[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Notices]
[Pages 63616-63620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: R1-2020-21403]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89967; File No. SR-IEX-2020-14]


Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Transaction Fees Pursuant to IEX Rule 15.110 Concerning D-Limit Orders

September 23, 2020.

    Editorial Note: Notice document 2020-21403, which published 
Tuesday, September 29, 2020, was incorrect. We are republishing it 
here in its entirety.

    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 September 11, 2020, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Act,\3\ 
and Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a 
proposed rule change to modify its Fee Schedule, pursuant to IEX Rule 
15.110(a) and (c), to establish fees for the execution of Discretionary 
Limit (``D-Limit'') orders, including pricing incentives for certain D-
Limit, Discretionary Peg (``D-Peg''), and Midpoint Peg (``M-Peg'') 
order executions. Changes to the Fee Schedule pursuant to this proposal 
are effective upon filing,\5\ and will be implemented in conjunction 
with the full launch of D-Limit trading on October 1, 2020.\6\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ See IEX Trading Alert #2020-024 (Discretionary Limit (D-
Limit) Order Type Launch) issued on August 28, 2020, available at 
https://iextrading.com/alerts/#/121. All D-Limit, D-Peg, and M-Peg 
executions that occur prior to October 1, 2020 will be subject to 
the fee schedule in effect prior to October 1, 2020.
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify its Fee Schedule, pursuant to IEX 
Rule 15.110(a) and (c), to establish fees for the execution of 
Discretionary Limit (``D-Limit'') orders, including pricing incentives 
for certain D-Limit, Discretionary Peg (``D-Peg'') and Midpoint Peg 
(``M-Peg'') order executions. Changes to the Fee Schedule, as proposed, 
will be implemented in conjunction with the full launch of D-Limit 
trading on October 1, 2020.\7\
---------------------------------------------------------------------------

    \7\ See supra note 6.
---------------------------------------------------------------------------

D-Limit Overview
    The D-Limit order type was approved by the Commission on August 26, 
2020,\8\ and is designed to protect liquidity providers from potential 
adverse selection by latency arbitrage trading strategies in a fair and 
nondiscriminatory manner.\9\ A D-Limit order may be a displayed or non-
displayed limit order that upon entry

[[Page 63617]]

and when posting to the Order Book \10\ is priced to be equal to and 
ranked at the order's limit price, but will be adjusted to a less-
aggressive price during periods of quote instability, as defined in IEX 
Rule 11.190(g).\11\ Otherwise, a D-Limit order operates in the same 
manner as either a displayed or non-displayed limit order, as 
applicable.\12\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 89686 (August 26, 
2020), 85 FR 54438 (September 1, 2020) (SR-IEX-2019-15) (``D-Limit 
Approval Order'').
    \9\ See Securities Exchange Act Release No. 87814 (December 20, 
2019), 84 FR 71997, 71998 (December 30, 2019) (SR-IEX-2019-15) (``D-
Limit Proposal'').
    \10\ See IEX Rule 1.160(p).
    \11\ See IEX Rules 11.190(b)(7) and 11.190(g).
    \12\ See IEX Rule 11.190(b)(7).
---------------------------------------------------------------------------

Proposed D-Limit Fees
    As proposed, liquidity taking D-Limit orders will be subject to the 
same transaction fees as other displayed or non-displayed orders.\13\ 
However, in order to incentivize the entry of liquidity providing D-
Limit orders, IEX proposes to establish pricing incentives, including 
free executions of certain liquidity providing D-Limit orders and 
discounted execution fees for certain liquidity providing D-Peg and M-
Peg orders.
---------------------------------------------------------------------------

    \13\ Generally, IEX currently charges $.0003 per share for any 
displayed orders that execute (whether they add or remove liquidity) 
and $.0009 per share for any non-displayed orders that execute 
(whether they add or remove liquidity). If the shares execute for 
less than $1.00 per share, the Exchange charges 0.30% of the total 
dollar value of the transaction. See IEX Fee Schedule, https://iextrading.com/trading/fees/.
---------------------------------------------------------------------------

    Specifically, as proposed, any Member \14\ that enters a D-Limit 
order that provides liquidity, with the exception of executions of such 
orders at a price below $1.00 per share, will be entitled to free 
executions and certain reduced transaction fees (in lieu of the fees 
otherwise specified and unless a lower fee applies) \15\ as described 
below:
---------------------------------------------------------------------------

    \14\ See IEX Rule 1.160(s).
    \15\ See IEX Fee Schedule, https://iextrading.com/trading/fees/.

