Document ID: SEC-2021-0606-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2021-05-03T04:00Z

[Federal Register Volume 86, Number 83 (Monday, May 3, 2021)]
[Notices]
[Pages 23471-23475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09133]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91691; File No. SR-IEX-2021-07]

Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Extend 
the Expiration Date of the Temporary Amendments Set Forth in SR-IEX-
2020-20

April 27, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on April 21, 2021, 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 and II below, which Items

[[Page 23472]]

have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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) of the Act \3\ and 
Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a proposed 
rule change to amend IEX Rule 2.160 (Registration Requirements and 
Restrictions on Membership), Supplementary Material .02 (Temporary 
Extension of the Limited Period for Registered Persons to Function as 
Principals) under paragraph (i) of the rule. The Exchange is proposing 
to extend the expiration date of the temporary amendment initially set 
forth in SR-IEX-2020-20 \5\ from April 30, 2021, to June 30, 2021. The 
proposed rule change would harmonize the IEX Rule with a Financial 
Industry Regulatory Authority, Inc. (``FINRA'') rule amendment that 
extended the 120-day period during which certain individuals can 
function as a principal without having successfully passed an 
appropriate qualifying examination, from April 30, 2021 through June 
30, 2021.\6\ IEX does not anticipate providing any further extensions 
to the temporary amendment identified in this proposed rule change 
beyond June 30, 2021.\7\
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ See Exchange Act Release No. 90752 (December 21, 2020), 85 
FR 85824 (December 21, 2020) (SR-IEX-2020-20).
    \6\ See Exchange Act Release No. 34-91506 (April 8, 2021), 86 FR 
19671 (April 14, 2021) (SR-FINRA-2021-005).
    \7\ If due to unforeseen circumstances a further extension is 
necessary, IEX will submit a separate rule filing to further extend 
the temporary amendment.
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    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 Exchange 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
    IEX Rule 2.160(i), Supplementary Material .01 provides, inter alia, 
that an IEX Member (``Member'') may designate any person currently 
registered, or who becomes registered with the Member as a 
representative to function as a principal for 120 calendar days prior 
to passing an appropriate principal qualification examination and that, 
in no event, may such person function as a principal beyond the initial 
120 calendar day period without having passed an appropriate principal 
qualifying examination.
    On December 15, 2020, the Exchange filed with the Commission, for 
immediate effectiveness, a proposed rule change to adopt Supplementary 
Material .02 (Temporary Extension of the Limited Period for Registered 
Persons to Function as Principals) under Rule 2.160(i).\8\ 
Supplementary Material .02 extended the 120-day period during which an 
individual designated by a Member to function as a principal could do 
so without having successfully passed the required qualifying 
examination. Specifically, the rule change provided that any individual 
designated by a Member as a principal prior to January 1, 2021 may 
continue to function as a principal without having passed an 
appropriate qualifying examination until April 30, 2021.
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    \8\ See supra note 5.
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    The Exchange is proposing to further extend the temporary relief 
provided in Supplementary Material .02. Under the proposed amendment, 
an individual designated to function as a principal prior to March 3, 
2021 may continue to function as a principal without having 
successfully passed an appropriate qualifying examination until June 
