Document ID: SEC-2021-1788-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2021-12-22T05:00Z

[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Notices]
[Pages 72650-72654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27660]

[[Page 72650]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93800; File No. SR-IEX-2021-17]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Reintroduce a Market Maker Peg Order Type

December 16, 2021.
    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 December 14, 2021, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    Pursuant to the provisions of Section 19(b)(1) under the Act,\4\ 
and Rule 19b-4 thereunder,\5\ the Exchange is filing with the 
Commission a proposed rule change to reintroduce a new Market Maker Peg 
order type, designed to simplify market maker compliance with IEX Rule 
11.151 (Market Maker Obligations), and make a conforming change 
regarding connectivity within the Exchange System.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    IEX is filing this rule change proposal to reintroduce a Market 
Maker Peg order type. IEX previously had a Market Maker Peg order 
type,\6\ which it retired in 2020 \7\ because at the time there were no 
Exchange-registered market makers.\8\ As described below, IEX's 
proposed new order type is almost identical to its original, 
Commission-approved, market maker peg order type, with the exception 
that the new Market Maker Peg order will have tighter quoting spreads 
than are required by IEX Rule 11.151.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 81482 (August 25, 
2017), 82 FR 41452 (August 31, 2017) (SR-IEX-2017-22) (Approval 
Order).
    \7\ See Securities Exchange Act Release No. 89146 (June 24, 
2020), 85 FR 39251 (June 24, 2020) (SR-IEX-2020-07).
    \8\ See generally IEX Rules 11.150 and 11.151.
---------------------------------------------------------------------------

Background
    IEX Rule 11.151 (Market Maker Obligations) requires market makers 
for each stock in which they are registered to continuously maintain a 
two-sided quotation within a designated percentage of the National Best 
Bid (``NBB'') and National Best Offer (``NBO''),\9\ as appropriate. In 
addition to the market maker quoting and pricing obligations set forth 
in the Exchange's rules, market makers must meet their obligations 
under Rule 15c3-5 under the Act (the ``Market Access Rule'') \10\ and 
Regulation SHO.\11\
---------------------------------------------------------------------------

    \9\ As defined by Regulation NMS Rule 600(b)(50). 17 CFR 
242.600(50); see also IEX Rule 1.160(u).
    \10\ 17 CFR 240.15c3-5.
    \11\ 17 CFR 242.200 through 204.
---------------------------------------------------------------------------

    The Market Access Rule requires a broker-dealer with market access, 
or that provides a customer or any other person with access to an 
exchange or alternative trading system through use of its market 
participant identifier or otherwise, to establish, document, and 
maintain a system of risk management controls and supervisory 
procedures reasonably designed to manage the financial, regulatory, and 
other risks of this business activity. These controls must be 
reasonably designed to ensure compliance with all regulatory 
requirements, which are defined as ``all federal securities laws, rules 
and regulations, and rules of self-regulatory organizations, that are 
applicable in connection with market access.'' \12\
---------------------------------------------------------------------------

    \12\ See supra note 10.
---------------------------------------------------------------------------

    In addition to the obligations of the Market Access Rule, broker-
dealers have independent obligations that arise under Regulation SHO. 
Regulation SHO obligations generally include properly marking sell 
orders, obtaining a ``locate'' for short sale orders, closing out fail 
to deliver positions, and, where applicable, complying with the short 
sale price test.\13\ While there are certain exceptions to some of the 
requirements of Regulation SHO where a market maker is engaged in bona-
fide market making activities,\14\ the availability of those exceptions 
is distinct and independent from whether a market maker submits an 
order that is a Market Maker Peg order.
---------------------------------------------------------------------------

