7902 Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 

4The below compares the limits of protection for 

cash under SIPA and the FDIA: SIPA: $20,000 (Pub. 

L. No 91–598, § 6(f)(1)(A), 84 Stat. 1636, 1651 

(1970)). FDIA: $20,000 (Pub. L. 91–151, 7, 83 Stat. 

371, 375 (1969)). SIPA: $40,000 (Pub. L. 95–283, 9, 

92 Stat. 249, 265 (1978)). FDIA: $40,000 (Pub. L. 93– 

495, 102(a), 88 Stat. 1500, 1502 (1974)). SIPA: 

$100,000 (Pub. L. 96–433, 1, 94 Stat. 1855 (1980)). 

FDIA: $100,000 (Pub. L. 96–221, 308, 94 Stat. 132, 

147 (1980)). SIPA: $250,000 (Pub. L. 111–203, 

929H, 124 Stat. 1376, 1865 (2010)). FDIA: $250,000 

(temporary until 12/31/2009) Public Law 110–343, 

136, 122 Stat. 3765, 3799 (2008); (permanent) 

Public Law 111–203, 335, 124 Stat. 1376, 1540 

(2010)). 

5 17 CFR 200.30–3(f)(3). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

In addition, the Board considered the 

views of the staffs of the Commission, 

the FDIC, and FINRA, as reported to the 

SIPC staff and as further reported by the 

SIPC staff to the Board. The Board 

concluded that the SIPC Fund remains 

on a steady growth path for the near 

future, barring any unforeseen 

catastrophic event, and that any 

increases in the cash limit of SIPA 

protection would not appreciably 

benefit customers. 

2. Other Appropriate Factors 

a. Potential Divergence Between FDIC 

and SIPC Protections 

The Board noted the equivalency— 

presently $250,000—between SIPA’s 

maximum cash advance amount and the 

‘‘standard maximum deposit insurance 

amount’’ that fixes the limit on bank 

deposit insurance under the Federal 

Deposit Insurance Act (‘‘FDIA’’), 12 

U.S.C. 1821 et seq. An inflation 

adjustment to the former without a 

corresponding adjustment to the latter 

would result in an unprecedented 

divergence between the maximum cash 

advance amount under SIPA and the 

standard maximum deposit insurance 

amount under FDIA. 

Increases to the limit of protection for 

cash claims under SIPA historically 

have been in lockstep with increases in 

FDIC deposit insurance.4 In 2008, and 

again, in 2010, parity with deposit 

insurance was the primary reason for 

SIPC’s request to Congress to increase 

the SIPA limit of protection for cash 

claims. In 2016, uniformity with FDIC 

deposit insurance was a primary factor 

in the Board’s determination not to 

adjust the standard maximum cash 

advance amount. 

b. Historical Claims Experience and 

Benefit to Customers 

The Board also reviewed the number 

of claims for cash exceeding the limit of 

protection in past and present 

liquidation proceedings. This data 

suggests that the benefit to customers of 

an inflation adjustment may be limited. 

Of the more than 770,000 allowed 

claims in completed or substantially 

completed liquidation proceedings as of 

year-end 2019, the unsatisfied portion of 

cash claims amounted to $25 million. 

More than half of that amount involved 

only three claims. In the seven SIPA 

proceedings initiated since 2010, when 

the cash limit was raised to $250,000, 

only one cash claim remains 

unsatisfied. 

c. Aggregate Credit Balances and Sweep 

Programs 

It also was brought to the Board’s 

attention that aggregate cash credit 

balances at member firms have not 

increased over the last five years in line 

with inflation. Instead, member firms 

have increasingly utilized sweep 

programs to move customer free credit 

balances from broker- dealers to banks. 

Conclusion 

The Board weighed all the relevant 

factors against a potential adjustment of 

$40,000, the amount determined by the 

formula set forth in SIPA § 78fff– 

3(e)(1)(B). The Board concluded that, on 

balance, in light of the intent to grow 

the SIPC Fund to reach a target of $5 

billion, the unprecedented break with 

the FDIC limit that would result, and 

the absence of evidence that an 

appreciable number of investors would 

be benefitted, an adjustment to the limit 

of protection for cash claims was not 

appropriate. Accordingly, the Board 

determined that the standard maximum 

cash advance amount should remain at 

$250,000 per customer.’’ 

* * * * * 

II. Date of Effectiveness and Timing for 

Commission Action 

Within thirty-five days of the date of 

publication of this notice of the SIPC 

Board’s determination in the Federal 

Register, or within such longer period 

(i) as the Commission may designate of 

not more than ninety days after such 

date if it finds such longer period to be 

appropriate and publishes its reasons 

for so finding or (ii) as to which SIPC 

consents, the Commission shall: 

(A) By order approve such 

determination or 

(B) Institute proceedings to determine 

whether such determination should be 

disapproved. 