30, 2021. The proposed amendment will align IEX's rule with FINRA Rule 
1210, which was recently amended to provide the same temporary 
extension for individuals designated as principals due to the 
continuing impact of the COVID-19 pandemic.\9\ FINRA performs certain 
functions related to the qualification, registration and continuing 
education requirements for registered persons pursuant to a regulatory 
services agreement with the Exchange.
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    \9\ See supra note 6.
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    In response to the COVID-19 global pandemic, during 2020 FINRA 
began providing temporary relief to firms from FINRA rules and 
requirements via frequently asked questions (``FAQs'') on its 
website.\10\ Two of these FAQs \11\ provided temporary relief to 
address disruptions to the administration of FINRA qualification 
examinations caused by the pandemic that had significantly limited the 
ability of individuals to sit for these examinations due to Prometric 
test center capacity issues.\12\
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    \10\ See Frequently Asked Questions Related to Regulatory Relief 
Due to the Coronavirus Pandemic, available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq.
    \11\ See https://www.finra.org/rules-guidance/key-topics/covid-19/faq#qe.
    \12\ At the outset of the COVID-19 pandemic, all FINRA 
qualification examinations were administered at test centers 
operated by Prometric. Based on the health and welfare concerns 
resulting from COVID-19, in March 2020 Prometric closed all its test 
centers in the United States and Canada and began to slowly reopen 
some of them at limited capacity in May. Currently, Prometric has 
resumed testing in many of its United States and Canada test 
centers, at either full or limited occupancy, based on local and 
government mandates.
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    FINRA published the first FAQ on March 20, 2020, providing that 
individuals designated to function as principals under FINRA Rule 
1210.04 prior to February 2, 2020, would be given until May 31, 2020, 
to pass the appropriate principal qualification examination.\13\ FINRA 
revised the FAQ to extend the expiration of the temporary relief to 
pass the appropriate examination until June 30, 2020, and then until 
August 31, 2020.
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    \13\ FINRA Rule 1210.04 (Requirements for Registered Persons 
Functioning as Principals for a Limited Period) allows a member firm 
to designate certain individuals to function in a principal capacity 
for 120 calendar days before having to pass an appropriate principal 
qualification examination.
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    On August 28, 2020, FINRA filed with the Commission a proposed rule 
change for immediate effectiveness to extend the temporary relief 
provided via the two FAQs by adopting temporary Supplementary Material 
.12 (Temporary Extension of the Limited Period for Registered Persons 
to Function as Principals) under FINRA Rule 1210 (Registration 
Requirements).\14\ Pursuant to this rule filing, individuals who were 
designated prior to September 3, 2020, to function as a principal under 
FINRA Rule 1210.04 would have until December 31, 2020, to pass the 
appropriate qualification examination.
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    \14\ See Exchange Act Release No. 89732 (September 1, 2020), 85 
FR 55535 (September 8, 2020) (SR-FINRA-2020-026). FINRA's proposed 
rule changes also provided for a similar temporary extension of the 
limited period for persons to function as an Operations Professional 
under FINRA Rule 1220(b)(3)(B) to December 31, 2020, and later to 
April 30, 2021, to pass the appropriate qualification examination. 
IEX does not have Operations Professional as a registration 
category.
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    On December 9, 2020, FINRA filed with the Commission a proposed 
rule

