59958 Federal Register / Vol. 88, No. 167 / Wednesday, August 30, 2023 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 96550 

(December 20, 2022), 87 FR 79401 (‘‘Notice’’). 

4See Securities Exchange Act Release No. 96864, 

88 FR 9945 (February 15, 2023). 

5 15 U.S.C. 78s(b)(2)(B). 

6See Securities Exchange Act Release No. 97195, 

88 FR 19173 (March 30, 2023). 

7See Securities Exchange Act Release No. 97784, 

88 FR 41710 (June 27, 2023). 

8Comments on the proposed rule change are 

available at: https://www.sec.gov/comments/srfinra-2022-032/srfinra2022032.htm. 

9See FINRA Rule 6220(a)(3). 

10See 17 CFR 242.600. 

11See Notice, supra note 3, at 79401. 

12See 17 CFR 242.600. 

13See 17 CFR 242.611 (‘‘Order Protection Rule’’ 

or ‘‘Rule 611’’). 

14 17 CFR 242.600(b)(6). 

15Commission Interpretation Regarding 

Automated Quotations Under Regulation NMS, 

Securities Exchange Act Release No. 78102 (June 

17, 2016), 81 FR 40785, 40792 (June 23, 2016) 

(‘‘Commission Interpretation of Automated 

Quotations’’). 

16See id. at 40789; see also Citadel Secs. LLC v. 

SEC, 45 F.4th 27, 35 (D.C. Cir. 2022) (finding the 

Commission’s conclusion that ‘‘mere de minimis 

delays do not cause an order to violate Regulation 

NMS’s immediacy requirement’’ was reasonable). 

17 17 CFR 242.610(b)(1). 

18 17 CFR 242.610(b)(2). 

19See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37549 (June 29, 2005) 

(‘‘NMS Adopting Release’’). 

20See id. 

21See Notice, supra note 3, at 79401. 

22According to FINRA, there have been no ADF 

participants since the first quarter of 2015. See id. 

23See Form ATS–N Filings and Information page 

on the Commission’s website, at https://

www.sec.gov/divisions/marketreg/form-ats-nfilings.htm. 

24See Notice, supra note 3, at 79402. FINRA 

states that all three IntelligentCross ASPEN order 

books act independently of each other (i.e., orders 

resting in one book do not rest on or interact with 

orders resting in another book). See id. In addition 

to IntelligentCross ASPEN, FINRA states that 

IntelligentCross also operates a midpoint book that 

only accepts non-displayed midpoint orders, which 

is distinct from and does not interact with the 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98212; File No. SR–FINRA– 

2022–032] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change Relating to 

Alternative Display Facility New 

Entrant 

August 24, 2023. 

I. Introduction 

On December 16, 2022, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’ 

or ‘‘SEC’’), pursuant to Section 19(b)(1) 

of the Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change 

(the ‘‘Proposal’’) to add IntelligentCross 

ATS (‘‘IntelligentCross’’) as a new 

entrant to the Alternative Display 

Facility (‘‘ADF’’). The proposed rule 

change was published for comment in 

the Federal Register on December 27, 

2022.3 On February 9, 2023, the 

Commission extended the time period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to approve or 

disapprove the proposed rule change to 

March 27, 2023.4 On March 24, 2023, 

the Commission initiated proceedings 

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

Exchange Act 5 to determine whether to 

approve or disapprove the proposed 

rule change.6 On June 21, 2023, the 

Commission extended the time period 

for Commission action to August 24, 

2023.7 The Commission has received 

comments on the proposed rule 

change.8 This order approves the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

The ADF is a quotation collection and 

trade reporting facility that provides 

ADF participants (i.e., ADF-registered 

market makers or electronic 

communications networks) 9 the ability 

to post quotations, display orders and 

report transactions in NMS stocks 10 for 

submission to the securities information 

processors (‘‘SIP’’) for consolidation and 

dissemination to vendors and other 

market participants.11 The ADF is also 

designed to deliver real-time data to 

FINRA for regulatory purposes, 

including enforcement of requirements 

imposed by Regulation NMS.12

In particular, Regulation NMS 

includes an order protection rule that 

provides that a trading center ‘‘shall 

establish, maintain, and enforce written 

policies and procedures that are 

reasonably designed to prevent tradethroughs on that trading center of 

protected quotations in NMS stocks’’ 

that do not fall within one of the 

exceptions set forth in the rule.13 For 

quotations to be protected under the 

rule, they must be, among other things, 

executable ‘‘immediately and 

automatically’’ against an incoming 

immediate-or-cancel (‘‘IOC’’) order.14 In 

2016, the Commission interpreted 

Regulation NMS’s immediacy 

requirement to allow for ‘‘an intentional 

access delay that is de minimis—i.e., a 

delay so short as to not frustrate the 

purposes of Rule 611 by impairing fair 

and efficient access to an exchange’s 

quotations.’’ 15 The Commission stated 

that ‘‘[i]n the context of Regulation 

NMS, the term ‘immediate’ does not 

preclude all intentional delays 

regardless of their duration, and such 

preclusion is not necessary to achieve 

the objectives of Rule 611. As long as 

any intentional delay is de minimis— 

i.e., does not impair fair and efficient 

access to an exchange’s protected 

quotations—it is consistent with both 

the text and purpose of Rule 611.’’ 16

In addition, Rule 610 of Regulation 

NMS requires that a trading center 

displaying quotations in an NMS stock 

through a self-regulatory organization 

(‘‘SRO’’) display-only facility (such as 

the ADF) ‘‘provide a level and cost of 

access to such quotations that is 

substantially equivalent to the level and 

cost of access to quotations displayed by 

SRO trading facilities in that stock.’’ 17

Rule 610 also requires that a trading 

center displaying quotations in an NMS 

stock through an SRO display-only 

facility not impose unfairly 

discriminatory terms that prevent or 

inhibit any person from obtaining 

efficient access to such quotations 

through a member, subscriber, or 

customer of the trading center.18 In 

articulating this standard, the 

Commission stated that the level and 

cost of access would ‘‘encompass both 

(1) the policies, procedures, and 

standards that govern access to 

quotations of the trading center, and (2) 

the connectivity through which market 

participants can obtain access and the 

cost of such connectivity.’’ 19 The nature 

and cost of connections for market 

participants seeking to access an ADF 

participant’s quotations would need to 

be substantially equivalent to the nature 

and cost of connections to SRO trading 

facilities.20

In evaluating whether a prospective 

ADF participant meets the access 

standards under Rule 610, Regulation 

NMS requires FINRA to submit a 

proposed rule change under Section 

19(b) of the Exchange Act in order to 

add the new ADF participant.21

Accordingly, FINRA is proposing to add 

IntelligentCross as a new ADF 

participant.22 IntelligentCross is an 

NMS stock alternative trading system 

(‘‘ATS’’) operating pursuant to an 

effective Form ATS–N.23

IntelligentCross currently operates three 

separate limit order books with optional 

display capability distinguished by 

different fee structures—the ASPEN fee/ 

fee limit order book (‘‘ASPEN Fee/Fee 

book’’), ASPEN maker/taker limit order 

book, and ASPEN taker/maker limit 

order book (collectively, 

‘‘IntelligentCross ASPEN’’).24 FINRA 


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IntelligentCross ASPEN. See id. at n.17. All activity 

on IntelligentCross is identified and reported under 

the ‘‘INCR’’ market participant identifier (‘‘MPID’’). 

See id. at 79402. 

25See id. at 79402. FINRA states that the 

‘‘effective date’’ of the Proposal would be the date 

of the Commission’s approval. See id. at 79404. 

26See id. at 76341. 

27See id. at 79404, n.37. 

28See id. at 79403. 

29See id. at 79402. FINRA states that the ASPEN 

Fee/Fee book accepts limit orders with optional 

display instructions, IOC orders, and pegged orders 

(which are treated as regular orders with an 

automated repricing to the national best bid or offer 

(‘‘NBBO’’)). See id. Only limit orders and primary 

peg orders (with or without a limit price) are 

eligible to be displayed on the ASPEN Fee/Fee 

book, and therefore on the ADF. See id. 

30 17 CFR 242.600(b)(38). 

31See Notice, supra note 3, at 79402. 

IntelligentCross has represented to FINRA that the 

ASPEN Fee/Fee book will be the only 

IntelligentCross ASPEN order book that will accept 

ISOs. See id. at 79402, n.22. 

32See id. at 79402. FINRA states that the ASPEN 

Fee/Fee book match schedules are defined by 

minimum/maximum time bands for each security, 

and these bands can have a minimum time of 150 

microseconds and a maximum time of 900 

microseconds. See id. For example, on a particular 

day, the match event band for XYZ stock may have 

a minimum time of 450 microseconds and a 

maximum time of 600 microseconds. See id. 

33See id. 

34See id. 

35See id. at 79402. According to FINRA, 

IntelligentCross has represented that both sides of 

the trade (buyers and sellers) are on equal footing 

for the next scheduled match event, while 

maintaining full control of their orders, i.e., both 

sides can cancel or update their orders at any time 

prior to the match. See id. at n.24. In addition, the 

ASPEN Fee/Fee book automatically updates its 

quotations, and all quotation updates, including 

those due to new or cancelled orders, are 

immediate. See id. 

36See id. at 79402, n.23. IntelligentCross has 

represented to FINRA that non-match events on the 

ASPEN Fee/Fee book occur in a minority of cases. 

See id. at 79403. For a more detailed discussion of 

examples regarding situations where an incoming 

order may not execute against a resting order at 

match event time, see id. at 79403. 

37See id. at 79403. FINRA states that the 

quotations displayed on the ASPEN Fee/Fee book 

are handled on an automated basis and that there 

is no human discretion in determining any action 

taken with respect to an order after the order is 

received. See id. 

38See id. FINRA states that IntelligentCross uses 

a combination of SIP and proprietary direct feeds 

from national securities exchanges to determine the 

NBBO and protected quotes, and to price 

executions. See id. at 79402, n.27. 

39See id. 

40See id. 

41See id. at 79404. FINRA states that the 

IntelligentCross’ fee schedule is published in the 

IntelligentCross Form ATS–N and advance notice is 

provided to its subscribers prior to a pricing change. 

See id. 

42See id. FINRA states that the base rate charged 

by IntelligentCross is $0.0008 per share for each 

side of a transaction on the ASPEN Fee/Fee book. 

See id. 

43See id. IntelligentCross has represented to 

FINRA that displayed orders from all three 

IntelligentCross ASPEN order books are available in 

the IQX Market Data Feed. See id. at 79402, n.28. 