    \13\ See supra note 11.
    \14\ See 17 CFR 242.203(b)(1). The Commission adopted a narrow 
exception to Regulation SHO's ``locate'' requirement for market 
makers engaged in bona fide market making that may need to 
facilitate customer orders in a fast-moving market without being 
subject to the possible delays associated with complying with such 
requirement. See Exchange Act Release No. 50103 (July 28, 2004), 69 
FR 48008, 48015 (August 6, 2004) (providing guidance as to what does 
not constitute bona-fide market making for purposes of claiming the 
exception to Regulation SHO's ``locate'' requirement). See also 
Exchange Act Release No. 58775 (October 14, 2008), 73 FR 61690, 
61698-9 (October 17, 2008) (providing guidance regarding what is 
bona-fide market making for purposes of complying with the market 
maker exception to Regulation SHO's ``locate'' requirement including 
without limitation whether the market maker incurs any economic or 
market risk with respect to the securities, continuous quotations 
that are at or near the market on both sides and that are 
communicated and represented in a way that makes them widely 
accessible to investors and other broker-dealers and a pattern of 
trading that includes both purchases and sales in roughly comparable 
amounts to provide liquidity to customers or other broker-dealers). 
Thus, market makers would not be able to rely solely on quotations 
priced in accordance with the Designated Percentages under proposed 
Rule 11.190(b)(17) for eligibility for the bona-fide market making 
exception to the ``locate'' requirement based on the criteria set 
forth by the Commission. It should also be noted that a 
determination of bona-fide market making is relevant for the 
purposes of a broker-dealer's close-out obligations under Rule 204 
of Regulation SHO. See 17 CFR 242.204(a)(3).
---------------------------------------------------------------------------

Proposed Rule
    The Exchange is proposing to reintroduce an optional Market Maker 
Peg order type, which will be identical to the previously approved 
order type, with the exception of the tighter quoting obligations 
discussed below. The Market Maker Peg order type is designed to 
simplify market maker compliance with the continuous quoting and 
pricing obligations in IEX Rule 11.151(a) in a manner consistent with 
compliance with the Market Access Rule and Regulation SHO. The Market 
Maker Peg order, as proposed, is not only almost identical to IEX's 
previously approved Market Maker Peg order type,\15\ it is also 
substantially similar to equivalent order types offered by other market 
centers, including Cboe

[[Page 72651]]

BZX Exchange, Inc. (``Cboe BZX''), Nasdaq Stock Market LLC 
(``Nasdaq''), and Cboe EDGX Exchange, Inc. (``Cboe EDGX'').\16\ 
Specifically, the Market Maker Peg order would be a one-sided limit 
order and, similar to other peg orders available to IEX Members, \17\ 
priced in reference to or ``pegged'' to the NBB or NBO,\18\ but is 
distinguishable in that like all other exchange market maker peg 
orders, it would always be displayed. In addition, a new timestamp is 
created for the order each time that it is automatically adjusted in 
accordance with the proposed rule. And Market Maker Peg orders may only 
be entered by a registered market maker, as defined in IEX Rule 11.150.
---------------------------------------------------------------------------

    \15\ See supra note 6.
    \16\ See e.g., Cboe BZX Rule 11.9(c)(15), Nasdaq Rule 
4702(b)(7), and Cboe EDGX Rule 11.8(e).
    \17\ See IEX Rule 1.160(s).
    \18\ See IEX Rule 11.190(a)(3).
---------------------------------------------------------------------------

    The Exchange believes that this order-based approach would provide 
an effective compliance tool to facilitate market makers' compliance 
with IEX Rule 11.151(a), while also enabling compliance with the 
requirements of the Market Access Rule and Regulation SHO. 
Specifically, market makers would have control of order origination, as 
required by the Market Access Rule, while also allowing market makers 
to make marking and locate determinations prior to order entry, as 
required by Regulation SHO. As such, market makers using Market Maker 
Peg orders would be able to comply with the requirements of the Market 
Access Rule and Regulation SHO, as they would when placing any order, 
while also facilitating compliance with their Exchange market making 
obligations. In this regard, the Market Maker Peg order does not ensure 
that the market maker is satisfying the requirements of the Market 
Access Rule, such as maintaining a system of risk management and 
supervisory controls reasonably designed to manage the risk of its 
market access business activity,\19\ or of Regulation SHO, including 
the satisfaction of the locate requirements of Regulation SHO Rule 
203(b)(1) or an exception thereto.\20\ Market makers must continue to 
perform the necessary checks to comply with both the Market Access Rule 
and Regulation SHO, prior to entry of a Market Maker Peg order.
---------------------------------------------------------------------------

