Document ID: SEC-2016-1459-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange LLC
Posted Date: 2016-08-17T04:00Z

[Federal Register Volume 81, Number 159 (Wednesday, August 17, 2016)]
[Notices]
[Pages 54873-54877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19581]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78550; File No. SR-IEX-2016-09]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Transaction and Regulatory Fees

August 11, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on August 5, 2016, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the 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 Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ 
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change to (i) adopt transaction fees applicable to Members \6\ of the 
Exchange pursuant to IEX Rule 15.110(a) and (c) (``Fee Schedule''), and 
(ii) adopt regulatory fees related to the Central Registration 
Depository (``CRD system''), which will be collected by the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') pursuant to IEX Rule 
15.110(a). The Exchange proposes to implement the rule change effective 
with its exchange launch. The text of the proposed rule change is 
available at the Exchange's Web site at www.iextrading.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CRF [sic] 240.19b-4.
    \6\ See, IEX Rule 1.160(s).
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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 statement [sic] 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
Transaction Fees
    The Exchange proposes to implement a fee schedule applicable to use 
of the Exchange commencing on the date it begins operating as a 
national securities exchange. The Exchange currently intends to 
commence operations as a national securities exchange on or about 
August 19, 2016. IEX proposes to implement the Fee Schedule described 
herein, which will be applicable to transactions executed in all 
trading sessions, effective with its exchange launch.
(A) Displayed Match Fee
    The Exchange does not propose to charge any fee to Members for 
executions on IEX that include resting interest with displayed priority 
(i.e., an order or portion of a reserve order that is booked and ranked 
with display priority on the Order Book either as the IEX best bid or 
best offer (``BBO'') or at a worse price on the Order Book) for both 
the liquidity adding and liquidity removing order.\7\
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    \7\ This pricing is referred to by the Exchange as ``Displayed 
Match Fee'' on the proposed Fee Schedule with a Fee Code of `L' to 
be provided by the Exchange on execution reports.
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(B) Non-Displayed Match Fee
    The Exchange proposes to charge $0.0009 per share (or 0.30% of the 
total dollar value of the transaction for securities priced below 
$1.00) to Members for executions on IEX that include resting interest 
with non-displayed priority (i.e., an order or portion of a reserve 
order that is booked and ranked with non-display priority on the Order 
Book either at the NBBO midpoint or at a worse price on the Order Book) 
for both the liquidity adding and liquidity removing order,\8\ with the 
exception of executions on the Exchange where the adding and removing 
order originated from the same Exchange Member and displayable orders 
removing non-displayed liquidity upon entry, each as described below.
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    \8\ This pricing is referred to by the Exchange as ``Non-
Displayed Match Fee'' on the proposed Fee Schedule with a Fee Code 
of `I' to be provided by the Exchange on execution reports.
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    Notwithstanding the foregoing, the Exchange does not propose to 
charge any fee to Members for executions on IEX that involve taking 
resting interest with non-displayed priority where (a) the liquidity 
removing order was displayable (i.e., the order would have booked and 
displayed if posted to the Order Book) and (b) on a monthly basis, at 
least 90% of the liquidity removing Member's aggregate executions of 
displayable orders added liquidity during such calendar month. However, 
in such transactions, the non-displayed liquidity adding interest will 
be subject to the Non-Displayed Match Fee described above.
(C) Internalization Fee
    The Exchange does not propose to charge any fee to Members for 
executions on IEX when the adding and removing order originated from 
the same Exchange Member.\9\ Orders from different market participant 
identifiers of the same broker dealer, with the same Central 
Registration Depository registration number, would be treated as 
originating from the same Exchange Member.
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    \9\ This pricing is referred to by the Exchange as 
``Internalization Fee'' on the proposed Fee Schedule with a Fee Code 
of `S' to be provided by the Exchange on execution reports.
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(D) Routing Charges
    The Exchange proposes to pass the fee or rebate from an away 
trading center to the Member and charge a fee of $0.0001 per share for 
all routing options offered by the Exchange. All charges for routing 
are applicable only in the event that an