44See id. at 79404. IntelligentCross has 

represented to FINRA that it is not involved in the 

installation of cross-connects; thus, subscribers 

must establish a relationship directly with the 

network service provider in NY4. See id. Further, 

IntelligentCross does not currently charge 

connectivity fees to access the ASPEN Fee/Fee book 

and has offered to pay for certain of subscribers’ 

cross-connect fees at NY4. See id. In particular, 

IntelligentCross currently covers payment for one 

primary connection and one back-up connection, 

and any direct subscriber is eligible for this 

payment. See id. IntelligentCross’ network provider 

and other similar network providers may charge 

fees relating to connectivity in NY4. See id. 

IntelligentCross has represented to FINRA that any 

such connectivity fees would be substantially 

equivalent to the costs to connect to any other 

trading center, such as an exchange. See id. 

45See id. 

46See id. 

47See id. 

48See id. 

states that the ASPEN Fee/Fee book 

would be the only order book displaying 

orders on the ADF.25

IntelligentCross provided FINRA with 

a summary of its policies and 

procedures regarding access to its 

quotations in an NMS stock displayed 

on the ADF, and a summary of its 

proposed fees for such access.26 Based 

on IntelligentCross’ representations, 

FINRA believes that IntelligentCross’ 

proposed level and cost of access to 

quotations on the ASPEN Fee/Fee book 

is substantially equivalent to the level 

and cost of access to quotations 

displayed by an SRO trading facility, 

both in absolute and relative terms.27

FINRA also believes that the quotations 

displayed on ASPEN Fee/Fee book 

would meet the definition of an 

‘‘automated quotation’’ under 

Regulation NMS.28

In particular, FINRA states that 

IntelligentCross only permits registered 

broker-dealers to be subscribers to 

IntelligentCross, and subscribers can 

interact with the ASPEN Fee/Fee book 

using conventional order types.29 The 

ASPEN Fee/Fee book will accept 

incoming intermarket sweep orders 

(‘‘ISOs’’) 30 once it displays orders on 

the ADF.31

FINRA states that the ASPEN Fee/Fee 

book establishes a matching schedule 32

using an overnight optimization process 

based on historical performance 

measurements from prior days’ matches 

across all three IntelligentCross ASPEN 

books.33 The match event time is 

randomized within the time band 

throughout the course of the trading day 

and any order that arrives prior to a 

match event (and that has not been 

cancelled, become unmarketable, or 

repriced) 34 is eligible to participate in 

the next match event for that security.35

IntelligentCross has represented to 

FINRA that, in the following cases, an 

incoming order on ASPEN Fee/Fee book 

may not execute against a resting order 

at match event time when: (i) an 

existing resting order cancels prior to 

the next match event; (ii) an incoming 

order is cancelled prior to the next 

match event; (iii) the NBBO moves 

between the time an order is received 

and the next match event takes place, 

making either the incoming order or the 

resting order non-marketable; or (iv) the 

NBBO changed before the next match 

event and pegged orders were repriced 

to the new NBBO, making the incoming 

order or the resting pegged order nonmarketable.36

FINRA states that the ASPEN Fee/Fee 

book’s matching engine operates nearcontinuously and that, when a new 

order arrives in the ASPEN Fee/Fee 

book, it would participate in the next 

scheduled match event by interacting 

with existing orders in the order book 

within a maximum time capped at 900 

microseconds.37

FINRA states that for each match 

event time, the ASPEN Fee/Fee book 

retrieves the NBBO and processes all the 

orders that have arrived and have not 

been cancelled in price-time priority.38

No subscriber to IntelligentCross (or 

non-subscriber accessing 

IntelligentCross through a subscriber) is 

given any priority through the matching 

process and the matching process is 

blind to the identity of the subscriber.39

All matches are reported immediately to 

subscribers and the SIPs via a FINRA 

trade reporting facility and 

disseminated on IntelligentCross’ 

market data feed.40

FINRA further states that 

IntelligentCross utilizes a fee/fee pricing 

model for activity on the ASPEN Fee/ 

Fee book where both sides are charged 

the same fee 41 for transactions.42

Eligible displayed orders are published 

via a free market data feed (‘‘IQX Market 

Data Feed’’).43 IntelligentCross does not 

charge connectivity fees to its 

subscribers.44 FINRA states that firms 

wishing to access liquidity on the 

ASPEN Fee/Fee book may connect in a 

variety of ways.45 Firms that are 

IntelligentCross subscribers can connect 

to the ASPEN Fee/Fee book via a 

Financial Information Exchange (‘‘FIX’’) 

connection.46 Such access is available to 

subscribers through an internet protocol 

address via communications that are 

compliant with the FIX application 

programming interface (‘‘API’’) provided 

by IntelligentCross.47 IntelligentCross 

does not accept orders via any other 

forms of communication (e.g., 

telephone, email, instant message).48

IntelligentCross allows a subscriber to 

determine its level of connectivity and 


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49See id. 

50See id. 

51See id. 

52See id. at 79404, n.43. 

53See id. at 79405. 

54 In approving the proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

55 15 U.S.C. 78o–3(b)(6). 

56See 17 CFR 242.610(b). 

57See 17 CFR 242.600(b)(7). 

58See 17 CFR 242.600(b)(6). 

59See 17 CFR 242.611. Rule 611(a)(1) requires a 

trading center to establish, maintain and enforce 

written policies and procedures that are reasonably 

designed to prevent trade-throughs on the trading 

center of protection quotations. 17 CFR 

242.611(a)(1). 

60See Letter from Tyler Gellasch, President and 

CEO, Healthy Markets Association, dated January 

13, 2023 (‘‘Healthy Markets Letter’’); Letter from 

Brett Kitt, Associate Vice President & Principal 

Associate General Counsel, Nasdaq, Inc., dated 

January 17, 2023 (‘‘Nasdaq Letter’’); Letter from 

Joanna Mallers, Secretary, FIA Principal Traders 

Group, dated January 17, 2023 (‘‘FIA PTG Letter’’); 

Letter from Stephen John Berger, Managing 

Director, Global Head of Government & Regulatory 

Policy, Citadel Securities, dated January 23, 2023 

(‘‘Citadel Letter’’); Letter from Ellen Greene, 

Managing Director, Equities & Options Market 

Structure, SIFMA, dated February 8, 2023 (‘‘SIFMA 

Letter’’); Letter from Joanna Mallers, Secretary, FIA 

Principal Traders Group, dated March 8, 2023 (‘‘FIA 

PTG Letter II’’); Letter from Tyler Gellasch, 

President and CEO, Healthy Markets Association, 

dated March 14, 2023 (‘‘Healthy Markets Letter II’’); 

Letter from John Ramsay, Chief Market Policy 

Officer, Investors Exchange LLC, dated April 14, 

2023 (‘‘IEX Letter’’); Letter from Stephen John 

Berger, Managing Director, Global Head of 

Government & Regulatory Policy, Citadel Securities, 

dated May 4, 2023 (‘‘Citadel Letter II’’); Letter from 

Stephen John Berger, Managing Director, Global 

Head of Government & Regulatory Policy, Citadel 

Securities, dated August 3, 2023 (‘‘Citadel Letter 

III’’); Letter from John Ramsay, Chief Market Policy 

Officer, Investors Exchange LLC, dated August 4, 

2023 (‘‘IEX Letter II’’). 

61See Letter from Nataliya Bershova, Head of 

Execution Research, Sanford C. Bernstein & Co., 

LLC, dated January 17, 2023. This commenter states 

that adding IntelligentCross’ displayed liquidity to 

the public quote would enable market participants 

to interact with better prices, enhance price 

discovery, and minimize pricing errors. See id. 

62See Letter from Faisal Sheikh, Assistant 

General Counsel, FINRA, dated March 13, 2023 

(‘‘FINRA Letter’’); Letter from Faisal Sheikh, 

Assistant General Counsel, FINRA, dated August 

22, 2023 (‘‘FINRA Letter II’’); Letter from Ari 

Burstein, General Counsel, Imperative Execution, 

dated February 16, 2023 (‘‘IntelligentCross Letter’’); 

Letter from Ari Burstein, General Counsel, 

Imperative Execution, dated July 14, 2023 

(‘‘IntelligentCross Letter II’’); Letter from Ari 

Burstein, General Counsel, Imperative Execution, 

dated August 18, 2023 (‘‘IntelligentCross Letter 

III’’). 

63 In particular, one commenter states that the 

Commission should reconsider and withdraw the 

Commission Interpretation of Automated 

Quotations. See Citadel Letter at 1–4, 8 (stating, 

among other things, that the Commission 

Interpretation of Automated Quotations is 

‘‘inconsistent with the plain text of Regulation NMS 

and therefore invalid’’); Citadel Letter II at 3; 

Citadel Letter III at 2, n.11. Some commenters 

question the appropriateness of the ADF in today’s 

market structure, including the need for the ADF 

given the number of exchanges and active nondisplay ATSs in the marketplace. See Nasdaq Letter 

at 2; Healthy Markets Letter at 8; IEX Letter at 10. 

One commenter recommends that the Commission 

should consider ‘‘whether the ADF is still needed 

or should be eliminated entirely.’’ Nasdaq Letter at 

1, 3 (stating that the ADF ‘‘continues to exist in 

form only, while serving no productive function’’). 

One commenter raises general questions regarding 

the potential impact to competing consolidators of 

adding IntelligentCross protected quotes after the 

implementation of the Commission’s Market Data 

Infrastructure Rule. See IEX Letter at 9. Finally, 

some commenters state that approval of the 

Proposal may undermine the recent Commission 

proposals to modernize equity market structure. See 

Healthy Markets Letter at 16; Nasdaq Letter at 2. 

