Document ID: SEC-2022-1519-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2022-11-22T05:00Z

[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Notices]
[Pages 71381-71384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25355]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96331; File No. SR-IEX-2022-09]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Pursuant to 
IEX Rule 15.110 To Amend IEX's Fee Schedule

November 16, 2022.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 7, 2022, the Investors Exchange LLC (``IEX'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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) under the Act,\4\ 
and Rule 19b-4 thereunder,\5\ the Exchange is filing with the 
Commission a proposed rule change to amend the fees applicable to 
Members \6\ (the ``Fee Schedule''), pursuant to IEX Rule 15.110(a) and 
(c). Changes to the Fee Schedule pursuant to this proposal are 
effective upon filing,\7\ and the Exchange plans to implement the 
changes on December 1, 2022.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ See IEX Rule 1.160(s).
    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 the 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule,\8\ pursuant to IEX 
Rule 15.110(a) and (c), to modestly increase: (i) the fees applicable 
to executions of and with non-displayed orders; (ii) the fees 
applicable to executions that remove displayed liquidity; (iii) and the 
fees applicable to the opening process for non-listed securities. The 
Exchange also proposes to reduce the fees for executions of securities 
priced below $1.00 per share and to make related and conforming 
changes.
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    \8\ See IEX Fee Schedule, available at https://exchange.iex.io/resources/trading/fee-schedule/.
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Non-Displayed Trading Fees
    The Exchange currently charges Members a standard fee of $0.0009 
per share for non-displayed transactions, both adding and removing 
liquidity, with an execution price greater than or equal to $1.00.\9\ 
IEX has not changed this fee for non-displayed adding and removing 
orders since it launched as an Exchange in 2016,\10\ although certain 
fee code combinations can result in a free execution for non-displayed 
adding and removing orders.\11\
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    \9\ See supra note 5 [sic].
    \10\ See Securities Exchange Act Release No. 78550 (August 11, 
2016), 81 FR 54873 (August 17, 2016) (SR-IEX-2016-09).
    \11\ Non-displayed Retail orders, Retail Liquidity Providing 
orders, and orders subject to the ``Internalization Fee'' (the 
Member executes against resting liquidity added by such Member) all 
execute for free. See IEX Fee Schedule.
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    IEX recently conducted an assessment of its non-displayed adding 
and removing fees, including an assessment of the fees charged by its 
competitors, and determined that charging $0.0009 to remove non-
displayed liquidity places IEX's fee well below the most inexpensive 
``maker-taker'' \12\ venues which range from $0.0026 to $0.0029.\13\

[[Page 71382]]