[[Page 54874]]

order is executed on an away trading center.\10\
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    \10\ The Exchange will provide the Fee Code from away market 
centers on execution reports of routed transactions. In the proposed 
Fee Schedule, the Fee Code of ``Alpha'' is used to indicate this 
behavior.
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(E) Other Fees
    The Exchange does not propose to charge fees for membership, 
connectivity port fees, or market data.
Regulatory Fees
    IEX is proposing to adopt certain regulatory fees under Rule 
15.110(a) related to the CRD system, which are collected by FINRA.\11\ 
As proposed, FINRA will collect and retain certain regulatory fees via 
the CRD system for the registration of persons associated with an 
Exchange Members [sic] that are not also FINRA members. The CRD system 
fees are use-based and there is no distinction in the cost incurred by 
FINRA if the user is a FINRA member or a member of an exchange but not 
a FINRA member. Accordingly, IEX is proposing to adopt the fees under 
IEX Rule 15.110(a) to mirror those assessed by FINRA pursuant to 
Section (4) of Schedule A to the FINRA By-Laws. As proposed, the fees 
are as follows: \12\
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    \11\ The CRD system is the central licensing and registration 
system for the U.S. securities industry. The CRD system enables 
individuals and firms seeking registration with multiple states and 
self-regulatory organizations to do so by submitting a single form, 
fingerprint card and a combined payment of fees to FINRA. Through 
the CRD system, FINRA maintains the qualification, employment and 
disciplinary histories of registered associated persons of broker 
dealers.
    \12\ The Exchange has only adopted the CRD system fees charged 
by FINRA to Non-FINRA Members when such fees are applicable. In this 
regard, certain FINRA CRD system fees and requirements are specific 
to FINRA members, but do not apply to IEX Members that are not also 
FINRA members. IEX Members that are also FINRA members are charged 
CRD system fees according to Section (4) of Schedule A to the FINRA 
By-Laws.

    (1) $100 for each initial Form U4 filed for the registration of 
a representative or principal;
    (2) $110 for the additional processing of each initial or 
amended Form U4, Form U5 or Form BD that includes the initial 
reporting, amendment, or certification of one or more disclosure 
events or proceedings;
    (3) $45 annual for each of the Member's registered 
representatives and principals for system processing;
    (4) $15 for processing and posting to the CRD system each set of 
fingerprint cards submitted electronically by the Member, plus a 
pass-through of any other charge imposed by the United States 
Department of Justice for processing each set of fingerprints;
    (5) $30 for processing and posting to the CRD system each set of 
fingerprint cards submitted in non-electronic format by the Member, 
plus a pass-through of any other charge imposed by the United States 
Department of Justice for processing each set of fingerprints; and
    (6) $30 for processing and posting to the CRD system each set of 
fingerprint results and identifying information that has been 
processed through a self-regulatory organization other than FINRA.