One of these commenters also questions how recent 

proposed reforms to Rule 605 of Regulation NMS 

would apply to the Proposal, particularly in relation 

to the single MPID that IntelligentCross uses to 

identify and report its transaction activity. See 

Healthy Markets Letter at 5, 16. These comments 

raise issues that are beyond the scope of the 

Commission’s consideration of whether the present 

Proposal is consistent with the Exchange Act and 

the rules and regulations thereunder. 

does not tier or discriminate among 

subscribers.49

Additionally, FINRA states that 

IntelligentCross has established and 

maintains policies and procedures 

related to periodic system capacity 

reviews and tests to ensure future 

capacity, as well as policies and 

procedures to identify potential 

weaknesses and reduce the risks of 

system failures and threats to system 

integrity.50 FINRA also states that, for 

purposes of displaying orders through 

the ADF, IntelligentCross’ policies and 

procedures require continuous 

monitoring of the ASPEN Fee/Fee 

book’s connections with an SRO 

display-only facility and, in the event 

that the ASPEN Fee/Fee book loses 

connection with the ADF, 

IntelligentCross has contingency plans 

in place, including removing (i.e., 

‘‘zeroing out’’) all quotes previously 

published by the system to the ADF and 

notifying its subscribers of such 

interruption.51

In the event that IntelligentCross 

makes a material change to the policies 

and procedures governing access to 

IntelligentCross, including a change to 

its fees, IntelligentCross has represented 

to FINRA that it will submit the changes 

made to FINRA, and acknowledges that 

FINRA will post on its website an 

amended description of IntelligentCross’ 

policies, procedures and fees governing 

access.52

Finally, FINRA states that all 

members in good standing of an SRO 

would be eligible to become a subscriber 

to the ASPEN Fee/Fee book and would 

be subject to eligibility requirements set 

by IntelligentCross.53

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder applicable to a 

national securities association.54

Specifically, the Commission finds that 

the proposed rule change is consistent 

with the provisions of Section 15A(b)(6) 

of the Exchange Act,55 which requires, 

among other things, that FINRA rules 

must be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. The 

Commission also finds that the 

proposed rule change by FINRA to 

allow IntelligentCross to operate as an 

ADF participant is consistent with Rule 

610(b) of Regulation NMS,56 which 

requires that any trading center that 

displays quotations in an NMS stock 

through an SRO display-only facility 

(such as the ADF) provide a level and 

cost of access to such quotations that is 

substantially equivalent to the level and 

cost of access to quotations displayed by 

an SRO trading facility in that stock, 

and not impose unfairly discriminatory 

terms that would prevent or inhibit any 

person from obtaining efficient access to 

such quotations through a member, 

subscriber, or customer of the trading 

center. In addition, the Commission 

finds that IntelligentCross would 

operate as an automated trading center, 

in compliance with Rule 600(b)(7) of 

Regulation NMS,57 such that its 

quotations would be ‘‘automated’’ under 

Rule 600(b)(6),58 and thus ‘‘protected’’ 

under Rule 611 of Regulation NMS.59

The Commission received several 

comment letters opposing the 

Proposal,60 a comment letter supporting 

the Proposal,61 and responses by FINRA 

and IntelligentCross.62 Commenters 

opposing the Proposal generally state 

the Proposal lacks sufficient detail 

necessary for the Commission to 

approve the Proposal and raise concerns 

about whether the Proposal: (1) 

complies with the requirements of 

Regulation NMS; (2) should contain 

additional processes for the ongoing 

operations of IntelligentCross while it is 

an ADF participant; (3) provides a 

sufficient implementation period for the 

industry to adopt changes due to the 

addition of IntelligentCross as an ADF 

participant; and (4) has provided 

information that the ADF has 

appropriate technological 

infrastructure.63


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64See Notice, supra note 3, at 79403. 

65 17 CFR 242.611. Rule 611(a)(1) requires a 

trading center to establish, maintain and enforce 

written policies and procedures that are reasonably 

designed to prevent trade-throughs on the trading 

center of protection quotations. 17 CFR 

242.611(a)(1). 

66See Citadel Letter at 1; SIFMA Letter at 3; FIA 

PTG Letter at 1–2; FIA PTG Letter II at 1–2; Nasdaq 

Letter at 2; Healthy Markets Letter at 13; Citadel 

Letter II at 1; Citadel Letter III at 1. 

67See Citadel Letter at 1; FIA PTG Letter at 1– 

2; FIA PTG Letter II at 1–2; SIFMA Letter at 4; 

Citadel Letter III at 2. 

68See Citadel Letter at 4; FIA PTG Letter at 2; 

Citadel Letter II at 3; Citadel Letter III at 2. 

69See Citadel Letter at 3; Citadel Letter II at 5; 

Citadel Letter III at 4. 

70See IntelligentCross Letter at 9. 

71 Id. FINRA also highlights the overall record of 

the Proposal, including the information and 

analysis provided by FINRA in the Notice and the 

letters by FINRA and IntelligentCross responding to 

comments regarding the qualification of 

IntelligentCross’ quotes as ‘‘protected quotations’’ 

under Regulation NMS. See FINRA Letter II at 3. 

Accordingly, FINRA states that the ‘‘Commission 

has available detailed information regarding 

IntelligentCross’ operations and the nature of its 

quotations that is sufficient to enable the 

Commission to make a substantive determination 

regarding whether FINRA’s rule filing to add 

IntelligentCross as an ADF participant is consistent 

with the Exchange Act.’’ Id. at 3. 

72See Commission Interpretation of Automated 

Quotations, supra note 15. 

73See Citadel Secs., 45 F.4th at 37 (upholding 

Commission’s determination that a 350-millisecond 

delay was de minimis, noting that it was ‘‘similar 

to the delay that traders’ communications already 

experience when traveling between various other 

exchanges across the country’’). 

74See Commission Interpretation of Automated 

Quotations, supra note 15. 

75See Citadel Letter at 4. This commenter states 

that the ‘‘required assessment of whether or not an 

intentional delay is de minimis must consider the 

impact of the intentional delay on fill rates and 

execution quality and whether it operates to 

frustrate the purposes of Rule 611 by impairing fair 

and efficient access to displayed quotations.’’ Id. at 

8. The commenter further states that based on the 

data presented in the Proposal, ‘‘nearly 9% of 

executable transactions do not occur’’ because of 

the reasons described by the commenter in its letter, 

which the commenter states is ‘‘certainly not de 

minimis.’’ Id. The commenter also states that 

granting ‘‘protected quotation’’ status for the first 

time to a matching process that uses discrete match 

events would treat the IntelligentCross displayed 

quote as equivalent to those on other market 

centers, even though the matching of counterparties 

and the execution of transactions only occurs after 

the match event is conducted. Id. at 7. See also 

Citadel Letter II at 9 (stating that the Proposal does 

not contain any analysis as to the whether the 

intentional delay may be inconsistent with 

Exchange Act Section 15A(b)(6) or Rule 610(b)(2) of 

Regulation NMS); IEX Letter II at 1 (stating that 

there are ‘‘meaningful differences between the 

matching process proposed to be used by 

IntelligentCross and the processes used by all other 

markets with protected quotes today.’’). 

76 IEX Letter at 2; IEX Letter II at 2. This 

commenter states that there should be additional 

transparency on the ‘‘specific inputs and the 

formula(s) applied’’ and the ‘‘technology or 

methods used to apply the randomized delay 

within the timebands.’’ Id. at 2–3. One commenter 

states that ‘‘FINRA must provide all necessary 

information and analysis in its own proposal so that 

the ‘public [can] provide meaningful comment’ on 

FINRA’s analysis.’’ Citadel Letter III at 3. 

77 IEX Letter at 3. See also IEX Letter II at 3–4 

(contrasting the Proposal’s level of disclosures on 

the IntelligentCross matching process with a recent 

exchange proposed rule change on a new order type 

and noting that a matching process driven by 

‘‘artificial intelligence’’ requires further inquiry and 

disclosure, especially in the application of 

displaying and accessing protected quotations). 

78 IEX Letter II at 4 (‘‘Specifically, [market 

participants] would not know the amount of time 

to account for in ‘staggering’ the routing of their 

orders to IntelligentCross. If they send individual 

orders to arrive on all markets simultaneously, the 

order to IntelligentCross will be subject to a 

maximum delay of 900 microseconds. If the 

execution of the IntelligentCross order were delayed 

substantially longer than the minimum time 

required to receive execution reports from other 

markets, this could allow fast market participants 

to cancel resting orders on IntelligentCross before 

the execution could occur.’’). 

1. Compliance With Regulation NMS 

and Ongoing Obligation To File 

a. Definition of Automated Quotation 

and Protected Quote Status 

As discussed above, FINRA believes 

that the quotations displayed on the 

ASPEN Fee/Fee book would meet the 

definition of an ‘‘automated quotation’’ 

under Regulation NMS,64 and thus 

‘‘protected’’ under the Order Protection 

Rule.65

Some commenters raise concern that 

IntelligentCross’ displayed quotations 

do not meet the Commission’s 

definition of ‘‘automated quotations’’ 

due to the intentional delay built into 

IntelligentCross’ delayed matching 

process.66 In particular, some 

commenters state that the Proposal does 

not demonstrate how the intentionally 

delayed matching process is de 

minimis.67 Some commenters state that 

the Proposal wrongly assumes that any 

delay under a millisecond is de 

minimis.68 One commenter questions 

whether IntelligentCross’ delayed 

matching process ‘‘frustrates the 

purposes of Rule 611 by impairing fair 

and efficient access’’ as required by the 

Commission Interpretation of 

Automated Quotations.69

In response, IntelligentCross states 

that its matching process is consistent 

with the Commission Interpretation of 

Automated Quotations.70

IntelligentCross states that, while the 

Commission did not establish a ‘‘bright 

line de minimis threshold,’’ the ASPEN 

Fee/Fee book’s matching engine 

‘‘operates near-continuously and when a 

new order arrives in the ASPEN Fee/Fee 

book, it will participate in the next 

scheduled match event by interacting 

with existing orders in the order book 

within a maximum time capped at 900 

microseconds.’’ 71 The Commission also 

disagrees with commenters who assert 

that as a result of IntelligentCross’ 

matching system, quotations displayed 

on the ASPEN Fee/Fee book would not 

meet the definition of an ‘‘automated 

quotation’’ under Regulation NMS. The 

Commission issued a final 

interpretation that, when determining 

whether a trading center maintains an 

‘‘automated quotation’’ for purposes of 

Rule 611 of Regulation NMS, the term 

‘‘immediate’’ in Rule 600(b)(6) 

precludes any coding of automated 

systems or other type of intentional 

device that would delay the action taken 

with respect to a quotation unless such 

delay is de minimis—i.e., so short as to 

not frustrate the purposes of Rule 611 by 

impairing fair and efficient access to an 

exchange’s quotations.72 In accordance 

with that interpretation, the 

Commission does not believe that 

IntelligentCross’ delayed matching 

functionality precludes IntelligentCross 

from maintaining an automated 

quotation. Because the delay imposed 

by IntelligentCross is well within 

geographic and technological latencies 

experienced today that do not impair 

fair and efficient access to an exchange’s 

quotations or otherwise frustrate the 

objectives of Regulation NMS, the 

Commission believes that such 

intentional delay will not frustrate the 

purposes of Regulation NMS by 

impairing fair and efficient access to 

IntelligentCross’ quotations.73

Accordingly, the delay in 

IntelligentCross’ matching functionality 

(a randomized delay of up to 900 

microseconds) is de minimis and thus 

IntelligentCross can maintain a 

protected quotation.74

One commenter states that the ‘‘novel 

features’’ of the Proposal have not been 

adequately assessed to provide the 

Commission with sufficient basis to 

make an affirmative finding that the 

Proposal is consistent with the 

Exchange Act.75 One commenter states 

that IntelligentCross should provide 

additional transparency on the 

operation of its matching process.76 This 

commenter states that all markets, 

including ATSs and registered 

exchanges, ‘‘should be subject to an 

equivalent level of transparency and 

review’’ regarding ‘‘how their quotes 

may be accessed and displayed and how 

executions involving those quotes may 

occur.’’ 77 This commenter also states 

that market participants need enough 

information ‘‘so that those who wish to 

do so can replicate how the mechanism 

will affect results in various market 

conditions.’’ 78 Additionally, this 

commenter states that it is unclear 

whether market participants could alter 

their routing strategies to account for 

IntelligentCross’ ‘‘randomized delay in 

the same way they can account for static 


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79 IEX Letter at 6. 