Similarly, IEX's fee for adding non-displayed liquidity places it well 
below the most inexpensive ``taker-maker'' \14\ venues, which range 
from $0.0024 to $0.0030.\15\ Additionally, IEX notes that several 
taker-maker exchanges also charge $0.0010 for orders that add non-
displayed midpoint liquidity.\16\
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    \12\ In a ``maker-taker'' model, an exchange will typically pay 
a rebate for an order that adds liquidity and charge a fee for an 
order that removes liquidity.
    \13\ See, e.g., MIAX Pearl Equities Fee Schedule (charging a 
standard fee of $0.0029 for orders that remove liquidity), https://www.miaxequities.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_09012022.pdf; NYSE Fee Schedule 
(charging a standard fee of at least $0.0026 for orders that remove 
non-displayed liquidity), https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf
    \14\ In a ``taker-maker'' model (also called an ``inverted'' 
exchange), an exchange will typically pay a rebate for an order that 
removes liquidity (or offer a free execution) and charge a fee for 
an order that adds liquidity.
    \15\ See, e.g., Cboe BYX Fee Schedule (charging a standard fee 
of $0.0024 to add non-displayed liquidity, https://www.cboe.com/us/equities/membership/fee_schedule/byx/; Cboe EDGA Fee Schedule 
(charging a standard fee of $0.0030 to add non-displayed liquidity), 
https://www.cboe.com/us/equities/membership/fee_schedule/edga/.
    \16\ This fee is charged by Cboe BYX and EDGA, see supra note 12 
[sic], and also Nasdaq BX, http://nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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    Therefore, IEX is proposing to modestly raise its non-displayed 
adding and removing fees for securities priced at or above $1.00 from 
$0.0009 to $0.0010, with no changes to non-displayed transactions that 
currently execute free of charge.\17\ These fee increases are designed 
to offset increased costs to operate the Exchange. IEX notes that in 
the past five years, the Exchange has not adopted transaction fee 
changes designed to increase overall fee revenue. During that time the 
costs of operating the Exchange, including the costs to subscribe to 
other exchanges' technology products, have increased considerably.
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    \17\ See supra note 8.
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Displayed Removing Fees
    Currently, orders that add displayed liquidity to the Exchange 
execute free of charge, while orders that remove displayed liquidity 
are charged $0.0006 (for orders priced greater than or equal to $1.00 
per share). IEX is not proposing to make any changes to the fees 
charged for adding displayed liquidity, but is proposing to increase 
the fee for removing displayed liquidity to $0.0009.
    IEX notes that its current fee for removing displayed liquidity is 
well below those charged by all the maker-taker exchanges (each of 
which charges a standard fee of $0.0030 for removing displayed 
liquidity \18\) and is even lower than the fees charged by one ``taker-
maker'' exchange, Nasdaq BX, which charges a standard fee of $0.0007 
for orders that remove liquidity.\19\
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    \18\ See, e.g., MIAX Pearl Equities Fee Schedule, https://www.miaxequities.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_09012022.pdf; NYSE Fee Schedule, 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; Nasdaq Fee Schedule, http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \19\ See Nasdaq BX, http://nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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    As with the proposed changes to the non-displayed trading fees, 
this modest proposed fee increase is designed to offset increased costs 
to operate the Exchange as described above.
Opening Process Fees
    IEX currently charges a fee of $0.0009 per share for executions 
equal to or greater than $1.00 per share in IEX's opening process for 
securities listed on other exchanges. Because this fee has been set at 
the same level as the non-displayed adding and removing fees, IEX is 
proposing to similarly increase the opening process fee to $0.0010. 
This modest proposed fee increase is also designed to offset increased 
costs to operate the Exchange as described above.
Sub-Dollar Execution Fees
    Currently, IEX charges .30% of the Total Dollar Value (``TDV'') for 
all executions below $1.00 per share, unless another fee code 
combination results in a free execution (e.g., a retail order that 
removes displayed liquidity). This can create a significant pricing 
disparity between taking orders for executions above and below $1.00. 
For example, in a 1,000-share execution at $1.01 the taker would pay a 
fee of $0.60, while a 1,000-share execution at $0.99 would pay a fee of 
$2.97 or approximately five times the fee for the $1.01 execution. IEX 
therefore believes it is fairer and more equitable to synchronize its 
sub-dollar transaction fees with its fees for executions above $1 per 
share.
    Thus, IEX proposes to reduce the non-displayed sub-dollar execution 
and opening process fees from 0.30% of TDV to 0.10% of TDV (more 
comparable to the new $0.0010 fee for non-displayed executions). 
Similarly, as proposed, any sub-dollar executed orders that add 
displayed liquidity would be charged no fee, while any sub-dollar 
executed orders that remove displayed liquidity would be charged a fee 
of 0.09% of TDV.
    IEX notes that its sub-dollar execution fees are currently higher 
than those charged by several other exchanges. For example, taker-maker 
exchange Cboe BYX charges 0.10% of TDV for transactions that remove 
liquidity,\20\ while taker-maker exchange Cboe EDGA and maker-taker 
exchange NYSE both charge no fee for sub-dollar executions that either 
add or remove liquidity.\21\
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    \20\ See Cboe BYX Fee Schedule, supra note 12 [sic].
    \21\ See Cboe EDGA Fee Schedule, supra note 12 [sic]; see also 
NYSE Fee Schedule, supra, note 10 [sic].
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Conforming Changes to the Fee Schedule
    As part of this fee change, IEX proposes to remove the bullet in 
the ``Transaction Fees'' section that states that ``Executions below 
$1.00 are assessed a fee of 0.30% of TDV unless the Fee Code 
Combination results in a FREE execution'' and add a new column to its 
``Fee Code Combinations and Associated Fees'' table to list the fees 
charged for sub-dollar executions, to reflect the proposed fee changes. 
In addition, IEX proposes to incorporate the existing fees for auctions 
in IEX listed securities into the new column.\22\
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    \22\ There are no IEX listed securities.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\23\ in general, and furthers the 
objectives of section 6(b)(4) \24\ 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 changes to the Fee Schedule are 
consistent with the investor protection objectives of section 6(b)(5) 
\25\ 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.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed changes to non-displayed 
order executions (and opening process executions) are reasonable, fair 
and equitable, non-discriminatory, and consistent with the Act. The 
Exchange operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive. Within that 
context, charging $0.0010 per share (or 0.10% of TDV for sub-dollar 
executions) for orders that add or remove non-displayed liquidity, as 
well