2. Statutory Basis
Transaction Fees
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \13\ of the Act in general, and furthers the 
objectives of Sections [sic] 6(b)(4) \14\ of the Act, in particular, in 
that it is designed to provide for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities. Additionally, IEX believes that the 
proposed fees are consistent with the investor protection objectives of 
Section 6(b)(5) \15\ of the Act in particular in that they are designed 
to promote just and equitable principles of trade, to remove 
impediments to a free and open market and national market system, and 
in general to protect investors and the public interest.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(5).
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    The proposed Fee Schedule set forth herein is designed to minimize 
incentives for trading and order routing decisions based solely on 
rebates that could create conflicts of interest by skewing economic 
incentives related to such decisions. In addition, by not offering 
rebates, IEX has simplified its order type offering to avoid order 
types designed to assure receipt of a rebate.\16\ By contrast, as 
proposed, IEX will charge relatively low fees for all executed shares, 
and which will be significantly lower than many other exchange fees 
charged for removing (or taking) liquidity.\17\ Moreover, IEX believes 
that adders of liquidity can be incentivized to rest shares by offering 
a market model and order types designed to protect their interests as 
opposed to the payment of a rebate.
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    \16\ In an address on equity market structure on June 5, 2014, 
Chair Mary Jo White called upon the exchanges to conduct a 
comprehensive review of their order types and how they operate, as 
well as to ``consider appropriate rule changes to help clarify the 
nature of their order types and how they interact with each other, 
and how they support fair, orderly, and efficient markets.'' (See, 
speech by Chair Mary Jo White at Sandler O'Neill & Partners, L.P. 
Global Exchange and Brokerage Conference, New York, N.Y., available 
at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312)
    \17\ For example, the New York Stock Exchange trading fee 
schedule on its public Web site reflects fees to ``take'' liquidity 
ranging from $0.0024-$0.00275 depending on the type of market 
participant, order and execution (See, https://www.nyse.com/markets/nyse/trading-info/fees). The Nasdaq Stock Market (``Nasdaq'') 
trading fee schedule on its public Web site reflects fees to 
``remove'' liquidity ranging from $0.0030 per share for shares 
executed at or above $1.00 or 0.30% of total dollar volume for 
shares executed below $1.00 (See, http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2). BATS BZX Exchange (``BZX) trading 
fee schedule on its public Web site reflects fees for ``removing'' 
liquidity ranging from $0.0030 for shares executed at or above $1.00 
or 0.30% of total dollar volume for shares executed below $1.00, 
subject to certain limited exceptions for orders trading in the 
opening, IPO or halt auctions BZX listed securities (See, https://www.batstrading.com/support/fee_schedule/bzx/).
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    IEX believes that it is appropriate, reasonable and consistent with 
the Act, to charge the $0.0009 per share Non-Displayed Match Fee, 
because it is within the transaction fee range charged by other 
exchanges.\18\ IEX also believes that it is appropriate, reasonable and 
consistent with the Act, not to charge a fee for transactions that 
include execution of an order with displayed priority on the Order 
Book. This fee structure is designed to incentivize Members to send IEX 
aggressively priced displayable orders, thereby contributing to price 
discovery and consistent with the overall goal of enhancing market 
quality. IEX believes that not charging a fee for both the liquidity 
adder and remover is equitable and not unfairly discriminatory because 
it is designed to facilitate execution of, and enhance trading 
opportunities for, displayable orders, thereby further incentivizing 
entry of displayed orders.
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    \18\ Id.
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    In addition, the Exchange believes that it is appropriate, and 
consistent with the Act, to not charge a fee to Members with respect to 
displayable orders that remove non-displayed liquidity upon entry so 
long as at least 90% of the Member's aggregate executed shares of 
displayable orders added liquidity during the month in question. This 
flexibility is designed to address limited inadvertent liquidity 
removal for Exchange Members who are largely adding displayed 
liquidity. Under these circumstances, the Member generally intends to 
add displayed liquidity on IEX, and the Exchange therefore believes 
that it is appropriate to provide a fee incentive to such order, 
subject to the 90% limitation described herein, to further encourage 
aggressively priced displayed orders. The Exchange also believes that 
it is appropriate, reasonable and consistent with the Act, to charge 
the $0.0009 per share Non-Displayed Match Fee to Members for the 
resting, non-displayed order that matches with the displayable order 
under such circumstances because the reduced fee for Members entering 
displayable orders removing non-displayed liquidity is a narrowly drawn 
incentive to address unintended

[[Page 54875]]