    \19\ See supra note 10.
    \20\ 17 CFR 242.203(b)(1).
---------------------------------------------------------------------------

    The Market Maker Peg order would be limited to registered market 
makers \21\ and would have its price automatically set and adjusted by 
the System \22\, both upon entry and any time thereafter, in order to 
comply with the Exchange's rules regarding market maker quoting and 
pricing obligations.\23\ Specifically, upon entry or at the beginning 
of the Regular Market Session, as applicable, the entered bid or offer 
is automatically priced by the System at the Market Maker Peg 
Designated Percentage away from the then current NBB or NBO, as 
applicable, or if there is no NBB or NBO, at the Market Maker Peg 
Designated Percentage away from the last reported sale from the 
responsible single plan processor. Proposed IEX Rule 11.190(b)(17)(A) 
defines the ``Market Maker Peg Designated Percentage'' as eight (8) 
percentage points for all securities, except that between 9:30 a.m. and 
9:45 a.m. and between 3:35 p.m. and the close of trading, the Market 
Maker Peg Designated Percentage shall be twenty (20) percentage points. 
For example, if the NBB of a security is $10 and the Market Maker Peg 
Designated Percentage for the security is 8%, the displayed price of a 
Market Marker Peg Order to buy would be $9.20. Market makers may submit 
Market Maker Peg orders to the Exchange starting at the beginning of 
the Pre-Market Session, but the order will not be executable or 
automatically priced until the beginning of the Regular Market Session 
and will expire at the end of the Regular Market Session.
---------------------------------------------------------------------------

    \21\ See IEX Rule 11.150.
    \22\ See IEX Rule 1.160(nn).
    \23\ The Market Maker Peg order is one-sided, and thus a market 
maker seeking to use Market Maker Peg orders to comply with the 
Exchange's continuous two-sided quotation requirements would need to 
submit both a bid and an offer using the order type.
---------------------------------------------------------------------------

    IEX also proposes to define, in proposed IEX Rule 11.190(b)(17)(B), 
a new term, ``Market Maker Peg Defined Limit'', as nine and one half 
(9.5) percentage points for all securities, except that between 9:30 
a.m. and 9:45 a.m. and between 3:35 p.m. and the close of trading, the 
Market Maker Peg Defined Limit shall be twenty-one and one half (21.5) 
percentage points.
    Upon reaching the Market Maker Peg Defined Limit, the price of a 
Market Maker Peg order bid or offer will be adjusted by the System to 
the Market Maker Peg Designated Percentage away from the then current 
NBB or NBO, or, if there is no NBB or NBO, the order will, by default, 
be the Market Maker Peg Designated Percentage away from the last 
reported sale from the responsible single plan processor. In the 
foregoing example, if the Market Maker Peg Defined Limit is 9.5% and 
the NBB increased to $10.17, such that the displayed price of the 
Market Maker Peg order would be more than 9.5% away, the order would be 
repriced to $9.36, or 8% away from the NBB.
    If a Market Maker Peg order bid or offer moves a specified number 
of percentage points away from the Market Maker Peg Designated 
Percentage towards the then current NBB or NBO, which number of 
percentage points will be determined and published in a circular 
distributed to Members from time to time, the price of such bid or 
offer will be adjusted by the System to the Market Maker Peg Designated 
Percentage away from the then current NBB or NBO, as applicable. If 
there is no NBB or NBO, as applicable, the order will be adjusted by 
the System to the Market Maker Peg Designated Percentage away from the 
last reported sale from the responsible single plan processor. In the 
event that pricing a Market Maker Peg order at the Market Maker Peg 
Designated Percentage away from the then current NBB and NBO, or, if no 
NBB or NBO, to the Market Maker Peg Designated Percentage away from the 
last reported sale from the responsible single plan processor, would 
result in the order exceeding its limit price, the order will be 
cancelled or rejected.
    If, after entry, the Market Maker Peg order is priced based on the 
last reported sale from the single plan processor and such Market Maker 
Peg order is established as the NBB or NBO, the Market Maker Peg order 
will not be subsequently adjusted in accordance with this rule until 
either there is a new consolidated last sale, or a new NBB or NBO is 
established by a national securities exchange.
    As noted above, this proposed reintroduction of the IEX Market 
Maker Peg order type is identical to the Market Maker Peg order type 
previously approved by the Commission, with the exception of the 
tighter quoting spreads that result from using the ``Market Maker Peg 
Designated Percentage'' and ``Market Maker Peg Defined Limit'' instead 
of the ``Designated Percentage'' \24\ and ``Defined Limit'' \25\ set 
forth in IEX's Market Maker Obligations rule. Specifically, the Market 
Maker Obligations rule sets the Designated Percentage at 28% below/
above the NBB/NBO, and 30% below/above the NBB/NBO at the market open 
and close for stocks not included in the S&P 500[supreg] Index, Russell 
1000[supreg] Index, and a pilot list of Exchange Traded Products. And 
the Market Maker Obligations rule sets the Defined Limit for those same 
stocks to be 29.5% below/above the NBB/NBO, and 31.5% below/above the 
NBB/NBO at the market open and close. For stocks that