    <bullet> A D-Limit order that provides liquidity and is executed 
at a price at or above $1.00 per share results in a free execution.
    <bullet> D-Peg and M-Peg orders that provide liquidity and 
execute at a price at or above $1.00 per share will be subject to a 
discount of $0.0002 per share from the fee that would otherwise be 
charged for the number of shares of such orders executed up to the 
number of shares of D-Limit orders that provided liquidity and 
executed at a price at or above $1.00 per share during such time 
period by the same Member, measured on a monthly basis.
    <bullet> IEX will aggregate all of a Member's MPIDs to calculate 
each Member's D-Peg, M-Peg, and D-Limit liquidity providing orders 
on a monthly basis. In addition, a Member may request that the 
Exchange aggregate its activity with activity of such Member's 
affiliated Members. A Member requesting aggregation of affiliate 
activity is required to certify to the Exchange the affiliate status 
of Members whose activity it seeks to aggregate prior to receiving 
approval for aggregation and inform the Exchange immediately of any 
event that causes an entity to cease being an affiliate. The 
Exchange shall review available information regarding the entities 
and reserves the right to request additional information to verify 
the affiliate status of an entity.\16\ The Exchange shall approve a 
request unless it determines that the certification is not 
accurate.\17\
---------------------------------------------------------------------------

    \16\ For example, the Exchange would review a Member's Form BD 
in FINRA's Central Registration Depository (``CRD'') to verify that 
the Member(s) for which it seeks aggregation pursuant to the 
proposed rule is under 75% common ownership or control of the 
requesting Member.
    \17\ If two or more Members become affiliated on or prior to the 
sixteenth day of a month and submit the required request for 
aggregation on or prior to the twenty-second day of the month, an 
approval of the request by the Exchange shall be deemed to be 
effective as of the first day of that month. If two or more Members 
become affiliated after the sixteenth day of a month or submit a 
request for aggregation after the twenty-second day of the month, an 
approval of the request by the Exchange shall be deemed to be 
effective as of the first day of the next calendar month. For 
purposes of applying the fees and discounts proposed herein, 
references to Member shall include the Member and any of its 
affiliates that have been approved for aggregation, and the term 
``affiliate'' shall mean any Member under 75% common ownership or 
control of that Member.

    The proposed fees are designed to provide a narrowly tailored 
incentive for Members to utilize a new and innovative order type. IEX 
understands that Members seeking to utilize the new D-Limit order type 
may need to modify and test their trading strategies and order entry 
systems in order to do so, and the proposed fees are designed to 
provide a meaningful economic incentive for such efforts.
    IEX believes that offering free executions for specified D-Limit 
orders, as well as a discount for qualifying D-Peg and M-Peg orders, 
will provide a meaningful incentive to Members to adopt the use of D-
Limit orders. IEX operates in a highly competitive environment in which 
a large number of national securities exchanges and other venues offer 
markets for the execution of equities transactions, and in which market 
participants can readily direct order flow to other venues. 
Accordingly, IEX believes that it is important to provide meaningful 
incentives for the adoption of D-Limit orders to demonstrate the value 
of the order type in protecting against certain types of latency 
arbitrage and thereby result in increasing use of the order type.
    D-Peg and M-Peg order types are widely used and have achieved 
significant adoption by a diverse group of IEX Members. Consequently, 
IEX believes that combining free executions for certain liquidity 
providing D-Limit orders with discounted executions for certain 
liquidity providing D-Peg and M-Peg orders, as described above, will 
effectively augment the incentive value provision of free D-Limit 
liquidity providing executions for orders executed at or above $1.00.
    IEX believes that providing pricing incentives to liquidity 
providing orders will best incentivize the adoption of D-Limit orders. 
While a D-Limit order can take liquidity upon entry, IEX believes that 
its commercial success will be based on Members having favorable 
experiences as liquidity adders, particularly for displayed liquidity 
providing D-Limit orders. As the Commission noted in the D-Limit 
Approval Order:

    [E]xchange functionality that protects resting displayed orders 
against adverse selection resulting from latency arbitrage will 
improve the execution quality experienced by market participants 
that post displayed liquidity and are affected by such adverse 
selection. This improved execution quality could encourage more 
displayed liquidity, which in turn, would contribute to fair and 
orderly markets and support the public price discovery process. 
Specifically, if sufficiently protected against being ``picked off'' 
when the conditions for latency arbitrage are present, long term 
investors will no longer experience those relatively poor executions 
and thus will have less incentive to avoid posting displayed orders 
on exchanges.\18\
---------------------------------------------------------------------------

    \18\ See D-Limit Approval Order, supra note 8, 54443.