[[Page 23473]]

change for immediate effectiveness to extend the limited period for 
registered persons to function as a principal through April 30, 
2021.\15\ IEX thereafter filed with the Commission its proposed rule 
change to adopt Temporary Supplementary Material .02, to provide the 
same relief extending the limited period for registered persons to 
function as a principal without successfully passing the appropriate 
qualifying examination through April 30, 2021.\16\
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    \15\ See Exchange Act Release No. 90617 (December 9, 2020), 85 
FR 81258 (December 15, 2020) (SR-FINRA-2020-043).
    \16\ See supra note 5.
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    The temporary relief was extended to address the interruptions in 
the administration of qualification examinations at Prometric test 
centers and the limited ability of individuals to sit for the 
examination as a result of the COVID-19 pandemic.\17\ It was noted that 
the pandemic could also result in firms potentially experiencing 
significant disruptions to their normal business operations that may be 
exacerbated if principal positions remained unfilled. Specifically, the 
limitation of in-person operations and staff absenteeism as a result of 
health and welfare concerns stemming from COVID-19 could result in 
firms having difficulty finding other qualified individuals to 
transition into the principal role or requiring them to reallocate 
employee time and resources away from other critical responsibilities 
at the firm.
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    \17\ Information about the continued impact of COVID-19 on 
FINRA-administered examinations is available at https://www.finra.org/rules-guidance/key-topics/covid-19/exams.
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    While there are signs of improvement, the COVID-19 conditions 
necessitating temporary relief persist, and the Exchange has determined 
that there is a continued need for this temporary relief beyond April 
30, 2021. Although Prometric has resumed testing in many of its U.S. 
test centers, Prometric's safety practices mean that currently not all 
test centers are open, some of the open test centers are at limited 
capacity, and some open test centers are delivering only certain 
examinations that have been deemed essential by the local 
government.\18\ In addition, while certain states have started to ease 
COVID-19 restrictions on businesses and social activities, public 
health officials continue to emphasize the importance for individuals 
to keep taking steps to protect themselves and help slow the spread of 
the disease.\19\
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    \18\ Information from Prometric about its safety practices and 
the impact of COVID-19 on its operations is available at https://www.prometric.com/corona-virus- update.
    \19\ See, e.g., Centers for Disease Control and Prevention, How 
to Protect Yourself & Others, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting- sick/prevention.html.
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    Although the COVID-19 conditions necessitating the temporary relief 
persist, the Exchange believes that an extension of the relief is 
necessary only until June 30, 2021, because of a recently expanded 
availability of online examinations. Prior to this expansion, the 
ongoing effects of the pandemic made it impracticable for IEX Members 
to ensure that the individuals designated to function in a principal 
capacity, as set forth in IEX Rule 2.160(i), could successfully sit for 
and pass the appropriate qualification examination within the 120-
calendar day period required under the rule. Specifically, if the 
individual wanted to take a qualifying examination, they were required 
to accept the health risks associated with taking an in-person 
examination because the examination was not available online. On 
February 24, 2021, however, FINRA adopted an interim accommodation 
request process to allow candidates to take additional FINRA 
examinations online, including the General Securities Principal 
(``Series 24'') examination.\20\ Because the Series 24 qualifying 
examination has been made available online only recently, the Exchange 
is concerned that individuals who have been designated to function in a 
principal capacity may not have sufficient time to schedule, study for, 
and take the applicable examination before April 30, 2021, the date the 
temporary amendment is set to expire. Therefore, the Exchange is 
proposing to extend the expiration date of the temporary amendment set 
forth in SR-IEX-2020-20 from April 30, 2021 to June 30, 2021. The 
proposed rule change would apply only to those individuals who have 
been designated to function as a principal prior to March 3, 2021. As 
noted above, the Exchange does not anticipate providing any further 
extensions to the temporary amendments and any individuals designated 
to function as a principal on or after March 3, 2021 will need to 
successfully pass an appropriate qualification examination within 120 
days.
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    \20\ See supra note 177.
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    The Exchange believes that this proposed continued extension of 
time is tailored to address the needs and constraints on Members' 
operations during the COVID-19 pandemic, without significantly 
compromising critical investor protection. The proposed extension of 
time will help to minimize the impact of COVID-19 on Members by 
providing continued flexibility so that they can ensure that principal 
positions remain filled. The potential risks from the proposed 
extension of the 120-day period are mitigated by the ongoing 
requirement that Members supervise the activities of these designated 
individuals and ensure compliance with federal securities laws and 
regulations, as well as IEX Rules.
    As noted in Item 1 of this filing, IEX has filed the proposed rule 
change for immediate effectiveness and has requested that the SEC waive 
the requirement that the proposed rule change not become operative for 
30 days after the date of the filing, so IEX can implement the proposed 
rule change immediately.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \21\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \22\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest by harmonizing the Exchange's registration rules with 
those of FINRA, on which they are based. Consequently, the proposed 
change will conform the Exchange's rules to changes made to 
corresponding FINRA rules, thus promoting the application of consistent 
regulatory standards with respect to rules that FINRA enforces pursuant 
to its regulatory services agreement with the Exchange.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    The Exchange further notes that the proposed rule change is 
intended to minimize the impact of COVID-19 on Members' operations by 
further extending the 120-day period during which individuals may 
function as a principal without having successfully passed the 
appropriate qualifying examination required under IEX Rule 2.160(i), 
Supplementary Material .01, until June 30, 2021. The proposed change 
does not relieve Members from maintaining, under the circumstances, a 
reasonably designed system to supervise the activities of their 
associated persons to achieve compliance with applicable securities 
laws and regulations, and with applicable IEX rules that directly serve 
investor protection. In a time

[[Page 23474]]

when faced with unique challenges resulting from the COVID-19 pandemic, 
IEX believes that the propose rule change is a sensible accommodation 
that will continue to afford Members the ability to ensure that 
critical principal positions are filled and customer services 
maintained, while continuing to serve and promote the protection of 
investors and the public interest in this unique environment.