III. Notice of the Determination of the 

SIPC Board Not To Adjust the Standard 

Maximum Cash Advance Amount for 

Inflation 

On January 1, 2021, pursuant to 

section 9(e)(1) of the Securities Investor 

Protection Act, 15 U.S.C. 78fff–3(e)(1), 

the Board of Directors of the Securities 

Investor Protection Corporation (the 

‘‘Board’’) determined that an inflation 

adjustment to the standard maximum 

cash advance amount would not be 

appropriate. Accordingly, the Board 

determined that the standard maximum 

cash advance amount will remain at 

$250,000 per customer, effective January 

1, 2022. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.5

Dated: January 27, 2021. 

J. Matthew DesLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02128 Filed 2–1–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91002; File No. SR– 

CboeEDGX–2021–006] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Fee Schedule 

January 27, 2021. 

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 January 

13, 2021, Cboe EDGX Exchange, Inc. 

(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. 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 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) is filing with 

the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change to amend the fee 

schedule applicable to Members and 

non-Members of the Exchange pursuant 

to EDGX Rules 15.1(a) and (c). Changes 

to the fee schedule pursuant to this 

proposal are effective upon filing. The 

text of the proposed rule change is 

provided in Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

options/regulation/rule_filings/edgx/), 


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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 7903 

4The Exchange initially filed the proposed fee 

changes January 4, 2021 (SR–CboeEDGX–2021– 

001). On January 13, 2021, the Exchange withdrew 

that filing and submitted this proposal. 

5See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (December 29, 

2020), available at https://markets.cboe.com/us/ 

equities/market_statistics/. 

6ROUC is a routing option under which an order 

checks the System for available shares and then is 

sent to destinations on the System routing table, 

Nasdaq OMX BX, and NYSE. If shares remain 

unexecuted after routing, they are posted on the 

EDGX Book, unless otherwise instructed by the 

User. See Rule 11.11(g)(1); see also Cboe Routing 

Strategies, FIX/BOE Routing Tags and Instructions, 

available at: https://cdn.cboe.com/resources/ 

features/Cboe_USE_RoutingStrategies.pdf. 

7The Exchange notes that there are other fee 

codes that apply to certain other routing 

specifications, however, those routed orders not 

otherwise specified in such other routing fee code 

descriptions yield the general routing fee codes 7 

or X. 

8Fee code 7 is currently appended to all routed 

orders in the pre- or post-market session that 

remove liquidity. The proposed rule change 

updates the description associated with fee code 7 

to clarify in the description that such orders remove 

liquidity. This update does not alter the orders to 

which fee code 7 currently applies but merely 

makes it clear in the Fee Schedule that fee code 7 

applies to qualifying routed orders that remove 

liquidity. 

9 15 U.S.C. 78f. 

10 15 U.S.C. 78f(b)(4). 

11 15 U.S.C. 78f.(b)(5). 

at the Exchange’s Office of the 

Secretary, 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

fee schedule applicable to its equities 

trading platform (‘‘EDGX Equities’’) by 

eliminating certain routing fee codes.4

The Exchange first notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive or 

incentives to be insufficient. More 

specifically, the Exchange is only one of 

16 registered equities exchanges, as well 

as a number of alternative trading 

systems and other off-exchange venues 

that do not have similar self-regulatory 

responsibilities under the Exchange Act, 

to which market participants may direct 

their order flow. Based on publicly 

available information,5 no single 

registered equities exchange has more 

than 16% of the market share. Thus, in 

such a low-concentrated and highly 

competitive market, no single equities 

exchange possesses significant pricing 

power in the execution of order flow. 

The Exchange believes that the evershifting market share among the 

exchanges from month to month 

demonstrates that market participants 

can shift order flow or discontinue to 

reduce use of certain categories of 

products, in response to fee changes. 

Accordingly, competitive forces 

constrain the Exchange’s transaction 

fees, and market participants can readily 

trade on competing venues if they deem 

pricing levels at those other venues to 

be more favorable. 

