(A)(ii).
Finally, the Exchange proposes to make non-substantive
organizational changes to the rule text in order to make the rule
easier to read and understand. Specifically, the Exchange is proposing
to renumber each of paragraphs (C), (D) and (E) to (B)(ii), (B)(iii)
and (B)(iv) and to renumber each of paragraphs (F) through (O) to (C)
through (K).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\20\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\21\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed change would protect
investors and remove impediments to, and perfect the mechanisms of, a
free and open market and a national market system by offering Users
additional order types and therefore afford them greater opportunities
to execute their bond orders on the Exchange.
The proposal to adopt All-or-None, Fill-or-Kill and Minimum
Quantity order types would allow Users the discretion to utilize
specifically designed order execution strategies. These new order types
would be substantially the same as other All-or-None, Fill-or-Kill or
Minimum Quantity order types that have been available on debt and
equity markets and ATSs.\22\ The Exchange notes that because fixed
income securities are not subject to Regulation NMS, unlike similar
All-or-None and Minimum Quantity order types on equity exchanges, the
Exchange proposes to display the All-or-None and Minimum Quantity and
permit executions that bypass an All-or-None order or Minimum Quantity
order if the terms of such orders cannot be met.
---------------------------------------------------------------------------
\22\ See supra note 13.
---------------------------------------------------------------------------
The proposed rule change to codify Good 'Til Date Orders and Timed
Orders is designed to add clarity and transparency regarding current
functionality without substantively modifying such functionality.
Specifically, the Exchange believes that the proposed rule change will
provide additional clarity and specificity regarding the functionality
of NYSE Bonds and thus would promote just and equitable principles of
trade and remove impediments to a free and open market. The Exchange
also believes that the proposed amendments will contribute to the
protection of investors and the public interest by making the
Exchange's rules easier to understand and would provide Users greater
flexibility in how they quote and trade bonds on the NYSE Bonds
platform, while also enhancing the overall market quality for bonds
traded on the Exchange.
The Exchange believes the proposed rule change would perfect the
mechanism of a free and open market and a national market system by
aligning the Exchange's offerings of order type functionality for bonds
with those available for over-the-counter trading of bonds. The
Exchange believes that the proposed rule change is not unfairly
discriminatory because the new order types would be available to all
Users.
The determination of the IMP is essential to executing the greatest
number of bonds during a Bond Auction and the Exchange believes
providing the level of detail, as proposed in the revised definition,
will promote transparency and provide clarity to the rule, which serves
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
The proposed amendments to current Rules 86(h) and (j) reflect the
addition of new order types and the codification of existing order
types and provide clarity and transparency to Exchange rules, which
serves to remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, to protect
investors and the public interest. The Exchange also believes that the
proposed non-substantive organizational changes are reasonable, fair,
and equitable because they are designed to make the rule easier to
comprehend. The proposed amendments to Rules 86(h) and (j) and the
organizational changes to Rule 86
[[Page 19678]]
are intended to make the rules clearer and less confusing for
participants and investors and to eliminate potential confusion,
thereby removing impediments to and perfecting the mechanism of a free
and open market and a national market system, and, in general,
protecting investors and the public interest.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\23\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, the Exchange believes that the proposed
change would contribute to competition because it would expand investor
choices on NYSE Bonds and allow the Exchange to compete better with
ATSs that already offer similar order types. The proposed rule change
also could encourage additional bond transactions on a public exchange,
which would contribute to greater price transparency.\24\
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\23\ 15 U.S.C. 78f(b)(8).
\24\ Bonds were traded almost exclusively via private telephone
negotiations until about 10 years ago, when regulatory changes and
technological advances prompted more electronic trading, which now
makes up about half of U.S. government-bond trading and 20 percent
of corporate, agency and municipal issues according to industry
estimates. See ``Bond `Electronification': Catalyst Needed,'' (June
5, 2014), available at https://marketsmedia.com/bond-electronification-catalyst-needed/.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2016-17 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2016-17. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2016-17 and should be
submitted on or before April 26, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07684 Filed 4-4-16; 8:45 am]
BILLING CODE 8011-01-P