80See Healthy Markets Letter at 14. This 

commenter also states, without identifying 

specifics, that the delayed randomized match 

creates ‘‘some challenges regarding the operation of 

ISOs.’’ See id. at 4. See also Healthy Markets Letter 

II at 4; Citadel Letter at 6–7 (stating that market 

participants could have difficulty adopting routing 

strategies to account for IntelligentCross’ 

randomized intentional delay); Citadel Letter III at 

6–7 (stating that the randomized intentional delay 

‘‘makes it practically impossible for market 

participants to stagger order routing such that 

orders are executed at IntelligentCross and other 

venues at precisely the same time’’); IEX Letter II 

at 2 (stating that the matching process used by 

IntelligentCross is ‘‘relatively opaque and 

unpredictable compared to other markets with 

protected quotes’’). 

81See IEX Letter II at 4. 

82See id. at 5. 

83See id. at 4. 

84See SIFMA Letter at 3–4. See also Citadel Letter 

II at 6 (stating that ‘‘[t]he displayed quotations on 

IntelligentCross are ‘maybe’ quotations that do not 

provide market participants with execution 

certainty. As a result, it would frustrate the 

purposes of Rule 611 to provide trade-through 

protection to these manual quotations on 

IntelligentCross.’’); Citadel Letter III at 5. 

85See SIFMA Letter at 3–4; Citadel Letter at 4. 

One of these commenters discusses prior SRO 

proposals considered by the Commission that raised 

similar concerns related to asymmetrical ‘‘speed 

bumps’’ in which one of the orders and/or messages 

on one side of the market are subject to a delay 

whereas others are not. See SIFMA Letter at 3. See 

also Citadel Letter II at 8 (stating that the 

IntelligentCross intentional delay resembles an 

asymmetric delay and, as a result, the Proposal 

warrants further scrutiny ‘‘to determine whether 

any discrimination is unfair and, therefore, 

inconsistent with the Exchange Act’’); Citadel Letter 

III at 4. 

86See Citadel Letter III at 6. 

87See id. at 6. This commenter also states that 

‘‘geographical and technological latencies are 

applicable to all market participants and do not 

provide liquidity providers with a clear structural 

advantage—namely, the option to cancel a 

displayed quote after an incoming order reaches the 

IntelligentCross matching engine.’’ Id. at 8. 

88See Citadel Letter at 5. This commenter further 

states that IntelligentCross fails to consider that the 

execution experience on IntelligentCross may be far 

worse than advertised, and may explain why more 

orders are not routed to the venue. See Citadel 

Letter III at 7. See also IEX Letter at 6 (requesting 

more transparency on how often cancellations 

might occur if IntelligentCross were to maintain a 

protected quote); Citadel Letter III at 8 (stating that 

the statistics cited by IntelligentCross are only 

based on its current status as a non-protected 

quotation venue where market participants are not 

required to route to IntelligentCross and its unclear 

the impact that granting IntelligentCross protected 

quotation status would have on those figures). 

89See SIFMA Letter at 3. This commenter states 

that areas to explore in addressing its concerns with 

the Proposal could include ‘‘instituting a delay 

regarding the ability to cancel a posted order that 

mirrors the delay for incoming orders seeking to 

interact with that posted order or removing the 

delay on incoming ISO/IOC orders attempting to 

access the ADF protected quote.’’ Id. at 4, n.10. 

90Citadel Letter III at 3. 

91FIA PTG Letter at 2. 

92See FIA PTG Letter II at 2; see also Citadel 

Letter II at 5–6. 

93See FIA PTG Letter II at 2. IntelligentCross 

responds that the specific example the commenter 

illustrates, while possible to occur, is nonetheless 

extremely unlikely, according to their most recent 

calculations based on observations on the 

IntelligentCross platform. Specifically, in June 

2023, the daily average incidence of such a 

hypothetical was 158 times in the course of 45 

million orders, i.e., 0.00035 percent of the time. See 

IntelligentCross Letter II at 7. 

94See IEX Letter at 8; IEX Letter II at 5. 

95See IntelligentCross Letter at 3; IntelligentCross 

Letter II at 3. 

96See IntelligentCross Letter at 4. IntelligentCross 

further states that both the taker and maker ‘‘are on 

equal footing for the next scheduled match while 

maintaining full control of their orders, and both 

sides of the trade must wait equally for the next 

scheduled match event to occur.’’ IntelligentCross 

Letter II at 5. 

97 IntelligentCross Letter at 4. 

and geographic delays.’’ 79 Similarly, 

another commenter states that the 

randomized nature of the matching 

process ‘‘creates significant challenges 

for best execution for brokers’’ and 

prevents ‘‘predictable staging of order 

sending activity by brokers across 

multiple venues,’’ resulting in 

‘‘significant risk of material information 

leakage and quote fading—leading to 

materially worse execution quality for 

investors.’’ 80

One commenter raises concerns about 

the relative ability of different market 

participants to react to market price 

movements in deciding whether to 

cancel after their orders have been 

accepted by the IntelligentCross system 

and during the delay before execution.81

This commenter believes that some 

‘‘participants could use their superior 

ability to track price changes on other 

markets within the variable delay period 

to determine whether to cancel their 

orders.’’ 82 This commenter asserts that 

this is a unique challenge that market 

participants do not face in managing the 

orders that they send to other protected 

quote venues.83

Some commenters state that the 

ability for liquidity providers to cancel 

displayed ADF orders through 

IntelligentCross’ functionality at any 

time raises questions about whether its 

functionality is consistent with 

Regulation NMS and prior Commission 

guidance.84 For example, some 

commenters state that they are 

concerned that a resting limit order 

could be cancelled at any time (even 

after the incoming order is received) 

prior to the match, including when such 

incoming orders are routed to 

IntelligentCross consistent with 

regulatory obligations under the Order 

Protection Rule.85 One commenter 

states, according to data it compiled on 

typical routing latencies using fiber 

infrastructure between datacenters, a 

liquidity provider on IntelligentCross 

has ample time to observe the trades 

executed on other U.S. equities 

exchanges before determining whether 

to cancel its own resting order.86 The 

commenter states that this option to 

cancel benefits liquidity providers on 

IntelligentCross at the expense of 

liquidity takers and hurts market 

competition across venues.87 The 

commenter further states that the nonmatch event data stated in the Proposal 

is a ‘‘material’’ figure that ‘‘likely 

understates expected cancellation rates’’ 

if market participants are required to 

route order flow to IntelligentCross.88

Another commenter states that order 

posters in the ASPEN Fee/Fee book 

have the ability to immediately cancel 

their orders, whereas order transmitters 

seeking to interact with that interest at 

the NBBO do not have the same ability 

to cancel their orders due to their 

regulatory obligation to attempt to 

access the protected quote.89 One 

commenter asserts that the 

IntelligentCross ‘‘price-sliding’’ 

mechanism to avoid locking its own 

market can result in quotations that may 

be ‘‘impossible to access’’ for incoming 

orders.90 Another commenter states that 

the Proposal ‘‘lacks basic information, 

such as whether the speed bump is 

symmetric or asymmetric and how it 

operates in practice.’’ 91 One commenter 

states that it has concerns about 

IntelligentCross creating a new 

protected NBB or NBO for orders that 

are pending a match and for which new, 

incoming orders will be ‘‘very likely 

inaccessible.’’ 92 The commenter 

provides a hypothetical example to 

support its assertion where, after a 

number of events occur in the markets, 

the NBBO is made up solely of two 100 

share orders on IntelligentCross such 

that, if another market participant 

responded to the quote, the new 

participant would be sequentially added 

to the queue and would not trade.93

Another commenter requests more 

transparency on how the consolidated 

market data feeds would reflect the state 

of IntelligentCross’ protected quotes.94

In its response letters, IntelligentCross 

states that it disagrees with the 

characterizations made by commenters 

of the IntelligentCross matching 

process.95 Specifically, IntelligentCross 

states that its matching process is 

‘‘completely symmetric in nature and 

does not favor a particular side of the 

trade; there is no differential treatment 

of certain market participants.’’ 96

IntelligentCross states that both sides— 

the buyer and the seller—‘‘can cancel or 

update their orders at any time prior to 

a match’’ and ‘‘must equally wait for the 

next scheduled match event to 

occur.’’ 97 It states that no information is 

provided to any market participant 

regarding the status (or existence) of the 


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98 IntelligentCross Letter III at 4. 99 IntelligentCross Letter at 4. 100 Id. IntelligentCross also states that, in the case 

of ISOs, commenter ‘‘concerns are misplaced as 

once the ISO is sent to a trading center displaying 

a protected quotation, a broker’s obligations under 

the Rule 611 have been met.’’ Id. at 5. 

IntelligentCross also states that ‘‘[t]he fact that a 

market participant may not receive an execution 

when routing to a market is not unique to 

IntelligentCross and is not indicative of the absence 

of fair and efficient access.’’ IntelligentCross Letter 

II at 4. 

101See supra note 88. 

102 IntelligentCross Letter at 8. 

103 Id. 

104See supra notes 84–87 and accompanying text. 

105 IntelligentCross Letter at 5. 

106See id. at 1. 

107 Id. 

108 Id. at 6. 

109See id. at n. 24. See also id. at 7 (stating that 

‘‘[t]he determination of fair and efficient access 

should not be about protecting the economic 

interests of one particular group of market 

participants or impeding innovation or the 

introduction of competition to protect the exchange 

status quo’’); IntelligentCross Letter III at 4 (stating 

that ‘‘[a] point that either has been misunderstood 

by commenters or effectively ignored in comments 

is that a market participant who sends an order to 

IntelligentCross does not know how much time 

remains before a match event may occur, and 

therefore how long they have—whether they are a 

maker or taker—to cancel or amend their order’’). 

