15826 Federal Register / Vol. 77, No. 52 / Friday, March 16, 2012 / Notices 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66218 

(January 24, 2012), 77 FR 4604 (‘‘Notice’’). 

4See NYSE Rule 1600(a). 

5See NYSE Rule 1600(b)(2)(C). 

6See proposed NYSE Rule 1600(c)(2)(D). 

7See id. 

8See id. See also NYSE Rule 1600(b)(2)(E). 

9Accordingly, as set forth in the Notice, the 

NYBX Facility would apply the order execution 

process that is set forth in Rule 1600(d)(1)(C)(i) to 

NYBX IOC orders, including that an NYBX IOC 

order may execute at multiple price points that may 

be available in the DBK and NYBX Facility that are 

within the limit price of the NYBX IOC order. 

Because by its terms, an NYBX IOC order does not 

route to other markets, have an MTV, or leave a 

residual in the NYBX, certain aspects of the order 

execution processing rules are inapplicable, 

specifically NYSE Rules 1600(d)(1)(C)(ii)–(vi) and 

1600(d)(1)(D). 

10 In the Notice, the Exchange provided the 

following example: If a buy NYBX IOC order for 

1,000 shares arrives at the Facility with a limit price 

of $10.05, the Facility would review the available 

contra-side liquidity in the DBK (both displayed 

and undisplayed) and the NYBX. Assuming the 

contra-side liquidity in the DBK is 300 shares at 

$10.04 (undisplayed), 200 shares at $10.05 (NBO 

displayed), and 200 shares at $10.05 (undisplayed), 

and in the NYBX is 200 shares at $10.05, the NYBX 

IOC buy order would simultaneously be routed to 

DBK as 300 shares at $10.04 and 400 shares at 

$10.05, and 200 shares would execute in the 

Facility at $10.05, for a total execution of 900 

shares. The remaining 100 shares of the buy NYBX 

IOC order would be cancelled. Assuming the buy 

NYBX IOC order is instead for 700 shares, pursuant 

to the tie-breaker rule in NYSE Rule 

1600(d)(1)(C)(i), the full volume of the order would 

route to the DBK, executing 300 shares at $10.04 

and 400 shares at $10.05, and the Facility’s 200 

share contra-side order at $10.05 would not be 

filled. 

11See Securities Exchange Act Release No. 60356 

(July 21, 2009), 74 FR 37281 (July 28, 2009) (SR– 

NYSE–2009–08) (Rescinding Rules 110 and 107A, 

which established the roles of Competitive Traders 

and Registered Competitive Market Makers). 

12 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

13 15 U.S.C. 78f(b)(5). 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–FINRA– 

2011–067) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6386 Filed 3–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66576; File No. SR–NYSE– 

2012–01] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving a Proposed Rule Change To 

Establish an NYBX Immediate-orCancel Order 

March 12, 2012. 

I. Introduction 

On January 11, 2012, the New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend NYSE Rule 1600 to establish a 

new order type known as an ‘‘NYBX 

IOC order.’’ A NYBX IOC order would 

execute exclusively against contra-side 

liquidity in the Exchange’s Display 

Book (‘‘DBK’’) and/or in the New York 

Block Exchange (‘‘NYBX’’ or ‘‘Facility’’). 

The proposed rule change was 

published for comment in the Federal 

Register on January 30, 2012.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