The Exchange assesses fees in 

connection with orders routed away to 

various exchanges. As a result of 

minimal use in the last months, the 

Exchange proposes to eliminate the 

following routing fee codes currently 

under the Fee Codes and Associated 

Fees section of the Fee Schedule: 

• Fee code 8, which is appended to 

Members’ orders routed to NYSE 

American that adds liquidity and 

assesses a charge of $0.00020 per 

contract for orders in securities priced at 

or above $1.00 and assesses no charge 

for orders in securities priced below 

$1.00; 

• Fee code K, which is appended to 

Members’ orders routed to PSX using 

the ROUC routing strategy 6 and assesses 

a charge of $0.00290 per contract for 

orders in securities priced at or above 

$1.00 and assesses a charge of 30% of 

the dollar value per contract for orders 

in securities priced below $1.00; and 

• Fee code MX, which is appended to 

Members’ orders routed to NYSE 

American using the ROUC routing 

strategy and assesses a charge of 

$0.00020 per contract for orders in 

securities priced at or above $1.00 and 

assesses no charge for orders in 

securities priced below $1.00. 

The Exchange has observed a minimal 

amount of volume in recent months in 

orders yielding fee codes 8, K, or MX. 

In particular, over the last six months 

the Exchange observed that orders 

yielding fee code MX accounted for 

approximately only 0.01% of all routed 

order volume, orders yielding fee code 

8 accounted for approximately only 

0.14% of all routed order volume, and 

orders yielding fee code K accounted for 

approximately only 0.004% of all routed 

order volume. The Exchange believes 

that, because so few Users elect to route 

their orders with specifications to which 

fee codes 8, K or MX, the current 

demand does not warrant the 

infrastructure and ongoing Systems 

maintenance required to support these 

separate fee codes. Therefore, the 

Exchange now proposes to delete fee 

codes 8, K and MX in the Fee Schedule. 

The Exchange notes that Users will 

continue to be able to choose to route 

their orders with the same specifications 

to which fee codes 8, K and MX 

currently apply—such orders will 

simply be assessed the fees currently in 

place for routed orders generally.7 That 

is, if any of the routed orders to which 

fee code K or MX currently apply are 

submitted in the pre- or post-market 

sessions that remove liquidity,8 then fee 

code 7 will apply, which is appended to 

Members’ routed orders in the pre- or 

post-market sessions and assesses a 

charge of $0.00300 per contract for 

orders in securities priced at or above 

$1.00 and assesses a charge of 30% of 

the dollar value per contract for orders 

in securities priced below $1.00. Fee 

code X will be appended to routed 

orders not submitted during the pre- or 

post-market sessions to which fee code 

K or MX currently apply and to routed 

orders to which fee code 8 currently 

applies. Fee code X currently assesses a 

charge of $0.00300 per contract for 

orders in securities priced at or above 

$1.00 and assesses a charge of 30% of 

the dollar value per contract for orders 

in securities priced below $1.00. The 

Exchange notes that rates applicable to 

orders yielding fee codes 7 and X are the 

standard routing fees pursuant to the 

Standard Rates section of the Fee 

Schedule. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,9

in general, and furthers the objectives of 

Section 6(b)(4),10 in particular, as it is 

designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its Members and 

issuers and other persons using its 

facilities. The Exchange also believes 

that the proposed rule change is 

consistent with the objectives of Section 

6(b)(5) 11 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 


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7904 Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices 

12See supra note 7. 

13See id. 

14See supra note 5. 

15See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

16NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR–NYSEArca–2006–21)). 

17 15 U.S.C. 78s(b)(3)(A). 

18 17 CFR 240.19b–4(f)(2). 

19 15 U.S.C. 78s(b)(2)(B). 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest, and, 

particularly, is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the Exchange believes 

the proposed rule change to remove fee 

codes 8, K and MX is reasonable as the 

Exchange has observed a minimal 

amount of volume in orders yielding 

these fee codes and, therefore, the 

continuation of these fee codes does not 

warrant the infrastructure and ongoing 

Systems maintenance required to 

support separate fee codes for specific 

routed orders. As such, the Exchange 

also believes that is reasonable and 

equitable to assess routed orders which 

meet the specifications to which fee 

codes 8, K and MX are currently 

applicable the slightly higher standard 

routing fee currently in place for all 

other routed orders—via fee codes 7 or 

X, as applicable. The Exchange believes 

that the proposed rule change is 

equitable and not unfairly 

discriminatory because Members will 

continue to have the option to elect to 

route their orders in the same manner 

(i.e., routed to NYSE American that add 

liquidity and routed to PSX or NYSE 

American using the ROUC routing 

strategy) will be automatically and 

uniformly assessed the applicable 

standard rates in place for generally all 

other routed orders.12 Further, if 

members do not favor the Exchange’s 

pricing for routed orders, they can send 

their routable orders directly to away 

markets instead of using routing 

functionality provided by the Exchange. 