110See supra note 90. 

111See IntelligentCross Letter II at 10 (‘‘In ASPEN, 

if a displayed Limit Order or Primary Peg Order 

would lock or cross displayed contra-side interest 

inside the ATS or the NBBO, such order will be 

displayed one minimum price variation less 

aggressive than the price of the displayed contraside interest inside the ATS or as part of the NBBO 

and ranked at the price of displayed contra-side 

interest inside the ATS or as part of the NBBO. In 

the event the displayed contra-side interest inside 

the ATS or the NBBO updates, such order’s 

displayed price will be updated to the most 

aggressive price permissible without locking 

displayed contra-side interest inside the ATS or as 

part of the NBBO, up to the order’s limit price, and 

such order’s ranked price will be updated to the 

most aggressive price permissible without crossing 

displayed contra-side interest inside the ATS or as 

part of the NBBO, up to the order’s limit price.’’). 

See also FINRA Rule 6240 (Prohibition from 

Locking or Crossing Quotations in NMS Stocks). 

112See supra note 80 and accompanying text. 

113See IntelligentCross Letter at 6. For the 

proposition that its system is designed to provide 

for best execution, IntelligentCross states that in the 

past year, it has grown from 70 basis points of the 

market on average in January 2022 to 110 basis 

points during January 2023. See id. In addition, 

IntelligentCross reached its highest daily market 

share versus total consolidated volume on June 6, 

2023 at 146 basis points and has averaged over 124 

basis points daily for the first six months of 2023. 

See IntelligentCross Letter II at 2. IntelligentCross 

also states that, for displayed orders in S&P 500 

stocks, quotations in the ASPEN Fee/Fee book were 

available strictly inside the NBB/NBO more than 12 

percent of the time, with an average improvement 

of over 2.5 basis points, and for displayed orders 

in Russell 3000 stocks and the top 100 ETFs, bids 

and offers strictly inside the NBB/NBO were 

available over 9 percent of the time, with an average 

improvement of over 10 basis points. See id. 

114See supra notes 81–83 and accompanying text. 

115See IntelligentCross Letter II at 6. 

116 Id. 

117See supra notes 78 and 80 and accompanying 

text. 

118 IntelligentCross Letter III at 4. 

119See supra notes 78–80 and accompanying text. 

120See IntelligentCross Letter at 2, 7. 

121 IntelligentCross Letter at 7. IntelligentCross 

also states that randomizing the match frequency 

provides benefits to both sides of a trade by, for 

example, reducing the potential for ‘‘gaming,’’ 

which can impede the process for achieving best 

execution. See id. at n.28. 

122 Id. at 7. IntelligentCross states that the ‘‘speed 

of a trader’s software, telecommunication resources, 

geography, and the number of ports purchased from 

Continued 

matchable state or the match event.98

IntelligentCross also emphasizes that 

the regulatory obligations attendant to 

‘‘protected quotations’’ under 

Regulation NMS do not provide a 

guarantee of an execution.99

Accordingly, IntelligentCross states that 

a market participant that routes an order 

to any market with the intention of 

matching against a displayed order may 

not ultimately receive an execution.100

Moreover, IntelligentCross disagrees 

with a commenter’s statement that nonmatch events on IntelligentCross are 

‘‘material’’ 101 and states that there is no 

evidence to the effect that non-match 

rates would increase if market 

participants are required to route order 

flow to IntelligentCross.102

IntelligentCross states that ‘‘it is just as 

likely that cancellations will decrease’’ 

as ‘‘the IntelligentCross order book will 

be in a matchable state more 

frequently.’’ 103

IntelligentCross also disagrees with 

commenters 104 that express concern 

regarding the ability for liquidity 

providers to cancel their order in 

IntelligentCross prior to a match event 

and believe it to be detrimental to the 

markets and investors.105

IntelligentCross’ stated purpose is to 

provide a ‘‘venue that optimizes price 

discovery, achieves maximum price 

stability after trades, and provides an 

opportunity for market participants to 

improve performance and achieve best 

execution by reducing market impact 

and adverse selection.’’ 106

IntelligentCross points to its own user 

experience on the platform, and data 

specifying that ‘‘in January 2023, 

ASPEN Fee/Fee [book] improved the 

NBBO over 5.3 million times per day 

(for orders of round-lot size or larger on 

arrival).’’ 107 Additionally, 

IntelligentCross states that any ‘‘tradeoffs’’ due to the manner of 

IntelligentCross’ matching process 

‘‘certainly do not frustrate the purpose 

of Regulation NMS by impairing fair 

and efficient access to IntelligentCross’ 

displayed quotations.’’ 108

IntelligentCross also states that in the 

scenario where the NBBO moves 

between the time an order is received 

and the next match event takes place, 

depending on the direction the NBBO 

moves, the liquidity taker may end up 

better off not executing at the old 

NBBO.109 Additionally, the ‘‘price 

sliding mechanism’’ raised by one 

commenter 110 is designed to address 

Rule 610 requirements to establish, 

maintain, and enforce specific written 

rules that are generally aimed at limiting 

the display of quotations that lock or 

cross any protected quotations in an 

NMS stock.111 Moreover, 

IntelligentCross states that there is no 

basis for the assumption by a 

commenter 112 that there is a significant 

risk of information leakage and quote 

fading due to an IntelligentCross 

protected quote.113

With respect to commenter concerns 

regarding ‘‘speed’’ in the markets related 

to the ability to cancel on 

IntelligentCross,114 IntelligentCross 

states that speed advantages already 

exist for faster market participants 

related to executions on all markets, 

including those currently with protected 

quotations such as exchanges.115

Accordingly, Intelligent states that ‘‘it is 

unrealistic to claim that there is no 

speed advantage across all trading 

markets, including on continuous 

exchange markets.’’ 116

With respect to commenter concerns 

regarding ‘‘predictability’’ and the 

ability for market participants to 

‘‘replicate’’ the matching process due to 

the randomization of the matching 

delay,117 IntelligentCross responds that 

the randomization of the matching 

process ‘‘is what contributes to [the] 

matching process not discriminating in 

favor of a particular market participant 

or category of participants, and also 

makes any would-be manipulation of 

the matching process difficult by 

reducing the potential for ‘systematical 

gaming.’ ’’ 118

In addressing commenter concerns 

regarding any difficulties for market 

participants to adapt to an 

IntelligentCross protected quote,119

IntelligentCross states it is already 

widely used by most major brokerdealer and electronic trading firms.120

IntelligentCross states that these firms 

and others ‘‘make routing decisions 

every day in response to the numerous 

order types already in place by 

exchanges, as well as implement a 

plethora of routing strategies to interact 

with, and respond to, the displayed 

liquidity in the markets.’’ 121

IntelligentCross further states that 

‘‘brokers must currently consider and 

account for technological and 

geographic differences and latencies 

when routing.’’ 122 Additionally, 


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an exchange’’ are all factors that ‘‘can affect 

outcomes as much as (if not more than) any actual 

delay mechanism.’’ IntelligentCross Letter II at 6. 

123 IntelligentCross Letter at 7. For example, 

IntelligentCross states that its matching process 

‘‘does not prevent market participants’’ from 

adopting ‘‘staggering’’ order routing strategies or 

employing ‘‘tools that already exist to assist in the 

‘predictable staging’ of order sending activity across 

multiple venues.’’ IntelligentCross Letter II at 5–6. 

124See IntelligentCross Letter II at n.23. 

125 IntelligentCross Letter at 2, 7. IntelligentCross 

also states that none of the commenters identify 

‘‘any basis under current regulations or from a 

practical standpoint why they would not be able to 

adjust and account for the IntelligentCross matching 

process.’’ Id. at 7–8. 

126See supra note 94 and accompanying text. 

127 IntelligentCross Letter II at 7. 

128See supra note 76 and accompanying text. 

129 IntelligentCross Letter II at 11 (additionally 

reiterating arguments made in the Proposal). 

130 Id. at 11 (‘‘The match event intervals per 

security are adjusted overnight after enough data 

points have been accumulated to warrant an 

adjustment, and each match event interval is 

designed to achieve two objectives: (1) provide for 

as many matches as possible to maximize liquidity; 

and (2) keep the NBBO as stable as possible for a 

period of time after executions occur on the ATS’’). 

IntelligentCross further states that one commenter 

misunderstands its use of ‘‘machine learning/AI’’ in 

the IntelligentCross matching process, and asserts 

that such technology is used solely for calculating 

the matching schedules using the overnight 

optimization process. See IntelligentCross Letter III 

at 2. IntelligentCross represents that ‘‘no changes 

occur to the IntelligentCross matching process 

during the trading day due to ‘machine learning 

technology’ or AI,’’ and the IntelligentCross 

‘‘matching process is not reactive to changing 

market conditions like other exchange order types 

or matching processes, i.e., our trade matching 

process is not ‘driven by AI as characterized by the 

commenter.’’ Id. See also supra note 77 (describing 

commenter concern on the use of ‘‘machine 

learning technology’’ in the IntelligentCross 

matching process). 

131See IntelligentCross Letter III at 4. 

132 IntelligentCross states that this review is to 

ensure ‘‘there are no anomalies outside a tolerance 

time band before those matching schedules are 

utilized during the trading day’’ and ‘‘a principal 

signs off that such review was performed.’’ Id. at 4– 

5. 

133 Id. at 5. 

134See supra note 84. 

135See supra note 75 (describing commenter’s 

request to consider impact of the intentional delay 

on fill rates and execution quality on 

IntelligentCross). 

136See supra note 87 and accompanying text. 

137See IntelligentCross Letter at 2; 

IntelligentCross Letter II at 2. See also supra note 

113 (describing execution quality statistics for the 

first six months of 2023). 

138See infra notes 169 and 171 and 

accompanying text. 