[[Page 72652]]

are included in the S&P 500[supreg] Index, Russell 1000[supreg] Index, 
and a pilot list of Exchange Traded Products; the Designated Percentage 
and Defined Limit would be the same as the Market Maker Peg Designated 
Percentage and Market Maker Peg Defined Limit, respectively. Thus, as 
proposed, market makers using the optional IEX Market Maker Peg order 
type will quote at narrower spreads than required by IEX Rule 11.151 
for stocks not included in the S&P 500[supreg] Index, Russell 
1000[supreg] Index, and a pilot list of Exchange Traded Products.
---------------------------------------------------------------------------

    \24\ See IEX Rule 11.151(a)(6).
    \25\ See IEX Rule 11.151(a)(7).
---------------------------------------------------------------------------

    IEX proposes to incorporate a tighter quoting structure for the 
Market Maker Peg order type in order to simplify technical complexities 
in the design of the order type associated with treating all stocks 
equally. Moreover, IEX believes that tighter displayed quoting spreads 
could help to increase access to displayed liquidity being posted by 
IEX market makers.
    The Exchange notes that notwithstanding the availability of the 
proposed Market Maker Peg order functionality, a market maker remains 
responsible for entering, monitoring, and resubmitting, as applicable, 
quotations that meet the requirements of IEX Rule 11.151. Furthermore, 
a market maker would not be required to use the Market Maker Peg order 
type and can instead submit its own quotes to satisfy its quoting and 
pricing obligations for any securities for which it is a registered 
market maker.\26\
---------------------------------------------------------------------------

    \26\ See IEX Rule 11.151(a)(1).
---------------------------------------------------------------------------

    Market Maker Peg orders, like all incoming orders, will be subject 
to 350 microseconds of inbound latency \27\ from the IEX point-of-
presence (``POP'') before reaching the System.\28\ Each time a Market 
Maker Peg order is automatically adjusted by the System in accordance 
with this proposed rule change (in response to a change in the NBB or 
NBO), the modified order instruction will be subject to 350 
microseconds of latency between the Market Maker Peg order repricing 
logic (i.e., the process by which the System determines that the price 
of the Market Maker Peg order should be adjusted) and the Order Book 
\29\ (to be equivalent to the 350 microseconds of inbound latency for 
all incoming orders) and all outbound communications to the market 
maker related to the modified order instruction will be subject to 37 
microseconds of latency between the Market Maker Peg order repricing 
logic and the POP (to be equivalent to the 37 microseconds of outbound 
latency that a market maker would have to wait for order entry 
confirmation), pursuant to IEX Rule 11.510(c)(1).\30\ In addition, a 
new timestamp is created for the order each time that it is 
automatically adjusted by the System in accordance with the proposed 
rule. This approach is designed so that a market maker using a Market 
Maker Peg order to facilitate compliance with the Exchange's continuous 
quoting and pricing obligations is in the same position as a market 
maker updating its own quote, whose orders and order modification 
instructions would be subjected to a 350-microsecond inbound latency 
and 37-microsecond outbound latency.
---------------------------------------------------------------------------