[[Page 71383]]

as opening process orders, is designed to set IEX's non-displayed 
pricing squarely within the fees charged by maker-taker exchanges to 
remove liquidity and taker-maker exchanges to add liquidity. Keeping 
IEX's prices competitive with those of other markets is designed to 
incentivize more market participants to trade on IEX and avail 
themselves of IEX's deep pool of non-displayed liquidity, which is 
consistent with the overall goal of enhancing market quality.
    The Exchange also believes that the proposed changes to executions 
that remove displayed liquidity are reasonable, fair and equitable, 
non-discriminatory, and consistent with the Act. As noted above, the 
Exchange operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive. Within that 
context, charging $0.0009 per share (or .09% of TDV for sub-dollar 
executions) for orders that remove displayed liquidity (coupled with 
continuing to offer free executions for orders that add displayed 
liquidity) is designed to keep IEX's displayed trading prices 
competitive with those of other exchanges. IEX believes that such 
competitive prices should incentivize Members and other market 
participants to enter displayed orders on IEX by providing a pricing 
incentive for such orders without offering rebates, thereby 
contributing to price discovery and price formation, which is 
consistent with the overall goal of enhancing market quality.
    Other exchanges use ``maker-taker'' or ``taker-maker'' fee 
structures that apply different fees to orders that add versus remove 
liquidity, generally providing a rebate rather than charging a fee to 
adding or removing orders. In a ``maker-taker'' model an exchange will 
typically pay a rebate for an order that adds liquidity and charge a 
fee for an order that removes liquidity. The Exchange is not proposing 
to pay a rebate, but as proposed the fee to remove displayed liquidity 
will still be lower than the fee to add or remove non-displayed 
liquidity and will be within the range (and in many cases much less 
than) the fees charged by competing exchanges to remove displayed or 
non-displayed liquidity.\26\ Consequently, IEX does not believe that 
the proposed fee structure for adding or remove non-displayed 
liquidity, or for removing displayed liquidity, raises any new or novel 
issues that the Commission has not already considered in the context of 
other exchanges' fees. The Exchange believes that this fee structure 
will attract and incentivize displayed order flow as well as order flow 
seeking to trade with displayed order flow. Additionally, increases in 
displayed liquidity would contribute to the public price discovery 
process which would benefit all market participants and protect 
investors and the public interest.
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    \26\ See Cboe BZX Fee Schedule (charging $0.0030 per share for 
any liquidity removing transactions), available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; MIAX 
Pearl Equities Free Schedule (charging $0.0030 per share for any 
liquidity removing executions), available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Equities_Fee_Schedule_01292021.pdf; MEMX Fee Schedule 
(charging $0.0026 per share for any liquidity removing executions), 
available at https://info.memxtrading.com/fee-schedule/; Nasdaq 
Equity 7 Section 118(a) (charging $0.0030 per share for any 
liquidity removing executions), available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7; NYSE 
Fee Schedule (charging $0.00275 per share for any liquidity removing 
executions), available at https://www.nyse.com/markets/nyse/trading-info/fees.
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    The Exchange also believes that it is reasonable to decrease the 
fees it charges for sub-dollar executions to synchronize those fees 
with the fees charged for executions at or above $1.00. These fees will 
result in lower transaction costs for sub-dollar executions at IEX, 
including for the first time allowing sub-dollar executions that add 
liquidity to execute free of charge.
    The Exchange further believes that the proposed fee change is 
consistent with the Act's requirement that the Exchange provide for an 
equitable allocation of fees that is also not unfairly discriminatory. 