    IEX believes that targeting fee incentives to liquidity adders will 
enable Members to see for themselves the benefits of using the 
innovative D-Limit order type, while adding to the pool of displayed 
(as well as non-displayed) liquidity from which all market participants 
will benefit.
    Specifically, IEX believes that the proposed fees are a narrowly 
tailored approach that is designed to increase liquidity on IEX, which 
would benefit investors in securities traded on IEX. Specifically, to 
the extent Members post more displayed D-Limit orders on IEX, price 
discovery would be enhanced drawing more natural trading interest to 
the public markets, which would deepen liquidity and dampen the impact 
of shocks from liquidity demand. The Exchange notes that other 
exchanges offer a diverse range of fee-based incentives to their 
members for trading activity that they believe incentivizes liquidity 
adding orders, and thereby improves market quality.\19\
---------------------------------------------------------------------------

    \19\ Notably, several exchanges pay rebates to Members for 
liquidity adding orders, which means the exchanges actually pay 
Members to add liquidity. See, e.g., New York Stock Exchange Price 
List as of August 20, 2020 (offering free execution for liquidity 
adding orders, with rebates ranging from $0.0000 to $0.0030 per 
share executed), https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; and Nasdaq Equity 7 Pricing Schedule (offering 
free execution for liquidity adding orders, with rebates ranging 
from $0.00005 to $0.0033 per share executed). See https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7.

---------------------------------------------------------------------------

[[Page 63618]]

    Importantly, the Exchange is not proposing to offer a rebate, in 
that the proposed fee reduction will not be greater than the fee 
charged for executions on the Exchange. The Exchange will offer a 
discount to the fees charged for qualifying orders, but such discounts 
will not result in any net payments to Members for the execution of 
such orders. The proposed fees are designed to provide an alternative 
fee-based incentive to Members to utilize a new order type on IEX.
    Finally, IEX notes that the affiliate aggregation for purposes of 
applying D-Limit fees and discounts is similar to pricing structures in 
place at other exchanges. For example, the New York Stock Exchange, 
Inc. (``NYSE'') pricing rules provide that ``[f]or purposes of applying 
any provision of the Price List where the charge assessed, or credit 
provided, by the Exchange depends upon the volume of a member 
organization's activity, a member organization may request that the 
Exchange aggregate its eligible activity with the eligible activity of 
its affiliates.'' The NYSE Price List also includes provisions 
regarding aggregation requests, and the timing thereof, that are 
substantially similar to those proposed in this rule change. Nasdaq 
Stock Market (``Nasdaq'') pricing rules contain virtually identical 
provisions.\20\
---------------------------------------------------------------------------

    \20\ See NYSE's Price List, available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; see also Nasdaq 
Equities 7 Pricing Schedule, Section 127.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\21\ in general, and furthers the 
objectives of Section 6(b)(4) \22\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
fees among IEX members and persons using its facilities. Additionally, 
IEX believes that the proposed fees are consistent with the investor 
protection objectives of Section 6(b)(5) \23\ of the Act, in 
particular, in that they are designed to prevent fraudulent and 
manipulative acts and practices; to promote just and equitable 
principles of trade; to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities; to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest; and are not designed to permit unfair discrimination 
between customers, brokers, or dealers.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees are consistent with 
the Act because they would be available to all Members on a fair, equal 
and nondiscriminatory basis. All Members, regardless of their 
technological sophistication, can enter D-Limit liquidity providing 
orders priced to execute at or above $1.00.\24\ Similarly, all Members, 
regardless of their technological sophistication, can enter liquidity 
providing D-Peg and M-Peg orders priced to execute at or above $1.00. 
Thus, all Members are able to benefit from the proposed fees on a fair, 
equal and nondiscriminatory basis.
---------------------------------------------------------------------------

    \24\ See D-Limit Approval Order, supra note 8, 54450 (``Because 
IEX will reprice all D-Limit orders without further action from the 
user, all users will benefit equally regardless of their 
technological capabilities and ability to take action within a 
prescribed period.'')
---------------------------------------------------------------------------