consequences. Accordingly, the Exchange believes that it is appropriate 
to charge the $0.0009 per share Non-Displayed Match Fee for such 
orders. The Exchange also notes that most other national securities 
exchanges charge different fees to members for adding and removing 
liquidity, and that this aspect of IEX's proposed Fee Schedule does not 
raise any new or novel issues that have not previously been considered 
by the Commission in connection with the fees of other national 
securities exchanges.\19\
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    \19\ See, for example https://www.nyse.com/markets/nyse/trading-info/fees, http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2, 
and https://www.batstrading.com/support/fee_schedule/bzx/).
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    With respect to internalized trades, the proposal to charge no fee 
is designed to incentivize Members (and their customers) to send orders 
to IEX that may otherwise be internalized off exchange. As broker 
operated ATSs and internalization mechanisms have proliferated to 
account for nearly 40% of trading volume,\20\ natural investor trading 
interest has become increasingly dispersed across these venues, while 
the overall trading volume on regulated exchanges has declined.\21\ IEX 
believes that one of the factors driving broker decisions to trade away 
from regulated exchanges has been exchange access fees. Accordingly, 
this fee structure is designed with the goal to increase resultant 
order interaction on IEX. In this regard, IEX believes that increased 
liquidity on IEX would have several benefits to investors in securities 
traded on IEX. First, it would increase opportunities for investors' 
orders to interact directly, thereby concurrently reducing the need for 
unnecessary intermediation and the associated implicit costs, including 
potential information leakage and gaming. Second, to the extent 
Exchange Members post more displayed 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. Third, orders executed on IEX rather than being 
internalized on broker-operated platforms, will have the benefit of 
exchange transparency, regulation, and oversight. Additionally, because 
IEX prices orders based on direct market data feeds of protected 
markets,\22\ the quality of executions on IEX may be enhanced compared 
to orders that are internalized on certain broker-operated platforms 
that price orders based on SIP market data feeds.
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    \20\ See, for example, BATS Market Volume Summary for June 14, 
2016 available at http://batstrading.com/market_summary/.
    \21\ See, for example a speech by former Commissioner Luis A. 
Aguilar on May 11, 2015 entitled ``U.S. Equity Market Structure: 
Making Our Markets Work Better for Investors'' (available at http://www.sec.gov/news/statement/us-equity-market-structure.html#_ednref1), and speech by Commission Chair Mary Jo 
White on June 5, 2014 entitled ``Enhancing our Equity Market 
Structure'' (available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312#_ednref17).
    \22\ See IEX Rule 11.410(a)(2)-(4), which describes IEX's use of 
proprietary market data feeds and those of the Securities 
Information Processors.
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    It is important to note that orders entered by the same broker 
(that by their terms could be executable against each other) are not 
guaranteed to be matched against each other, and each order is 
individually at market risk for execution against contra-side orders 
from other Members. Moreover, Members sending orders eligible for this 
fee structure are subject to all existing IEX and FINRA rules 
applicable to customer orders, including without limitation those 
pertaining to wash sales, best execution, and customer priority. (See 
for example, Chapter 10 of the IEX Rules and FINRA Rules 5210, 5310 and 
5320).
    Moreover, IEX believes that there are precedents for exchanges to 
charge fees that distinguish between different types of members to 
incentivize certain types of members. These fee structures may 
discriminate in favor of certain types of members but not in an 
unfairly discriminatory manner in violation of the Act. In this regard, 
most other exchanges offer reduced fees to members that reach certain 
volume based tiers. Such fee structures, while nominally available to 
all members, are targeted to incentivize larger members with enough 
volume to reach the volume-based tiers. For example, the NYSE fee 
schedule provides rebates of up to $0.0022 per share for members 
generally that provide greater than 1.10% of consolidated average 
trading volume compared to no rebate for firms that do not reach 
specified volume tiers. And NYSE floor brokers, which have no unique 
obligations to the market, receive higher rebates at certain volume 
levels, as well as lower take fees, compared to NYSE member firms 
generally.\23\
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    \23\ See, https://www.nyse.com/markets/nyse/trading-info/fees.
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    Similarly, the IEX fee structure is designed to incentivize Members 
to send orders to a regulated exchange and enable IEX to compete more 
effectively with internalizers and dark pools that provide internalized 
matching. Notwithstanding that IEX will not pay for order flow, the 
Exchange believes that some Members may nonetheless choose to direct 
order flow to IEX as a regulated exchange in order to benefit from 
real-time reporting and regulatory oversight, and that not charging a 
fee will help IEX to compete for such order flow. The Exchange does not 
believe that this fee incentive is unfairly discriminatory because it 
is available to any IEX Member, consistent with applicable FINRA and 
IEX rules, and potentially benefits all members because the fee 
incentive may result in increased order flow and liquidity in IEX. As 
noted above, internalization on IEX is not guaranteed, and the 
additional order flow that does not internalize is available to trade 
by all Members, and would enhance price discovery if such order flow 
results in more displayed orders.
    Trading on the IEX alternative trading system (``ATS'') directly 
supports the Exchange's contention that the proposed pricing structure 
will provide benefits to Members generally and is not unfairly 
discriminatory. IEX has offered comparable pricing on its ATS. Between 
January 1, 2016 and June 30, 2016, internalized transactions occurred 
across 66 of 145 ATS subscribers with a range of business models (e.g., 
full service, agency, and retail broker-dealers).\24\ During the period 
January 1, 2016 through June 30, 2016, approximately 454 million shares 
internalized on the IEX ATS. For those transactions on the IEX ATS that 
included self-matched volume, the liquidity removing orders also 
executed against approximately 63 million resting shares of other 
subscribers.\25\ Thus, IEX does not believe that the internalization 
fee incentive has had an unfairly discriminatory impact in practice, 
since internalized transactions occurred across a large number of 
different types of subscribers, providing collateral liquidity benefits 
to other subscribers.
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    \24\ Between January 1, 2016 and June 30, 2016, only 2.97 
percent of overall subscribers' volume was from internalized 
transactions.
    \25\ During the same period, there were also approximately 578 
million unexecuted shares from the incoming orders that self-
matched.
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    Additionally, the Exchange believes that its proposed fee codes, to 
be provided on execution and routing reports, will provide transparency 
and predictability to Members as to applicable transaction fees. In 
this regard, IEX notes that Members will be able to maintain a tally of 
executions of displayable orders eligible for no fee for taking non-
displayed liquidity by calculating, on a monthly basis, whether the 
proportion of their executed displayable orders that added liquidity is 
90% or more of their total monthly volume of executed displayable 
orders. Using IEX execution reports, Members