As proposed, the fees for adding and removing displayed and non-
displayed liquidity will apply in an equal and nondiscriminatory manner 
to all Members. All Members are eligible to enter displayed or non-
displayed orders and orders to remove displayed or non-displayed 
orders. Moreover, to the extent the proposed change is successful in 
incentivizing the entry and execution of displayed orders on IEX, such 
greater liquidity will benefit all market participants by increasing 
price discovery and price formation as well as market quality and 
execution opportunities.
    In addition, the Exchange believes that it is reasonable to add a 
new column to the Fee Code Combinations and Associated Fees table to 
reflect the proposed fee changes and to provide information to Members 
on the relevant charges, including indicating how sub-dollar pricing 
will apply to all possible fee code combinations. This addition to the 
Fee Schedule will provide additional clarity for Members on transaction 
fees, consistent with the objectives of section 6(b)(1) \27\ of the 
Act. The revisions are designed to reflect the fee changes, and also to 
provide enhanced clarity to the applicable Fee Code Combinations and 
Associated Fees, so the Exchange does not believe that adding such 
information raises any new or novel issues not already considered by 
the Commission. Accordingly, the Exchange believes that it is 
reasonable to revise the Fee Code Combinations as proposed in order to 
reflect the applicable fees.
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    \27\ 15 U.S.C. 78f(b)(1).
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    Further, the Exchange believes that it is reasonable to make a 
conforming change to delete the provision in the Fee Schedule 
specifying that all sub-dollar executions are assessed a fee of 0.30% 
of TDV unless the Fee Code Combination results in a free execution. As 
discussed in the Purpose section, this language is no longer accurate 
because sub-dollar execution fees will now be synchronized with the 
fees charged for executions at or above $1.00, and deletion will avoid 
any unnecessary confusion as to the applicable fees.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe 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. 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. Moreover, IEX notes that the proposed fees are 
designed to enhance competition by incentivizing the entry of liquidity 
on IEX and thereby increasing the Exchange's pool of both displayed and 
non-displayed liquidity to the benefit of all market participants. 
Further, subject to the SEC rule filing process, other exchanges could 
adopt similar fees.
    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 remove displayed liquidity or add or remove non-displayed 
liquidity will be subject to different fees based on this usage, those 
differences are not based on the type of Member entering orders but

[[Page 71384]]

on whether the Member chose to submit displayed or non-displayed 
liquidity providing orders. Every Member would benefit from the 
availability of more liquidity on the Exchange that the proposed fees 
are designed to incentivize. The related and conforming changes are 
designed, as discussed in the Purpose and Statutory Basis sections, to 
provide additional clarity and remove superfluous provisions. 
Accordingly, the Exchange does not believe that these changes will have 
any impact 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 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) \28\ of the Act.
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    \28\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 under 
section 19(b)(2)(B) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-IEX-2022-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-IEX-2022-09. This file 
number should be included in 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 Section, 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 will also be available for inspection 
and copying at the IEX's principal office. 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-2022-09 and should be submitted on or before December 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25355 Filed 11-21-22; 8:45 am]
BILLING CODE 8011-01-P