    \27\ See IEX Rule 11.510(b)(1).
    \28\ See IEX Rule 11.510(a).
    \29\ See IEX Rule 1.160(p).
    \30\ See proposed edits to IEX Rule 11.510(c)(1).
---------------------------------------------------------------------------

    The Exchange also proposes to make a conforming change to IEX Rule 
11.510(c)(1) regarding connectivity, to provide that, pursuant to IEX 
Rule 11.190(b)(17), each time a Market Maker Peg order is automatically 
adjusted by the System, all inbound communications related to the 
modified order instruction will be subject to a 350-microsecond latency 
and all outbound communications related to the modified order 
instruction will be subject to a 37-microsecond latency between the 
Market Maker Peg order repricing logic and the Order Book.
    The Exchange plans to implement the proposed changes in December 
2021 or January 2022, subject to the effectiveness of filing with the 
Commission. The Exchange will announce the implementation date of the 
proposed changes by Trader Alert at least 10 business days in advance 
of such implementation date and within 90 days of the effectiveness of 
this proposed rule change.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with 
Section 6(b) of the Act in general, \31\ and furthers the objectives of 
Section 6(b)(5) of the Act,\32\ in particular, in that it is 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. As noted above, the Exchange 
believes that the proposed rule is designed to simplify market maker 
compliance with the minimum continuous quoting and pricing obligations, 
as well as facilitate market maker compliance with the requirements of 
the Market Access Rule and Regulation SHO.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f.
    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that simplifying compliance 
with this rule will remove impediments to and perfect the mechanism of 
a free and open market and a national market system, and protect 
investors and the public interest, because it will provide a simplified 
means by which market makers may offer liquidity, using a tighter 
quoting spread than the market maker obligations require, even in 
circumstances where they are not willing to quote at the inside market. 
As a result, in circumstances where liquidity available at displayed 
prices closer to the inside than the price of a Market Maker Peg order 
is exhausted during an aggressive market-wide sweep, the Market Maker 
Peg order may nevertheless be available to support executions at prices 
that are at least within the applicable Market Maker Peg Designated 
Percentage or Market Maker Peg Defined Limit. Moreover, the methodology 
for repricing Market Maker Peg orders is consistent with the 
requirements of the Act because it is designed to ensure that the 
displayed price of the order is at least within the applicable Market 
Maker Peg Designated Percentage or Market Maker Peg Defined Limit, as 
applicable.
    The proposed rule change also is designed to support the principles 
of Section 11A(a)(1) of the Act \33\ in that it seeks to assure fair 
competition among brokers and dealers and among exchange markets. The 
Exchange believes that offering the Market Maker Peg order to market 
makers exclusively is consistent with fair competition among brokers 
and dealers in that market makers have chosen to subject themselves to 
the obligations of IEX Rule 11.151, and the benefit conferred on such 
market participants by this order type is commensurate with such 
obligations. Furthermore, all Members are eligible to apply for 
registration as a market maker under Rule 11.150 on a fair and equal 
basis.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78k-1.
---------------------------------------------------------------------------

    The Exchange also believes that it is fair and reasonable for all 
inbound communications related to the repricing of a Market Maker Peg 
order to be subject to 350 microseconds of latency and for all outbound 
communications related to the repricing of a Market Maker Peg order to 
be subject to 37 microseconds of latency, each between the Market Maker 
Peg repricing logic and the Order Book. As noted in the