IntelligentCross points to the 

‘‘technological capabilities of order 

routers today’’ and believes that a 

market participant ‘‘should not have 

difficulties in configuring their routers 

to adopt to the IntelligentCross 

matching process.’’ 123 IntelligentCross 

states that market participants already 

use ‘‘tools to manage order routing and 

repricing on the scale of hundreds of 

microseconds’’ such as ‘‘mechanisms 

that adapt to the changing technology 

on trading venues,’’ including 

adaptations that address delay 

periods.124 Accordingly, 

IntelligentCross believes that any market 

participants should be able to account 

for the IntelligentCross protected quote 

without significant or material changes 

to its technology and without adopting 

any change that would frustrate the 

purposes of Regulation NMS.125

In response to questions regarding 

how IntelligentCross protected quotes 

would be reflected in consolidated 

market data feeds,126 IntelligentCross 

states that it will provide any quotes or 

quote updates to the ADF no later than 

when it is disseminated via the IQX 

Market Data Feed.127 In response to 

commenter questions regarding 

additional transparency of the matching 

process,128 IntelligentCross states that it 

publicly posts its Form ATS–N 

disclosures on EDGAR.129

IntelligentCross also states that in 

calculating its matching schedules, the 

firm uses an ‘‘overnight optimization 

process’’ that uses, among other things, 

historical performance measurements 

from prior days’ matches, and each 

security has an individualized matching 

schedule.130 IntelligentCross further 

states that it has policies and procedures 

in place to oversee and to review the 

calculation and application of its 

matching schedules.131 In particular, 

IntelligentCross states that it performs 

reviews on a daily basis to ensure that 

its matching parameters are within the 

correct time bands,132 and, on a weekly 

basis, reviews performance of its 

systems ‘‘to ensure that it is 

accomplishing its objectives and to 

ensure that the matching process does 

not act in a discriminatory manner in 

favor of or against any participant or 

category of participants.’’ 133

The other concerns related to the 

IntelligentCross matching process and 

the qualification of its displayed quotes 

as a protected quotation, have been 

adequately addressed in the response 

letters by IntelligentCross and FINRA, as 

well as in the Proposal, such that the 

Proposal is consistent with the 

requirements of the Exchange Act and 

the rules and regulations applicable to 

a national securities association. 

Specifically, with respect to requests for 

more transparency and detail on access 

to its displayed quotations and the 

differential treatment of market 

participants,134 IntelligentCross has 

provided more detail, demonstrating 

that its matching process is symmetric 

in nature and does not favor a particular 

side of the trade.135 Match schedules are 

defined by minimum/maximum time 

bands for each security (between 150 

and 900 microseconds) based on an 

overnight optimization process that uses 

historical performance measurements 

from prior days’ matches. The time of 

the actual match event is randomized 

within the match event band throughout 

the course of the trading day. As 

described by IntelligentCross, the 

delayed matching process is calibrated 

to reduce market impact and adverse 

selection for market participants, 

thereby fostering increased access to 

displayed liquidity through the ADF 

and more competition among markets to 

the benefit of all market participants. 

Both sides—the buyer and the seller— 

can cancel their orders at any time prior 

to a match and must wait equally for the 

next scheduled match event to occur in 

price-time priority, thus not resembling 

an asymmetric delay as supposed by 

certain commenters.136 The 

IntelligentCross matching process 

provides both sides a fair opportunity to 

manage their orders, as both sides are 

blind to the length of the delay once an 

order is accepted by the system or 

where the order sits in the delay 

mechanism (e.g., whether there are 5 

microseconds or 500 microseconds 

remaining before a match event takes 

place), and neither side knows when 

submitting their order which direction 

the market may move if there are 

changes in the NBBO that occur during 

the delay. Accordingly, depending on 

the side of the market the NBBO moves, 

the buyer or seller may be as equally 

likely to attempt to cancel their orders 

prior to a match event as there is not a 

systematized delay on one side of a 

trade, and thus the matching process 

does not impose unfairly discriminatory 

terms against efficient access to 

displayed quotations. 

With respect to more information on 

‘‘fill rates and execution quality’’ on 

IntelligentCross in assessing protected 

quotation status to the market, 

IntelligentCross provided additional 

data highlighting execution quality 

metrics for the first six months of 

2023.137

The Commission also agrees with 

IntelligentCross that the regulatory 

obligations associated with protected 

quotations under Regulation NMS do 

not provide a guarantee of an execution, 

which commenters appear to suppose 

when highlighting non-match events or 

cancellation rates.138 While market 

participants accessing the 

IntelligentCross protected quotation 

would be subject to IntelligentCross’ 

delayed, randomized matching process, 

the Commission believes, as stated 

above, that the length of 


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139See supra notes 78–80 and accompanying text. 

140See supra note 80. 

141See id. 

142See IntelligentCross Letter at 2 (in January 

2023, IntelligentCross’ daily market share was 110 

basis points, and was consistently third in total 

shares traded by ATSs of NMS Tier 1 and Tier 2 

stocks in FINRA ATS weekly statistics, averaging 

$5.9 billion notional traded per day). 

143See Notice, supra note 3, at 79404, n.37. 

144See Healthy Markets Letter at 2; FIA PTG 

Letter at 2; FIA PTG Letter II at 2. See also IEX 

Letter at 3 (stating that it is important for there to 

be a ‘‘clear expectation that material changes to 

methods affecting quote display and access’’ be 

subject to appropriate review, for example, by 

requiring material changes to be filed by FINRA 

through the SEC rule filing process); IEX Letter II 

at 6. 

145See FIA PTG Letter at 2; FIA PTG Letter II at 

2–3. 

146See FIA PTG Letter at 2; FIA PTG Letter II at 

2–3. 

147See IEX Letter II at 6. 

148See id. at 6. 

149See Healthy Markets Letter at 2. This 

commenter states that if the Commission approves 

the Proposal, ‘‘it would be difficult, if not 

impossible, for the Commission to practically 

constrain IntelligentCross’ fees and potential 

limitations for accessing the newly protected 

quotations.’’ Id. at 9. See also Healthy Markets 

Letter II. 

150See Healthy Markets Letter at 2. This 

commenter also states that if the Commission 

approves the Proposal, it should expressly 

condition the approval on IntelligentCross being 

compliant with Regulation SCI like other trading 

centers with protected quotations. See id. at 8, n.29. 

IntelligentCross states that it became Regulation SCI 

compliant as of August 1, 2023. See IntelligentCross 

Letter III at 5. 

151See Healthy Markets Letter at 2. 

152See id. at 17. See also IEX Letter at 10; IEX 

Letter II at 6 (stating that ‘‘approval of the Proposal 

would result in a double standard in treatment of 

exchanges compared to ATSs that have protected 

quotes’’). 

153See IntelligentCross Letter at 11; 

IntelligentCross Letter II at 8–9. 

154See FINRA Letter II at 3–4. 

155See IntelligentCross Letter II at 8–9 (discussing 

level and cost of access to IntelligentCross). 

IntelligentCross states that FINRA provides a preapproved (non-exclusive) list of ADF connectivity 

providers to help market participants seeking to 

access quotations posted through the ADF, and ADF 

participants must be accessible through at least two 

of the connectivity providers. Id. at 8. 

IntelligentCross’ specific delay or its 

randomized nature would not frustrate 

the purposes of Regulation NMS by 

impairing fair and efficient access to 

IntelligentCross’ displayed quotations. 

Furthermore, as described above, the 

information provided in the Proposal, 

the response letters by IntelligentCross 

and FINRA, and the availability of 

further information on IntelligentCross’ 

publicly posted Form ATS–N and 

website, have addressed transparency 

concerns surrounding the 

IntelligentCross matching process such 

that the information will promote fair 

and efficient access to its quotations. 

The Commission is also unpersuaded 

by comments regarding the difficulties 

for market participants to adapt to an 

IntelligentCross protected quote.139

With respect to ISOs,140 the 

Commission believes that market 

participants can satisfy their obligations 

under Regulation NMS by simply 

routing ISOs to IntelligentCross’ 

protected quotations, as necessary. 

While some commenters state that the 

IntelligentCross matching mechanism 

could pose challenges for market 

participants to deploy certain order 

routing strategies or lead to information 

leakage,141 IntelligentCross is already 

widely used by most major brokerdealer and electronic trading firms,142

which no other commenter disputed, 

and the commenters did not present 

evidence that the current considerations 

that market participants face when 

interacting with IntelligentCross’ 

liquidity and displayed liquidity in 

other markets would be appreciably 

affected by the Proposal. 

b. Compliance With Rule 610 of 

Regulation NMS and Ongoing 

Obligations 

As discussed above, FINRA believes 

that IntelligentCross’ proposed level and 

cost of access to quotations on the 

ASPEN Fee/Fee book is substantially 

equivalent to the level and cost of access 

to quotations displayed by an SRO 

trading facility, both in absolute and 

relative terms.143 Two commenters raise 

questions regarding the regulatory 

process in connection with proposed 

changes to IntelligentCross’ operations 

and fees associated with displaying 

protected quotations on the ADF.144

One commenter states that there is 

currently no regulatory process for 

ongoing operational changes at nonexchange venues with protected quotes 

and intentional access delays.145 This 

commenter states that without the 

exchange notice and comment process 

in connection with changes to 

operations, it seeks additional 

information on the regulatory process 

for managing such changes at 

IntelligentCross and the ADF.146 One 

commenter states that even if 

IntelligentCross agrees to a method of 

review for material changes as an ADF 

participant, IntelligentCross does not 

offer suggestions about how rule filing 

and review process would work or 

suggest any alternatives.147 This 

commenter also states that FINRA has 

made no representation in the record to 

indicate it would be willing to 

undertake a rule filing obligation with 

respect to material changes by 

IntelligentCross as an ADF 

participant.148

One commenter states that if the 

Commission chooses to permit any 

trading center to disseminate quotations 

using the ADF, it must condition 

approval with limitations that are 

consistent with limitations imposed 

upon other trading venues (i.e., 

exchanges) whose quotations have 

protected quotation status.149 In 

particular, this commenter states that 

approval of the Proposal should be 

conditioned upon IntelligentCross: (1) 

continuing to not charge for market data 

or connectivity; (2) having fees and 

rebates (if adopted) that are at or below 

those charged by exchanges; (3) 

notifying the Commission and FINRA of 

all changes related to the ASPEN Fee/ 

Fee book; and (4) describing how any 

such changes are consistent with the 

ASPEN Fee/Fee book quotations 

continuing to be included as a protected 

quotation is consistent with the 

Exchange Act and protection of 

investors.150 This commenter also states 

that both the Commission and FINRA 

should detail how they would ‘‘gather, 

review, analyze, and publish for public 

consideration’’ any changes to 

IntelligentCross’ policies and 

procedures related to the Proposal, as 

well as describe how they would 

intervene to block or disallow any 

concerning changes in IntelligentCross’ 

policies and procedures related to the 

ADF.151 Overarching this commenter’s 

concerns with the Proposal are that any 

changes to the ASPEN Fee/Fee book 

rules and operations should be treated 

the same for regulatory purposes as if 

they were changes made by an 

exchange, including that they are put 

out for notice and public comment, and 

subject to Commission disapproval.152

In its response letters, IntelligentCross 

points to its current regulatory 

responsibilities associated with being a 

registered broker-dealer and an ATS, as 

well as the Regulation NMS obligations 

attached to being an ADF participant.153

FINRA also states that its rules set forth 

requirements applicable to an ADF 

participant and require that such 

participants meet the requisite 

standards on an ongoing basis.154

IntelligentCross states its belief that the 

level and cost of access to its quotations 

complies with Rule 610 as it is 

substantially equivalent to the level and 

cost of access to quotations displayed by 

SRO trading facilities and will not 

impose burdens on market 

participants.155 Additionally, 

IntelligentCross states that it does not 

impose unfairly discriminatory terms 

that would prevent or inhibit any 

person from accessing its quotations 

through a subscriber of the trading 


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59966 Federal Register / Vol. 88, No. 167 / Wednesday, August 30, 2023 / Notices 

156See id. at 9 (discussing fair access to its market 

by subscribers). IntelligentCross highlights 

obligations under FINRA Rules 6240 (Prohibition 

from Locking or Crossing Quotations in NMS 

Stocks), 6250 (Quote and Order Access 

Requirements), and 6260 (Review of Direct or 

Indirect Access Complaints) regarding ADF access 

requirements. See id. 