NYBX is a facility of the Exchange 

and provides for electronic matching 

and execution of non-displayed orders 

with the aggregate of all displayed and 

non-displayed orders residing within 

NYBX and the DBK.4 Only securities 

listed on NYSE are eligible to trade on 

NYBX.5

NYSE proposes to establish a new 

order type, the NYBX IOC order, which 

is a limit order to buy or sell that is 

designated as immediate or cancel and 

would be cancelled if the order is not 

immediately able to execute, in whole 

or in part, exclusively against contraside liquidity in the DBK and/or NYBX 

at a price that is at or within the 

national best bid or offer (‘‘NBBO’’).6

Any unexecuted portion of an NYBX 

IOC order would be immediately 

cancelled. No portion of an NYBX IOC 

order would be routed elsewhere, 

placed on the DBK, or remain in the 

NYBX Facility. Instead the order would 

be cancelled back to the User.7 Unlike 

other NYBX order types, the NYBX IOC 

order will not allow a minimum 

triggering volume quantity (‘‘MTV’’) 

designation.8

A NYBX IOC order would be entered 

in the same manner as other NYBX 

orders, as provided under NYSE Rule 

1600(c)(1), and, except for the optional 

time in force order parameters of NYSE 

Rule 1600(c)(3)(B)(i), would be required 

to contain the order parameters listed in 

NYSE Rule 1600(c)(3)(A). A NYBX IOC 

order would be subject to order 

processing set forth in NYSE Rule 

1600(d)(1).9 In a situation in which the 

size of the NYBX IOC order is less than 

the total available contra side liquidity 

that is potentially executable within the 

limit price in the NYBX and the DBK, 

the existing ‘‘tie breaker’’ rules set forth 

in NYSE Rule 1600(d)(1)(C)(i) for 

routing decision purposes will provide 

that an execution in the DBK has 

priority over an execution at the same 

price in the NYBX.10

Since NYBX IOC order would not be 

routed elsewhere, if another automated 

trading center is displaying a better 

price than either the NYBX or the DBK, 

and an execution in the NYBX Facility 

or DBK would result in a trade through 

in violation of Regulation NMS, the 

NYBX IOC order would be cancelled. 

Likewise, if another automated trading 

center is displaying prices that are the 

same or inferior to prices in the NYBX 

or the DBK, and routing is not required 

by Regulation NMS, the NYBX IOC 

order would execute within the DBK 

and/or the NYBX without routing to 

such automated trading center. 

NYSE also proposes certain technical 

changes to NYSE Rule 1600. First, the 

Exchange proposes to amend NYSE 

Rule 1600(g) to add references to trading 

pauses in individual securities, as 

provided for under NYSE Rule 80C. 

Second, because the Exchange has 

eliminated the class of market 

participants formerly known as 

Registered Competitive Market Makers, 

the Exchange proposes to delete NYSE 

Rule 1600(h)(3), which is no longer 

applicable.11 Third, the Exchange 

proposes to clarify NYSE Rule 

1600(b)(2)(D) that NYBX orders are 

defined within NYSE Rule 1600(c)(2), 

not only within NYSE Rule 

1600(c)(2)(A) as is currently reflected. 

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.12 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,13 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts, promote just and 

equitable principles of trade, remove 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 52 / Friday, March 16, 2012 / Notices 15827 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The terms TRACE–Eligible Security, Agency 

Pass-Through Mortgage-Backed Security and TBA 

are defined in, respectively, Rule 6710(a), Rule 

6710(v) and Rule 6710(u). 

4The term Historic TRACE Data is defined in 

Rule 7730(f)(4) and refers to aged TRACE 

transaction data, which will include TBA 

transaction data. 

5As defined in Rule 6710(v), an Agency PassThrough Mortgage-Backed Security means: 

A mortgage-backed security issued by an Agency 

or a Government-Sponsored Enterprise, for which 

the timely payment of principal and interest is 

guaranteed by an Agency or a GovernmentSponsored Enterprise, representing ownership 

interests in a pool or pools of residential mortgage 

loans with the security structured to ‘‘pass through’’ 

the principal and interest payments made by the 

mortgagees to the owners of the pool(s) on a pro rata 

basis. 