Routing through the Exchange is 

optional, and the Exchange operates in 

a competitive environment where 

market participants can readily direct 

order flow to competing venues or 

providers of routing services if they 

deem fee levels to be excessive. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe the proposed 

rule change will impose any burden on 

intramarket competition because all 

Members orders that would yield 

current fee codes 8, K or MX, will 

automatically and uniformly be assessed 

the fees already in place for routed 

orders generally,13 as applicable (i.e., fee 

codes 7 or X). 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on intermarket competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange again notes that orders 

that meet the specifications to which fee 

codes 8, K or MX would currently 

apply, will yield the same fee codes and 

be assessed the same corresponding 

rates that are already in place in the Fee 

Schedule for routed orders generally, as 

previously filed with the Commission. 

Also, as previously discussed, the 

Exchange operates in a highly 

competitive market. Members have 

numerous alternative venues that they 

may participate on and director their 

order flow, including 15 other options 

exchanges and off-exchange venues. 

Additionally, the Exchange represents a 

small percentage of the overall market. 

Based on publicly available information, 

no single options exchange has more 

than 16% of the market share.14

Therefore, no exchange possesses 

significant pricing power in the 

execution of option order flow. Indeed, 

participants can readily choose to send 

their orders to other exchange and offexchange venues if they deem fee levels 

at those other venues to be more 

favorable. Moreover, the Commission 

has repeatedly expressed its preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. Specifically, in Regulation 

NMS, the Commission highlighted the 

importance of market forces in 

determining prices and SRO revenues 

and, also, recognized that current 

regulation of the market system ‘‘has 

been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 15 The 

fact that this market is competitive has 

also long been recognized by the courts. 

In NetCoalition v. Securities and 

Exchange Commission, the D.C. Circuit 

stated as follows: ‘‘[n]o one disputes 

that competition for order flow is 

‘fierce.’ . . . As the SEC explained, ‘[i]n 

the U.S. national market system, buyers 

and sellers of securities, and the brokerdealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’.16 Accordingly, the 

Exchange does not believe its proposed 

fee change imposes 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 neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 17 of the Act and 

subparagraph (f)(2) of Rule 19b–4 18

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such 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 

under Section 19(b)(2)(B) 19 of the Act to 

determine whether the proposed rule 

change should be approved or 

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. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 


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20 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Rule 7.31(c)(1)(D). 

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

6 15 U.S.C. 78f(b)(5). 

CboeEDGX–2021–006 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–CboeEDGX–2021–006. 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 website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website 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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CboeEDGX–2021–006, and 

should be submitted on or before 

February 23, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02119 Filed 2–1–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90996; File No. SR–NYSE– 

2021–07] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending Rule 

7.32 

January 27, 2021. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on January 

25, 2021, New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. 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 amend 

Rule 7.32 (Order Entry) to provide that 

the Exchange would not apply order 

entry size limitations to Issuer Direct 

Offering (‘‘IDO’’) Orders. The proposed 

rule change is available on the 

Exchange’s website 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 

1. Purpose 

The Exchange proposes to amend 

Rule 7.32 (Order Entry) to provide that 

the Exchange would not apply order 

entry size limitations to IDO Orders. 

Rule 7.32 provides that orders entered 

that are greater than five million shares 

in size will be rejected, provided, that 

in Auction-Eligible Securities, the 

Exchange will accept orders defined in 

Rule 7.31(c), DMM Auction Liquidity as 

defined in Rule 7.35, and Floor Broker 

Interest intended for the Closing 

Auction as defined in Rule 7.35B(a)(1), 

up to 25 million shares in size. In 

addition, in all securities traded on the 

Exchange, the Exchange will accept 

proposed cross transactions under Rule 

76 up to 25 million shares in size. 

The Exchange recently amended its 

rules to add the IDO Order, which is to 

be traded only in a Direct Listing for a 

Primary Direct Floor Listing.4 Rule 

7.31(c)(1)(D)(iii) provides that the IDO 

Order must be for the quantity of shares 

offered by the issuer, as disclosed in the 

prospectus in the effective registration 

statement. To facilitate this requirement, 

the Exchange proposes to amend Rule 

7.32 to specify that the Exchange would 

not apply order entry size limitations to 

IDO Orders. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act,5

in general, and furthers the objectives of 

Section 6(b)(5) of the Act,6 in particular, 

in that 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 facilitating transactions in securities, 

and to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system. 

The Exchange believes that the 

proposed rule change would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

would provide specificity in Exchange 

rules that Exchange systems would be 

able to accept IDO Orders that comply 

with the requirement specified in Rule 

7.31(c)(1)(D)(iii) that an IDO Order must 

be for the quantity of shares offered by 

the issuer, as disclosed in the 


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