157See id. at 9–10 (also stating that 

IntelligentCross creates and maintains records of all 

decisions granting or denying access, that 

IntelligentCross considers a subscriber’s regulatory 

history in examining a subscriber’s application, and 

that, when the ASPEN Fee/Fee book displays orders 

through the ADF, non-subscribers would access 

IntelligentCross). 

158See IntelligentCross Letter at 11. 

159See id. IntelligentCross also states that it 

would not object to describing how such changes 

are consistent with the ASPEN Fee/Fee book 

quotations continuing to be included as protected 

quotations, consistent with the Exchange Act. See 

id. In addition, IntelligentCross states that material 

changes to its policies and procedures governing 

access to IntelligentCross, including a change to its 

fees, will be submitted to the Commission under 

Form ATS–N. See IntelligentCross Letter II at 11. 

160See IntelligentCross Letter at 11. 

161See Notice, supra note 3, at 79402, n.19. See 

also IntelligentCross Letter at 11, n. 41. 

162See supra note 145 and accompanying text. 

163See IntelligentCross Letter at 11–12. 

IntelligentCross also states that it currently does not 

charge for market data and connectivity. See id. at 

12. 

164See NMS Adopting Release at 37549. 

165See id. 

166See id. 

167See NMS Adopting Release at 35749, n.449. 

168 IntelligentCross states that in January 2023, 3.9 

percent of potential matches on the ASPEN Fee/Fee 

book did not complete because a displayed order 

was cancelled, and 4.5 percent of potential matches 

did not complete because the NBBO changed and 

at least one of the sides became non-marketable. See 

IntelligentCross Letter at 8, n.30. 

169See supra note 133 and accompanying text. 

170See Securities Exchange Act Release No. 

89686 (August 26, 2020), 85 FR 54438, 54445 

(September 1, 2020) (Order Approving a Proposed 

Rule Change to Add a New Discretionary Limit 

Order Type Called D Limit). 

171See supra note 52. 

center.156 Specifically, IntelligentCross 

represents that ‘‘it does not tier or 

discriminate among subscribers’’ and 

any registered US broker-dealer in good 

standing of an SRO may become a 

subscriber of IntelligentCross.157

IntelligentCross also states that, while 

an ATS is not subject to the same 

regulatory requirements as exchanges, it 

also does not share the same benefits as 

exchanges.158 However, IntelligentCross 

states that it does not object to notifying 

the Commission and FINRA in advance 

if changes are made to the level and cost 

of access to the ASPEN Fee/Fee book 

impacting the display of 

IntelligentCross’ protected quotations on 

the ADF, or the operation of the ASPEN 

Fee/Fee book impacting the provision of 

the protected quote.159 IntelligentCross 

also states that it does not object to an 

‘‘appropriately structured process’’ to 

engage the Commission in evaluating 

and commenting on such changes.160

Further, IntelligentCross acknowledges 

that it may be subject to other regulatory 

obligations in the future depending on 

changes to its platform or its volume.161

But IntelligentCross disagrees with the 

commenter’s recommendation to 

condition IntelligentCross’ approval on 

‘‘continuing to not charge for market 

data or connectivity’’ 162 given that it 

believes such a requirement would not 

be consistent with the limitations 

imposed on exchanges and the 

‘‘substantially equivalent’’ basis under 

Rule 610.163

FINRA, as the SRO responsible for 

enforcing compliance by ADF 

participants with the requirements of 

the Exchange Act, must act as the 

‘‘gatekeeper’’ for the ADF, and, as such, 

is required to closely evaluate the extent 

to which ADF participants, including 

IntelligentCross and any future ADF 

participants, meet the access standards 

of Rule 610.164 As part of this process, 

the Commission stated in the NMS 

Adopting Release that NASD (now 

FINRA) would be required to submit a 

proposed rule change under Section 

19(b) of the Exchange Act in order to 

add a new ADF participant.165 If an 

ADF participant is not complying with 

the access standards under Rule 610, 

FINRA has the responsibility to stop 

publishing the participant’s quotations 

until the participant comes into 

compliance.166 The Commission 

believes that a reasonable and 

appropriate method for FINRA to satisfy 

its ongoing responsibility for ensuring 

that an ADF participant is complying 

with Rule 610 is to submit material 

changes that affect access, including the 

level and cost of access, to quotations 

displayed by the ADF participant as 

proposed rule changes under Section 

19(b) of the Exchange Act that would be 

subject to notice and comment. 

The fees and the policies and 

procedures governing access to 

protected quotations displayed on the 

ADF by IntelligentCross as described 

above would provide market 

participants with fair and efficient 

access and are not unfairly 

discriminatory such that they would 

prevent a market participant from 

obtaining efficient access to such 

quotations. All members in good 

standing of an SRO are eligible to 

become IntelligentCross subscribers, 

and both subscribers and nonsubscribers may access IntelligentCross 

liquidity. IntelligentCross offers both 

subscribers and non-subscribers 

multiple options to access its liquidity. 

In addition, IntelligentCross has policies 

and procedures that require it to 

respond to orders by non-subscribers as 

promptly as it responds to orders by 

subscribers and allow for nonsubscribers to be able to automatically 

execute against quotations displayed by 

the system. IntelligentCross does not 

assess charges that may be assessed by 

exchanges, such as membership fees, 

trading rights fees, risk gateway fees, 

and other miscellaneous fees. 

IntelligentCross’ proposed level and cost 

of access to quotations on the ASPEN 

Fee/Fee book is substantially equivalent 

to the level and cost of access to 

quotations displayed by an SRO trading 

facility, both in absolute terms and 

relative to its trading volume.167 Both 

sides—the buyer and the seller—can 

cancel or update their orders at any time 

prior to a match and both must equally 

wait for the next scheduled match event 

to occur. In addition, the Commission 

does not believe that the level of 

cancellation during the delay imposes 

unfairly discriminatory terms that 

prevent or inhibit any person from 

obtaining efficient access to such 

quotations as it has been shown that 

non-match events occur in a minority of 

cases, and market participants receive 

an execution the majority of the time.168

IntelligentCross has policies and 

procedures in place to oversee and 

review the calculation and application 

of its matching schedules to help ensure 

the matching process does not act in a 

discriminatory manner in favor of or 

against any market participants.169

Furthermore, the Commission believes 

that the cancellation rate alone does not 

demonstrate that IntelligentCross 

imposes unfairly discriminatory terms 

given that the ability of any market 

participant to successfully execute 

against any particular displayed quote is 

subject to a number of factors and is not 

guaranteed on any market, as at any 

time any market participant can be 

seeking to execute against an order that 

is being repriced, changed, cancelled, or 

executed by a different market 

participant.170

Further, as discussed above, in the 

event that IntelligentCross intends to 

make a material change to the policies 

and procedures governing access to 

IntelligentCross, including a change to 

its fees, it has represented that it will 

submit the changes made to FINRA, and 

acknowledges that FINRA will post on 

its website an amended description of 

IntelligentCross’ policies, procedures, 

and fees governing access.171 In 

response to comments on the lack of a 

notice and comment process in 

connection with the potential for future 

material changes to the operations and 


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172See supra notes 145–147. 

173See FINRA Letter II at 4. 

174See supra notes 150–152 and accompanying 

text. 

175See supra note 151. 

176See supra note 151 and accompanying text. 

177See Notice, supra note 3, at 790404. 

178See FIA PTG Letter at 2; FIA PTG Letter II at 

3; SIFMA Letter at 4. 

179See FIA PTG Letter at 2. 

180See SIFMA Letter at 4–5. 

181See IntelligentCross Letter at 10. 

182See id. 

183See id. 

184See FIA PTG Letter II at 3 (citing to Securities 

Exchange Act Release Nos. 58375 (August 18, 

2008), 73 FR 49498, 49505 (August 21, 2008) 

(approval of the BATS Exchange), 61698 (March 12, 

2010), 75 FR 13151, 13163 (March 28, 2010) 

(approval of the EDGA and EDGX exchanges) and 

78101 (June 17, 2016), 81 FR 41141 (approval of the 

Investors’ Exchange)). 

185See 17 CFR 242.611(a). 

186See Securities Exchange Act Release No. 

53829 (May 18, 2006), 71 FR 30038, 30041 (May 24, 

2006) (File No. S7–10–04) (extending the 

compliance dates for Rule 610 and Rule 611 of 

Regulation NMS under the Exchange Act). 

187See supra note 120. 

188See supra note 182. 

189See Healthy Markets Letter at 14–17. 

190See id. at 14. This commenter asserts that it 

is ‘‘not aware of any public details regarding the 

details of [the ADF’s] operations, including systems 

specifications and latencies.’’ Id. 

191See id. at 7. 

192See id. at 8. 

193See IEX Letter at 8. This commenter also raises 

general questions regarding latency and the use of 

consolidated data or proprietary data for receiving 

IntelligentCross quotes. See id. at 9. IntelligentCross 

states that it has committed to providing quote 

updates to the ADF no later than when they are 

disseminated via its proprietary data feed. See 

IntelligentCross Letter II at 7. 

fees of IntelligentCross as an ADF 

participant,172 FINRA has represented 

to the Commission that it will file such 

material changes as a proposed rule 

change with the Commission under 

Section 19(b) of the Exchange Act.173

Under this process, the Commission 

would review the proposed rule change 

and consider any public comments 

received. In addition, changes to the 

operations of IntelligentCross, as well as 

its disclosures on its public Form ATS– 

N, are subject to the requirements of 

Rule 304 of Regulation ATS. 