The terms Agency and Government-Sponsored 

Enterprise (‘‘GSE’’) are defined in, respectively, 

Rule 6710(k) and Rule 6710(n). 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. The 

proposal appears reasonably designed to 

provide NYBX users flexibility and 

greater control over how their orders 

interact with available liquidity. The 

Commission notes that the proposal is 

consistent with the order protection rule 

of Regulation NMS, because an NYBX 

IOC order would not be permitted to 

trade through a protected quotation of 

another automated trading center. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–NYSE–2012– 

01) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6387 Filed 3–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66577; File No. SR–FINRA– 

2012–020] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Post-Trade Transparency for Agency 

Pass-Through Mortgage-Backed 

Securities Traded TBA 

March 12, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on March 1, 

2012, the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. 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 

FINRA is proposing to amend the 

FINRA Rule 6700 Series and Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’) dissemination protocols 

regarding the reporting and 

dissemination of transactions in 

TRACE–Eligible Securities that are 

Agency Pass-Through Mortgage-Backed 

Securities that are traded to be 

announced (‘‘TBA’’) (‘‘TBA 

transactions’’); to amend FINRA Rule 

7730 regarding TRACE fees to provide 

for data fees for TBA transaction data; 

and to amend the FINRA Rule 6700 

Series and FINRA Rule 7730 to delete 

references to a pilot program that 

expired on November 18, 2011, and to 

incorporate other minor administrative, 

technical or clarifying changes.3

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 

FINRA proposes amendments to the 

TRACE rules and dissemination 

protocols to provide greater 

transparency in TBA transactions. First, 

FINRA proposes to amend Rule 6730, to 

establish distinct requirements for 

reporting TBA transactions for which 

good delivery may be made (‘‘TBA 

transactions GD’’) and for reporting TBA 

transactions in products that are not 

traded for good delivery (‘‘TBA 

transactions NGD’’), and, in two stages, 

to reduce the time frames to report each 

type of TBA transaction and to make a 

related amendment to Rule 6710(u), the 

definition of ‘‘TBA,’’ to incorporate the 

concepts ‘‘for good delivery’’ and ‘‘not 

for good delivery.’’ Second, FINRA 

proposes to amend Rule 6750 to provide 

for the dissemination of TBA 

transactions and to establish, as part of 

TRACE dissemination protocols, a $25 

million dissemination cap for TBA 

transactions GD and a $10 million 

dissemination cap for TBA transactions 

NGD. Third, FINRA proposes to amend 

Rule 7730 to establish fees for current 

market data for TBA transactions and 

aged TBA transaction data.4 Finally, 

FINRA proposes to amend Rule 6730 to 

delete references to a pilot program that 

expired on November 18, 2011, and 

Rule 6730 and Rule 7730 to incorporate 

other minor administrative, technical or 

clarifying changes as described in 

greater detail below. 

TBA Transactions 

As provided in Rule 6710(u), TBA 

means 

‘‘to be announced’’ and refers to a 

transaction in an Agency Pass-Through 

Mortgage-Backed Security * * * where the 

parties agree that the seller will deliver to the 

buyer an Agency Pass-Through MortgageBacked Security of a specified face amount 

and coupon from a specified Agency or 

Government-Sponsored Enterprise program 

representing a pool (or pools) of mortgages 

(that are not specified by unique pool 

number).5

In a TBA transaction, the parties agree 

on a price for delivering a given volume 

of Agency Pass-Through MortgageBacked Securities at a specified future 

date. The distinguishing feature of a 

TBA transaction is that the actual 

identity of the securities to be delivered 

at settlement is not specified on the date 

of execution (‘‘Trade Date’’). Instead, the 

parties to the trade agree on only five 

general parameters of the securities to 

be delivered: issuer, mortgage type, 

maturity, coupon, and month of 

settlement. 

TBA transactions are ‘‘for good 

delivery’’ (‘‘GD’’) or ‘‘not for good 

delivery’’ (‘‘NGD’’). The GD and NGD 

distinctions and classifications are 

based on market standards and 

conventions that identify which 

mortgage pools (or combinations of 

mortgage pools) satisfy ‘‘good delivery’’ 

requirements, which were developed to 

facilitate the securitization of common 

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