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

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is 
intended solely to extend temporary relief necessitated by the 
continued impacts of the COVID-19 pandemic and the related health and 
safety risks of conducting in-person activities. IEX believes that the 
proposed rule change is necessary to temporarily rebalance the 
attendant benefits and costs of the obligations under IEX Rule 2.160 in 
response to the impacts of the COVID-19 pandemic that would otherwise 
result if the current temporary extension were to expire on April 30, 
2021.
    IEX further notes that the proposed rule change is not designed to 
address any competitive issue but to align the Exchange's rules with 
those of FINRA, which will assist FINRA in its oversight work done 
pursuant to a regulatory services agreement with IEX. The proposed rule 
change will also provide for consistent application of the Exchange's 
registration rules with those of FINRA, on which they are based. 
Consequently, the Exchange believes that the proposed temporary relief 
afforded by the proposed rule change and the benefit of harmonizing the 
Exchange's registration and qualification rules with those of FINRA 
does not present any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

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

    Written comments on the proposed rule change were neither solicited 
nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-
4(f)(6) thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. As noted 
above, the Exchange stated that the conditions necessitating the 
temporary relief continue to exist and the proposed extension of time 
will help minimize the impact of the COVID-19 outbreak on IEX Members' 
operations by allowing them to keep principal positions filled and 
minimizing disruptions to client services and other critical 
responsibilities. Despite signs of improvement, the Exchange further 
stated that the ongoing extenuating circumstances of the COVID-19 
pandemic make it impractical to ensure that individuals designated to 
act in a principal capacity are able to take and pass the appropriate 
qualification examination during the 120-calendar day period required 
under the rules.
    The Exchange observed that, following a nationwide closure of all 
test centers earlier in the year, some test centers have re-opened, but 
are operating at limited capacity or are only delivering certain 
examinations that have been deemed essential by the local 
government.\25\ However, on February 24, 2021, FINRA began providing 
the General Securities Principal (Series 24) Examination online through 
an interim accommodation request process.\26\ Prior to this change, if 
individuals wanted to take these qualifying examinations, they were 
required to accept the health risks associated with taking an in-person 
examination. Even with the expansion of online qualifications 
examinations, the Exchange stated that extending the expiration date of 
the relief set forth in SR-IEX-2020-20 until June 30, 2021 is still 
needed. The Exchange stated that this temporary relief will provide 
flexibility to allow individuals who have been designated to function 
as a principal sufficient time to schedule, study for and take the 
applicable examination before the temporary relief expires. Notably, 
the Exchange stated that it does not anticipate providing any further 
extensions to the temporary amendment and that any individuals 
designated to function as a principal on or after March 3, 2021 will 
need to successfully pass an appropriate qualification examination 
within 120 days.
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    \25\ See supra notes 17 and 18. The Exchange notes that 
Prometric has also had to close some reopened test centers due to 
incidents of COVID-19 cases.
    \26\ See supra note 17 (including the February 24, 2021 
announcement of the interim accommodation process for candidates to 
take certain examinations, including the General Securities 
Principal (Series 24) Examination, online.)
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    For these reasons, the Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest.\27\ Accordingly, the Commission hereby waives the 
30-day operative delay and designates the proposal operative upon 
filing.\28\
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    \27\ As noted above by the Exchange, this proposal is an 
extension of temporary relief provided in SR-IEX-2020-20 where the 
Exchange also requested and the Commission granted a waiver of the 
30-day operative delay. See SR-IEX-2020-20, 85 FR at 85826-27.
    \28\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or

[[Page 23475]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-IEX-2021-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-IEX-2021-07. 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 such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-IEX-2021-07 and should be submitted on 
or before May 24, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09133 Filed 4-30-21; 8:45 am]
BILLING CODE 8011-01-P