    The proposed fees take a narrowly tailored approach, designed to 
maximize participation for the launch of D-Limit by incentivizing the 
entry of certain displayed and non-displayed liquidity adding D-Limit 
orders. As noted in the Purpose section, IEX understands that Members 
seeking to utilize the D-Limit order type may need to modify and test 
their trading strategies and order entry systems in order to do so, and 
the proposed fees are designed to provide a meaningful economic 
incentive for such efforts.
    As discussed in the Purpose section, IEX believes that the proposed 
fees are narrowly tailored to incentivize Members to enter liquidity 
providing D-Limit, D-Peg and M-Peg orders on IEX that execute at or 
above $1.00, which would have several benefits to investors in 
securities traded on IEX. First, to the extent Members post more 
displayed D-Limit orders on IEX, price discovery would be enhanced 
potentially drawing more natural trading interest to the public 
markets, which would deepen liquidity and dampen the impact of shocks 
from liquidity demand. Second, incentivizing the entry of both 
displayed and non-displayed liquidity adding orders should deepen the 
Exchange's liquidity pool and contribute to public price discovery, 
consistent with the goal of enhancing market quality. Third, to the 
extent that the proposed fees incentivize additional liquidity 
providing D-Peg and M-Peg orders that execute at the Midpoint Price 
\25\ and at or above $1.00, such orders will result in benefits to 
counterparties, offering price improvement over the prevailing national 
best bid and offer prices.\26\ Finally, to the extent price discovery 
is enhanced and more orders are drawn to the public markets, orders 
executed on IEX will have the benefit of exchange transparency, 
regulation, and oversight. These benefits would generally apply to all 
Members, even if a Member elects to not use the D-Limit order type.
---------------------------------------------------------------------------

    \25\ See IEX Rule 1.160(t).
    \26\ See IEX Rule 1.160(u).
---------------------------------------------------------------------------

    Additionally, IEX notes that it operates in an increasingly 
competitive and fragmented marketplace consisting of a large number of 
national securities exchanges and non-exchange venues that trade equity 
securities. As a relatively small market, IEX believes that meaningful 
pricing incentives are necessary to encourage market participants to 
utilize the new D-Limit order type and address the significant 
competitive challenges of attracting liquidity to the Exchange. While 
the Exchange believes that adding liquidity with a D-Limit order with 
less risk of adverse selection should provide an incentive for Members 
to use D-Limit, the Exchange also believes that offering Members the 
proposed fees will enhance such incentive.
    The Exchange notes that other exchanges offer a diverse range of 
pricing incentives to their members for providing certain order flow. 
For example, Cboe BZX Exchange, Inc. offers free executions for orders 
that participate in its new Cboe Market Close, which it describes as a 
``competitive pricing structure designed to incentivize market 
participants to direct their [Market-On-Close] orders to the Cboe 
Market Close, which the Exchange believes would facilitate the 
execution of those orders . . . .'' \27\ And several exchanges offer 
rebate tiers for liquidity adding orders, which increase in value as 
the member increases its volume of liquidity adding orders.\28\

[[Page 63619]]

