Document ID: SEC-2018-0376-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2018-03-05T05:00Z

[Federal Register Volume 83, Number 43 (Monday, March 5, 2018)]
[Notices]
[Pages 9349-9351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04337]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82784; File No. SR-IEX-2018-04]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 5.170 To Reflect an Update to a FINRA Rule

February 27, 2018.
    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 February 21, 2018, 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 
and II 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 
Commission a proposed rule change to amend Rule 5.170 to reflect an 
update to a rule of the Financial Industry Regulatory Authority 
(``FINRA'')

[[Page 9350]]

incorporated by reference therein. The Exchange has designated this 
rule change as ``non-controversial'' under Section 19(b)(3)(A) of the 
Act \6\ and provided the Commission with the notice required by Rule 
19b-4(f)(6) thereunder.\7\
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4.
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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 Rule 5.170 to reflect an update to a 
FINRA rule incorporated by reference therein. On April 7, 2016, the 
Commission approved a FINRA proposed rule change to adopt new FINRA 
Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions) 
in the Consolidated FINRA Rulebook, which addresses accounts opened or 
established by associated persons of FINRA members at firms other than 
the firm with which they are associated (the ``FINRA Rule Filing''). As 
part of the FINRA Rule Filing, FINRA also deleted NASD Rule 3050 and 
Incorporated New York Stock Exchange (``NYSE'') Rules 407, 407A, and 
Incorporated NYSE Rule Interpretation 407, each of which governed the 
obligations of FINRA member firms and their associated persons with 
respect to transactions effected by such associated persons in accounts 
established outside of the member firm.\8\ Thus FINRA Rule 3210 updated 
and consolidated into the FINRA Rulebook NASD Rule 3050 and certain 
Incorporated NYSE rules.\9\
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    \8\ See Exchange Act Release No. 77550 (April 7, 2016), 81 FR 
21924 (April 13, 2016) (Order Approving File No. SR-FINRA-2015-029).
    \9\ Id.
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    NASD Rule 3050 is incorporated by reference in Exchange Rule 5.170 
(Transactions for or by Associated Persons), which provides that 
``Members and persons associated with a Member shall comply with NASD 
Rule 3050 as if such Rule were part of IEX's Rules.''
    Accordingly, in view of the FINRA rule change whereby NASD Rule 
3050 was consolidated into FINRA Rule 3210, the Exchange proposes to 
update the reference to NASD Rule 3050 with a reference to FINRA Rule 
3210. As proposed, IEX Members would be subject to the requirements of 
FINRA Rule 3210 rather than NASD Rule 3050. A description of the 
requirements of FINRA Rule 3210, and the differences between FINRA Rule 
3210 and former NASD Rule 3050, are described in the FINRA Rule 
Filing.\10\
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    \10\ Id.
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \11\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \12\ 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. The Exchange notes that in approving the FINRA Rule 
Filing, the Commission stated that it ``believes that the proposal 
would help protect investors and the public interest by establishing a 
framework through which a member can adequately supervise securities-
related activities of their associated persons at firms other than the 
one with which they are associated . . . [and that the] rule makes the 
core supervisory obligation more operationally workable for employer 
firms.'' The Exchange agrees with the Commission and believes the 
proposed rule change is also consistent with the Act because it will 
provide greater clarity to Members regarding IEX's rules.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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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 Exchange does not believe 
that the proposed rule change will result in a burden on intra-market 
competition since it will apply equally to all Members. Further, as 
described in the FINRA Rule Filing and the SEC approval order thereof, 
FINRA Rule 3210 enables FINRA members to design a supervisory system 
that suits their respective business model and risk profiles. Further, 
FINRA noted in the FINRA Rule Filing, because FINRA Rule 3210 is 
consistent with prior NASD Rule 3050, current requirements and 
longstanding practice, it will not impose additional burdens on FINRA 
members. The Exchange believes that these factors mitigate against any 
disparate burden on IEX Members. The Exchange also does not believe 
that the proposed rule change will result in a burden on inter-market 
competition, since it is designed to address regulatory requirements 
rather than competitive considerations.

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

    Because the 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 \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to 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 proposal may become operative immediately upon

[[Page 9351]]

filing. According to the Exchange, waiver of the operative delay will 
help to avoid any potential confusion that may otherwise occur on the 
part of IEX Members as to the requirements of IEX Rule 5.170. The 
Commission believes that the proposed rule change raises no new or 
novel issues and that waiver of the operative delay is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule'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 under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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-2018-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-IEX-2018-04. 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 20549-1090. Copies of the filing will also be available for 
inspection and copying at the IEX's principal office and on its 
internet website at www.iextrading.com. 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-
2018-04 and should be submitted on or before March 26, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04337 Filed 3-2-18; 8:45 am]
 BILLING CODE 8011-01-P