Accordingly, the Commission believes 

that commenter concerns regarding the 

regulatory process for proposed changes 

to IntelligentCross’ operations and fees 

associated with displaying protected 

quotations on the ADF have been 

adequately addressed by 

IntelligentCross and FINRA.174 FINRA’s 

ongoing obligation to ensure compliance 

by IntelligentCross as an ADF 

participant with its Regulation NMS 

obligations, FINRA’s commitment to file 

proposed rule changes relating 

IntelligentCross’ operations, and 

IntelligentCross’ regulatory 

responsibilities as an ATS, 

appropriately ensures transparency and 

ongoing assessment of consistency with 

the Exchange Act. 

Finally, in response to one 

commenter’s recommendation that 

approval of the Proposal be conditioned 

on IntelligentCross ‘‘continuing to not 

charge for market data or 

connectivity,’’ 175 such a condition is 

inconsistent with the limitations 

imposed on an ADF participant under 

Rule 610 which requires a level and cost 

of access that is substantially equivalent 

to the level and cost of access to 

quotations displayed by SRO trading 

facilities.176

2. Implementation Period 

FINRA states that the ‘‘effective date’’ 

of the Proposal would be the date of the 

Commission’s approval.177

Two commenters suggest that the 

proposed implementation period for the 

Proposal is too short given the 

connectivity arrangements that the 

industry would need time to 

establish.178 One commenter suggests an 

implementation period of no less than 

120 days following the date of 

Commission approval.179 Another 

commenter recommends an 

implementation period of no less than 

90 days following the date of 

Commission approval.180 In one of its 

response letters, IntelligentCross states 

that it has been working with industry 

participants to ensure that they have all 

the information necessary to prepare for 

the IntelligentCross protected quote.181

IntelligentCross also states that most 

major broker-dealers and electronic 

trading firms are already connected to, 

and trading within, IntelligentCross.182

Moreover, IntelligentCross believes that 

a reasonable implementation timeframe 

would be to require that industry 

participants begin treating 

IntelligentCross’ quotes as a protected 

quotation no later than 90 days after the 

date of the Commission’s approval 

order.183 One commenter states that the 

90-day implementation period proposed 

by IntelligentCross is in line with 

previous Commission guidance on 

treating new exchange quotes as 

protected.184

Following the issuance of this order 

and IntelligentCross having met the 

conditions to begin operating as an ADF 

participant, market participants will be 

required to have reasonably designed 

policies and procedures to treat 

IntelligentCross’ best bid and best offer 

as a protected quotation.185 At the same 

time, to meet their regulatory 

responsibilities under Rule 611(a) of 

Regulation NMS, market participants 

must have sufficient notice of new 

protected quotations, as well as all 

necessary information (such as final 

technical specifications).186 Given that 

the Commission understands 

IntelligentCross is already widely used 

by most major broker-dealer and 

electronic trading firms,187 and has 

engaged in market participant outreach 

regarding its status as an ADF 

participant,188 the Commission believes 

that an implementation period of no less 

than 90 days following the date of 

Commission approval is a sufficient 

timeframe for market participants to 

establish connectivity to the 

IntelligentCross protected quotation in 

order to meet their obligations under 

Rule 611. Accordingly, the Commission 

believes that it would be a reasonable 

policy and procedure under Rule 611(a) 

to require that industry participants to 

begin treating IntelligentCross’ best bid 

and best offer as a protected quotation 

within 90 days after the date of this 

order, or such later date as 

IntelligentCross begins operation as a 

new ADF participant. 

3. ADF Technological Infrastructure 

One commenter states that the 

Commission and FINRA should 

consider whether to ‘‘wind down’’ the 

ADF due to concerns regarding the 

latency and technological infrastructure 

of the ADF.189 Specifically, this 

commenter states that the Proposal does 

not provide any details of the ADF’s 

systems capabilities and questions 

whether the ‘‘intake, processing, and 

dissemination systems [are] up to 2023 

speed and capacity standards.’’ 190 This 

commenter also expresses concern 

regarding the speed at which the ADF 

disseminates quotation data compared 

to the speed at which IntelligentCross’ 

proprietary quotation feed is 

disseminated to market participants.191

This commenter states that it is unclear 

the extent to which ‘‘FINRA has 

attempted to upgrade the system’’ to 

address the latency gap.192 One 

commenter requests more transparency 

regarding any latency tests conducted 

by FINRA with IntelligentCross to 

determine the latency related to 

transmission from IntelligentCross to 

the ADF and the time for the ADF to 

process and publish updates to the 

SIPs.193

In its response letter, FINRA states 

that it has made technological updates 

to the ADF infrastructure that make it 

‘‘well-equipped to support use of the 

ADF by multiple market participants for 


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59968 Federal Register / Vol. 88, No. 167 / Wednesday, August 30, 2023 / Notices 

194See FINRA Letter at 3. FINRA states that in 

2021 it began a multi-year effort to update the 

technological infrastructure for several of its 

facilities, relevant data vendor feeds, and related 

reference data. See id. The ADF’s trade reporting 

and quoting functionality were migrated onto a new 

platform in November 2021 and March 2022, 

respectively. See id. 

195See id. FINRA states that the ADF supports 

increments of nanoseconds for both its quoting and 

reporting functions. See id. 

196 Id. 

197See FINRA Letter II at 6. FINRA states that the 

ADF latency tests conducted by FINRA with 

IntelligentCross were conducted as stress tests that 

included processing volumes and sustained 

messages rates well in excess of those likely to be 

experienced in production. See id. See FINRA 

Letter II at 5–6 for additional detailed description 

of FINRA’s ADF latency tests. 

198See id. 

199See id. 

200See supra notes 195 and 196. 

201See Notice, supra note 3, at 79404; FINRA 

Letter II at 6. 

202 15 U.S.C. 78s(b)(2). 

203 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Existing Accord was previously approved 

by the Commission. See Securities Exchange Act 

Release Nos. 81266, 81260 (Jul. 31, 2017) (File Nos. 

SR–NSCC–2017–007; SR–OCC–2017–013), 82 FR 

36484 (Aug. 4, 2017). 

4Capitalized terms not defined herein are defined 

in the NSCC Rules available at www.dtcc.com/-/ 

media/Files/Downloads/legal/rules/nscc_rules.pdf. 

5OCC also has filed a proposed rule change and 

an advance notice with the Commission in 

connection with this proposal. See File Nos. SR– 

OCC–2023–007 and SR–OCC–2023–801 (the ‘‘OCC 

Filing’’). 

6The term ‘‘physically-settled’’ as used 

throughout the OCC Rulebook refers to cleared 

contracts that settle into their underlying interest 

(i.e., options or futures contracts that are not cashsettled). When a contract settles into its underlying 

interest, shares of stock are sent, i.e., delivered, to 

contract holders who have the right to receive the 

shares from contract holders who are obligated to 

deliver the shares at the time of exercise/assignment 

in the case of an option, and maturity in the case 

of a future. 

quoting and trading purposes.’’ 194

FINRA also states that its recent 

technological updates to the ADF have 

significantly reduced the ADF’s 

processing latency times as compared to 

when the ADF was last operational in 

2015.195 FINRA also represents that it 

continues to conduct capacity 

requirement testing with 

IntelligentCross and ‘‘aim[s] to address 

any potential areas identified for further 

improvement prior to IntelligentCross 

becoming an ADF [p]articipant and 

sending quotes to the ADF (subject to 

SEC approval).’’ 196 Additionally, based 

on the results of FINRA’s ADF testing 

with IntelligentCross, FINRA states that 

ADF latency is generally in line with 

exchange latency to dissemination by 

the SIPs.197 FINRA also states that it 

expects the ADF latency in production 

to be lower than in the ADF test 

environment.198 Accordingly, FINRA 

believes that any processing latency for 

the ADF would generally be in line with 

exchange processing latencies once 

IntelligentCross begins quoting on the 

ADF.199

The Commission believes that FINRA 

has demonstrated that, with the recent 

technological updates to address latency 

in the ADF’s system capabilities,200

along with recent tests to the ADF 

application with IntelligentCross, the 

ADF technology infrastructure will be 

consistent with current speed and 

capacity standards for processing and 

disseminating IntelligentCross’ 

quotations. Moreover, FINRA and 

IntelligentCross have represented that 

they will continue to conduct testing 

and explore technological 

enhancements to further reduce ADF 

latency, thus ensuring that the ADF 

technology infrastructure continues to 

be consistent with current processing 

latencies.201

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,202

that the proposed rule change (SR– 

FINRA–2022–032) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.203

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18677 Filed 8–29–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98213; File No. SR–NSCC– 

2023–007] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of 

Proposed Rule Change To Modify the 

Amended and Restated Stock Options 

and Futures Settlement Agreement and 

Make Certain Revisions to the NSCC 

Rules 

August 24, 2023. 

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 August 

10, 2023, National Securities Clearing 

Corporation (‘‘NSCC’’) 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 clearing agency. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to (1) modify the Amended 

and Restated Stock Options and Futures 

Settlement Agreement dated August 5, 

2017 between NSCC and The Options 

Clearing Corporation (‘‘OCC,’’ and 

together with NSCC, the ‘‘Clearing 

Agencies’’) (‘‘Existing Accord’’) 3 and (2) 

make certain revisions to Rule 18, 

Procedure III and Addendum K of the 

NSCC Rules & Procedures (‘‘NSCC 

Rules’’) 4 in connection with the 

proposed modifications to the Existing 

Accord, as described in greater detail 

below.5

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

Executive Summary 

NSCC is a clearing agency that 

provides clearing, settlement, risk 

management, and central counterparty 

services for trades involving equity 

securities. OCC is the sole clearing 

agency for standardized equity options 

listed on national securities exchanges 

registered with the Commission, 

including options that contemplate the 

physical delivery of equities cleared by 

NSCC in exchange for cash (‘‘physically 

settled’’ options).6 OCC also clears 

certain futures contracts that, at 

maturity, require the delivery of equity 

securities cleared by NSCC in exchange 

for cash. As a result, the exercise/ 

assignment of certain options or 

maturation of certain futures cleared by 

OCC effectively results in stock 

settlement obligations. NSCC and OCC 

maintain a legal agreement, generally 

referred to by the parties as the 

‘‘Accord’’ agreement, that governs the 

processing of such physically settled 

options and futures cleared by OCC that 


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