Furthermore, several exchanges use ``cross-asset'' incentives, which 
offer pricing incentives to members that submit different order types 
to the exchange.\29\ Similarly, other exchanges have fee structures 
that use trading in one order type to incentivize trading either in 
another order type or more generally, as well as coupling requirements 
of displayed and non-displayed volume to qualify for preferential 
pricing, that are analogous to IEX's proposal to provide discounts to 
certain D-Peg and M-Peg executions to incentive the use of D-Limit 
orders.\30\ Additionally, other exchanges have fee structures that 
incentivize the posting of non-displayed liquidity adding orders, which 
is analogous to how the proposed fees incentivize non-displayed 
liquidity adding M-Peg and D-Peg orders, in addition to incentivizing 
liquidity adding D-Limit orders.\31\ Finally, maker-taker exchanges pay 
rebates to members that add liquidity,\32\ while taker-maker exchanges 
pay rebates to members that take liquidity, in each case to incentivize 
such order flow.\33\
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release No. 88487 (March 26, 
2020), 85 FR 18290 (April 1, 2020) (SR-CboeBZX-2020-027).
    \28\ See e.g., ``Nasdaq Growth Program,'' Nasdaq Equity 7 
Section 114 (paying a $0.0025 per share rebate to a member that adds 
a daily average of 750,000 or more shares and also increases its 
volume of shares traded on Nasdaq in prior months by 20%; and paying 
a larger $0.0027 per share rebate if that member increases its share 
of liquidity adding volume by at least 50% versus its August 2016 
share of liquidity adding volume); see also NYSE Arca Equities Fee 
Schedule, Retail Order Step-Up Tiers 1-3 (paying rebates ranging 
from $0.0035 to $0.0037 per share for retail orders that provide 
displayed liquidity with the rebates increasing as the member 
submits more retail orders (both adding and taking) in any given 
month when compared to a prior period).
    \29\ See, e.g., NYSE Arca Equities Fee Schedule, Cross-Asset 
Tiers 1-2 (paying rebates of $0.0031 per share and $0.0030 per 
share, respectively, for adding more than 0.30% of consolidated 
average daily volume concurrent with an affiliate meeting certain 
volume thresholds on the NYSE Arca Options exchange). See https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf. See also, Cboe BZX Exchange, Inc. 
Cross-Asset Tape B Tier (paying a rebate of $0.0031 per share for 
adding volume since February 2015 equal to or greater than 0.06% of 
total consolidated volume if the member also has an options market 
maker that added options customer volume equal to or greater than 
1.00%), available at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \30\ See Nasdaq Equities 7 Pricing Schedule, Section 118 
(providing lower fees or higher rebates/credits for specified levels 
of volume, either generally or through the use of a particular order 
type if coupled with specified volume in other specified order 
types, including several examples of rebates tied to adding 
displayed liquidity and non-displayed liquidity at specified levels 
of volume). For example, Nasdaq pays a rebate of $0.00295 per share 
for adding more than 0.70% of total consolidated volume (``TCV''), 
provided that at least 0.20% of the added TCV was done with midpoint 
and midpoint extended life orders, and the member also removed at 
least 1.10% of TCV). Similarly, Nasdaq pays a rebate of $0.0027 per 
share for displayed quotes/orders that provide liquidity if the 
member also takes and provides specified levels of consolidated 
volume and provides a daily average of at least 800,000 shares of 
non-displayed liquidity during the month in question; see also NYSE 
Arca Equities Fee Schedule, Limit Non-Displayed Order Step Up Tier 
(paying rebates ranging from $0.0004 to $0.0020 per share for 
meeting certain thresholds of adding limit non-displayed liquidity 
and adding midpoint (non-displayed) liquidity). Similarly, NYSE Arca 
pays rebates ranging from $0.0029 to $0.0031 per share for orders 
that meet certain thresholds for adding displayed liquidity, 
removing liquidity, and participating in the exchange's closing 
auctions, including additional rebates of between $0.0010 to $0.0020 
per share for adding liquidity with non-displayed midpoint orders.
    \31\ See Nasdaq Equities 7 Pricing Schedule, Section 118 
(providing rebates of between $0.0005 to $0.0075 per share for 
adding non-displayed liquidity at specified levels of volume, 
provided that some of the added non-displayed liquidity was done 
with various combinations of midpoint and midpoint extended life 
orders).
    \32\ See supra note 19.
    \33\ Cboe EDGA pays a $0.018 per share rebate for liquidity 
taking orders, see https://markets.cboe.com/us/equities/membership/fee_schedule/edga/; Cboe BYX pays a $0.005 per share rebate for 
liquidity taking orders, see https://markets.cboe.com/us/equities/membership/fee_schedule/byx/; and Nasdaq BX pays between $0.0000 and 
$0.0030 per share for liquidity taking orders, see Nasdaq BX Equity 
7, https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-equity-7.
---------------------------------------------------------------------------