[[Page 54876]]

can calculate whether the sum of executions with Fee Code L and a Last 
Liquidity Indicator (FIX tag 851) of `1' (Added Liquidity), divided by 
the sum of executions with Fee Code L is at least 90%.
    In summary, IEX believes that the proposed fee structure for 
internalized transactions is reasonable, fair and equitable, and not an 
unfairly discriminatory allocation of fees because it will provide all 
Members with incentives not to avoid sending orders to IEX that will 
contribute to enhanced liquidity and price discovery on a regulated 
exchange. While not all Members necessarily will have the ability to 
directly benefit from the proposed fee structure for internalized 
transactions, as noted above internalization is not guaranteed so IEX 
believes that Members generally may indirectly benefit from an increase 
in order flow that does not internalize on IEX, as has been the case on 
the ATS.
    With respect to orders routed to other exchanges, the proposal to 
pass through fees charged by such other away trading centers for 
executed shares plus charge a fee of $0.0001 payable to IEX is a 
reasonable, fair and equitable, and not an unfairly discriminatory 
allocation of fees because the fee is applicable to all Members in an 
equivalent manner. The $0.0001 fee payable to IEX is not inconsistent 
with the fees charged by other exchanges for routed orders, since many 
of their routing fees are variable based on the fees and rebates 
charged by such other venues.\26\ Accordingly, the IEX proposed 
approach raises no new or novel issues.
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    \26\ See, for example, Nasdaq Stock Market Rule 7018(a)(1).
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    As described more fully below in the Exchange's statement regarding 
the burden on competition, the Exchange believes that it is subject to 
significant competitive forces, and that its proposed fee structure is 
an appropriate effort to address such forces.
    IEX also believes that not charging a fee for membership, 
connectivity or market data is reasonable because it may incentivize 
broker-dealers to become members of the Exchange and to therefore 
direct order flow to IEX. As a new exchange, IEX will operate in a 
highly competitive environment, and not charging fees for such services 
and access is designed to enable it to compete effectively.
    In conclusion, the Exchange also submits that its proposed fee 
structure satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act for the reasons discussed above in that it does not permit 
unfair discrimination between customers, issuers, brokers, or dealers, 
and is designed 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. For the foregoing reasons, the 
Exchange believes that its simplified fee structure is consistent with 
the Act, in that it is designed to promote just and equitable 
principles of trade, to remove impediments to a free and open market 
and national market system and in general to protect investors and the 
public interest.
Regulatory Fees
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \27\ of the Act in general, and furthers the 
objectives of Section 6(b)(4) \28\ of the Act, in particular, in that 
it provides for the equitable allocation of reasonable fees and other 
charges among its members, and does not unfairly discriminate between 
customers, issuers, brokers and dealers. All similarly situated Members 
are subject to the same fee structure, and every Member firm must use 
the CRD system for registration and disclosure.
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    \27\ 15 U.S.C. 78f.
    \28\ 15 U.S.C. 78f(b)(4).
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    The proposed fees are reasonable because they are identical to 
those adopted by FINRA for use of the CRD system for disclosure and the 
registration of associated persons of FINRA members.\29\ As FINRA noted 
in its filing adopting its existing fees, it believes the fees are 
reasonable based on the increased costs associated with operating and 
maintaining the CRD system, and listed a number of enhancements made to 
the CRD system since the last fee increase, including: (1) 
Incorporation of various uniform registration form changes; (2) 
electronic fingerprint processing; (3) Web EFTTM, which 
allows subscribing firms to submit batch filings to the CRD system; (4) 
increases in the number and types of reports available through the CRD 
system; and (5) significant changes to BrokerCheck, including making 
BrokerCheck easier to use and expanding the amount of information made 
available through the system.\30\ These increased costs are similarly 
borne by FINRA when a member of IEX that is not a member of FINRA uses 
the CRD system, so the fees collected for such use should mirror the 
fees assessed on FINRA members, as is proposed by IEX. FINRA further 
noted its belief that the proposed fees are reasonable because they 
help to ensure the integrity of the information in the CRD system, 
which is important because the Commission, FINRA, other self-regulatory 
organizations and state securities regulators use the CRD system to 
make licensing and registration decisions, among other things.\31\
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    \29\ See Securities Exchange Act Release No. 67247 (June 25, 
2012), 77 FR 38866 (June 29, 2012) (SR-FINRA-2012-30).
    \30\ See supra, note 27 [sic], at 77 FR 38866, 38868.
    \31\ See supra [sic], at 77 FR 38866, 38868.
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    The Exchange also believes that the proposed fees, like FINRA's 
fees, are consistent with an equitable allocation of fees because the 
fees will apply equally to all individuals and members required to 
report information to the CRD system. Thus, those members that register 
more individuals or submit more filings through the CRD system will 
generally pay more in fees than those members that use the CRD system 
to a lesser extent. In addition, the proposed fees, like FINRA's fees, 
are equitable and not unfairly discriminatory because they will result 
in the same regulatory fees being charged to all IEX Members required 
to report information to the CRD system and for services performed by 
FINRA, regardless of whether or not such Member is a FINRA member.

