# Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to the Trading of Bonds > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A98-11210 ## Record - **Collection:** Federal Register - **Document type:** Notice - **Published:** April 28, 1998 - **Citation:** 63 FR 23324 ## Text SECURITIES AND EXCHANGE COMMISSION [Release No. 34-39903; File No. SR-NYSE-98-13] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to the Trading of Bonds April 22, 1998. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ notice is hereby given that on April 15, 1998, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items, I, II, and III below, which Items have been prepared by the NYSE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). --------------------------------------------------------------------------- [[Page 23325]] I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE is proposing amendments to its rules and procedures governing the trading of bonds. The Exchange is deleting obsolete provisions of its bond trading rules, streamlining those rules, and consolidating the bond-trading rules in new Rule 86. In addition to adopting new Rule 86, the proposal includes amendments to the following Exchange rules: Rule 13; Rule 61; Rule 70; Rule 72; Rule 76; Rule 79A; and Rule 85. II. Self-Regulatory Organization's Statement of the Proposed of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NYSE has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange currently trades non-convertible bonds in its Automated Bond System (``ABS'') and convertible bonds on its bond Floor. Later this year, the Exchange will move all bond trading into ABS. Currently, various Exchange rules govern the trading of bonds, particularly Rule 85, governing the trading of ``cabinet'' securities. The proposed rule change will provide for uniform bond trading procedures and will consolidate those procedures in new Rule 86.\2\ The rule change (i) will incorporate into new Rule 86 the same price/time priority matching procedures as Rule 85, (ii) will establish appropriate cross references to new Rule 86 in other NYSE rules and (iii) will eliminate the rules governing trading on the bond Floor, which will no longer be necessary. --------------------------------------------------------------------------- \2\ New Rule 86 specifies that these bond trading procedures apply only to bonds ``traded through ABS.'' The Exchange trades certain bonds, such as equity-linked securities, on its stock Floor. These securities are traded pursuant to NYSE equity-trading procedures and are not subject to Rule 86. See Securities Exchange Act Release No. 32650 (July 16, 1993) 58 FR 39586 (July 23, 1993). --------------------------------------------------------------------------- A substantive change the Exchange is proposing involves the crossing of bonds. Currently, Rule 85 requires that a member hold a proposed cross for a ``reasonable'' period of time before effecting the cross, and that the member announce the intention to effect the cross on the bond Floor. For the purposes of ABS, the Exchange has interpreted this as requiring a member to display a proposed cross in ABS for two minutes prior to effecting the trade. The Exchange's experience with these crossing procedures indicates that they no longer are needed. There are very few crosses in ABS (approximately two to four a day), and those that do take place are of small size (generally between two and nine bonds). Furthermore, most crosses involve instances where bond brokers receive matching buy and sell orders from two different correspondent firms within two minutes of each other. Also, members may cross orders of ten bonds and over off the Exchange, with the result being that the current rule places the Exchange at a competitive disadvantage to off-Exchange markets. The final change to the bond trading rules moves the rules governing transactions at wide variations from Rule 79A.40 to new Rule 86(g). For non-convertible bonds, the Exchange is retaining the requirement that a Floor Official approve all sales made two points away from the last sale or more than 30 days after the last transaction. The Exchange is not proposing to apply those requirements to convertible bonds, since such bonds generally are priced in relation to the underlying equity security. However, new Rule 86(g) allows a Floor Governor to impose the same requirements on the trading of convertible bonds if market conditions warrant. 2. Statutory Basis The basis under the Act for the proposed rule change is the requirement under Section 6(b)(5) that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date 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 such 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 is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to the File No. SR-NYSE-98-13 and should be submitted by May 19, 1998. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\3\ --------------------------------------------------------------------------- \3\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [[Page 23326]] Margaret H. McFarland, Deputy Secretary. [FR Doc. 98-11210 Filed 4-27-98; 8:45 am] BILLING CODE 8010-01-M --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A98-11210. Public record. Not legal advice.