    The proposed fees are designed to provide a simple, non-rebate 
incentive to market participants to enter certain liquidity providing 
D-Limit orders on IEX, through free executions and discounts on certain 
D-Peg and M-Peg orders.
    The Exchange further believes that the proposed fees are consistent 
with the Act's requirement that the Exchange provide for an equitable 
allocation of fees because all Members are eligible for incentive 
pricing on the same terms and conditions, and there are no restrictions 
on the use of impacted order types. Additionally, IEX believes that it 
is reasonable to incentivize Members to use certain D-Limit liquidity 
providing orders in view of the potential burdens on those Members that 
choose to adopt this new order type and the highly competitive market 
in which IEX operates, which provides myriad alternatives to Members. 
Furthermore, the Exchange believes that the proposed fees are an 
equitable allocation of fees because to the extent the incentive 
pricing results in increased liquidity on IEX, all market participants 
will benefit, irrespective of if the market participant is an IEX 
Member that submits certain liquidity adding D-Limit, D-Peg, and M-Peg 
orders. Accordingly, IEX believes that the proposed fees constitute an 
equitable allocation of fees.
    Moreover, the Exchange believes that the proposal to cap the 
$0.0002 discount on certain D-Peg and M-Peg orders executed by a Member 
(including any aggregated affiliates) at the number of D-Limit 
liquidity adding shares executed by that Member in the same month is 
reasonable, because the cap is designed to further incentivize Members 
to submit certain liquidity-adding D-Limit orders. Further, all Members 
will benefit from the discount in the same manner based on the number 
of qualifying D-Limit liquidity adding shares they execute.
    Finally, the Exchange believes that the proposed aggregation 
provision is consistent with the protection of investors and the public 
interest because it establishes a clear policy with respect to 
affiliate aggregation for fee purposes that is common among other 
exchanges, thereby promoting Members' understanding of the parameters 
of the D-Limit fee and discount structure and the efficiency of its 
administration. The proposed rule is equitable because all similarly 
situated members are subject to the proposed rules equally, and access 
to the Exchange is offered on fair and nondiscriminatory terms.
    All Members seeking to aggregate their activity are subject to the 
same reasonable parameters, in accordance with a standard that 
recognizes an affiliation as of the month's beginning, or close in time 
to when the affiliation occurs, provided the Member submits a timely 
request. Moreover, the proposed billing aggregation language is 
reasonable because it establishes a standard for implementation of 
aggregation requests that is easy to administer and that reflects the 
need for the Exchange to review and approve aggregation requests while 
avoiding the complexities associated with proration of the bills of 
Members that become affiliated during the course of a month. The 
Exchange believes that this approach will thus simplify the process of 
billing for the Exchange and its Members and is substantially similar 
to aggregation standards adopted by other exchanges.\34\
---------------------------------------------------------------------------

    \34\ See supra note 20.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule change avoids 
disparate treatment of Members that have divided their various business 
activities between separate legal entities as compared to Members that 
operate those business activities within a single legal entity. The 
Exchange further notes that the aggregation provisions are reasonable 
and designed to remove impediments to and perfect the mechanism of a 
free and open market by harmonizing with the rules across exchanges 
that govern the aggregation of certain activity for purposes of 
billing. In particular, as noted above, both Nasdaq and NYSE have 
substantially similar rules governing aggregation of activity for fee 
purposes.\35\ Thus, the Exchange believes the proposed change does not 
present any unique or novel issues under the Act that have not already 
been considered by the Commission.
---------------------------------------------------------------------------

    \35\ Id.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not

[[Page 63620]]

necessary or appropriate in furtherance of the purposes of the Act. To 
the contrary, IEX believes that the proposed fees would enhance 
competition and execution quality by increasing the Exchange's pool of 
both displayed and non-displayed liquidity, and to the extent that 
displayed liquidity increases, would contribute to the public price 
discovery process.
    The Exchange does not believe that the proposed fees will impose 
any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act since competing 
venues use various pricing structures to incentivize market 
participants to add liquidity to their markets, including but not 
limited to paying rebates to liquidity providers.\36\ The proposed fees 
are a means of providing such incentives without the use of rebates, as 
described in the Purpose and Statutory Basis sections. And, as noted in 
the Statutory Basis section, other exchanges have adopted similar 
pricing incentives for their current offerings. Moreover, subject to 
the SEC rule filing process, other exchanges could adopt a similar 
order type and fee incentive. Further, the Exchange operates in a 
highly competitive market in which market participants can easily 
direct their orders to competing venues, including off-exchange venues, 
if its fees are viewed as non-competitive.
---------------------------------------------------------------------------

    \36\ See supra note 19.
---------------------------------------------------------------------------

    The Exchange also does not believe that the proposed rule change 
will impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. While Members 
that add liquidity using certain D-Limit orders (as well as certain D-
Peg and M-Peg orders) will be subject to different fees based on this 
usage, those differences are not based on the type of Member entering 
orders but on whether the Member chose to submit certain liquidity 
providing D-Limit orders. As noted above, not only can any Member 
submit certain liquidity adding D-Limit orders, but every Member would 
benefit from the availability of more liquidity on the Exchange that 
the proposed fees are designed to incentivize

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \37\ of the Act.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \38\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188">[email protected]</span></a>. Please include 
File Number SR-IEX-2020-14 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-IEX-2020-14. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal offices of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-IEX-2020-14, and should be submitted on 
or before October 20, 2020.
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. R1-2020-21403 Filed 10-7-20; 8:45 am]
BILLING CODE 1301-00-D


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>