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

    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 Exchange does not believe 
that the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. To the contrary, the Exchange believes that the 
proposed pricing structure will increase competition and hopefully draw 
additional volume to the Exchange. The Exchange will operate in a 
highly competitive market in which market participants can readily 
favor competing venues if fee schedules at other venues are viewed as 
more favorable. As a new exchange, IEX expects to face intense 
competition from existing exchanges and other non-exchange venues that 
provide markets for equities trading. Consequently, the Exchange 
believes that the degree to which IEX fees could impose any burden on 
competition is extremely limited, and does not believe that such fees 
would burden competition of Members or competing venues in a manner 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

[[Page 54877]]

    The Exchange 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 because, while 
different fees are assessed in some circumstances, these different fees 
are not based on the type of Member entering the orders that match but 
on the type of order entered and all Members can submit any type of 
order. Further, the proposed fees are intended to encourage market 
participants to bring increased volume to the Exchange, which benefits 
all market participants.
Regulatory Fees
    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. Specifically, the Exchange 
believes that the proposed fees will result in the same regulatory fees 
being charged to all Members required to report information to the CRD 
system and for services performed by FINRA, regardless of whether or 
not such Members are FINRA members.

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) of the Act \32\ and paragraph (f) of Rule 19b-4 \33\ 
thereunder. 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.
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 17 CFR 240.19b-4(f).
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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 rule-comments@sec.gov. Please include 
File Number SR-IEX-2016-09 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-2016-09. 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 Web site (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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-IEX-2016-09, and should be 
submitted on or before September 7, 2016.
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    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19581 Filed 8-16-16; 8:45 am]
 BILLING CODE 8011-01-P