[[Page 72653]]

Purpose section, this approach is designed so that a market maker using 
a Market Maker Peg order to facilitate compliance with the Exchange's 
continuous quoting and pricing obligations is in the same position as a 
market maker updating its own quote, whose order instructions would be 
subject to 350 microseconds of inbound latency and 37 microseconds of 
outbound latency. Similarly, price adjustments to Market Maker Peg 
orders will experience the same latency as other displayed limit orders 
entered on the Exchange.
    Accordingly, the Exchange believes that it is consistent with the 
public interest and the protection of investors to reprice Market Maker 
Peg orders subject to a 350-microsecond latency for all inbound 
communications related to the modified order instruction and a 37-
microsecond latency for all outbound communications related to the 
modified order instruction in the interest of ensuring that market 
makers using the Market Maker Peg order type will not have any unfair 
advantage over market makers that update their own quotes, as well as 
with other market participants using displayed orders.
    Furthermore, the Exchange believes that it is consistent with the 
public interest and the protection of investors to apply a new 
timestamp to a Market Maker Peg order each time it is repriced so that 
a Market Maker Peg order does not achieve execution priority superior 
to a displayed order entered at that price earlier in time. 
Accordingly, market makers will not have any unfair advantage over a 
market maker updating its own quote, or other market participants using 
displayed orders on the Exchange.
    Additionally, the Exchange believes that the proposed conforming 
rule change to IEX Rule 11.510(c)(1) is consistent with the protection 
of investors and the public interest in that it is designed to provide 
clarity to market participants regarding Market Maker Peg order 
repricing methodology.
    Finally, IEX notes that the Commission previously approved an 
almost identical market maker peg order type.\34\ As described in the 
Purpose section, the one difference between this proposed Market Maker 
Peg order type and IEX's previous market maker peg order type is that 
this order type will apply the same Market Maker Peg Designated 
Percentage and Market Maker Peg Defined Limit to all stocks, 
irrespective of if they are included in the S&P 500[supreg] Index, 
Russell 1000[supreg] Index, and a pilot list of Exchange Traded 
Products. IEX believes this modification is consistent with the 
protection of investors and helps perfect the mechanism of a free and 
open market because this proposal will result in Market Maker Peg 
orders resting on the Order Book quoting at the tighter limit that is 
only required for certain securities. IEX believes these tighter quote 
spreads would be of particular benefit to investors during times of 
high market volatility by making it more likely that a security will 
avoid so-called ``stub quotes'' that are so far away from the NBB or 
NBO that the quote is unlikely to be executed. Additionally, IEX notes 
that the proposed application of the tighter quote spreads to all 
Market Maker Peg orders will simplify the technical complexities in the 
design and functioning of the order type. Furthermore, IEX notes that 
the proposed Market Maker Peg order is an optional order type that may 
be used by any registered market maker to facilitate its compliance 
with their obligations but that market makers are free to manage their 
own quotes subject to the applicable quoting and pricing requirements 
of IEX Rule 11.151.
---------------------------------------------------------------------------

    \34\ See supra note 6.
---------------------------------------------------------------------------

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. Specifically, the Exchange 
believes that the proposal will enhance the Exchange's competitiveness 
by providing market makers on IEX with a tool designed to facilitate 
quoting and offering liquidity even in circumstances where they are not 
willing to quote at the inside market. Based on informal discussion 
with market participants that serve as market makers on other trading 
centers, the Exchange believes that this functionality will be 
appealing to potential market makers, and therefore will make it more 
likely that market participants will choose to become registered market 
makers on the Exchange. This may, in turn, increase the extent of 
liquidity available on IEX and increase its ability to compete with 
other execution venues to attract orders that are seeking liquidity. 
The Exchange further notes that the Market Maker Peg order, as 
proposed, is substantially similar to equivalent order types offered by 
other market centers, including Cboe BZX, Nasdaq, and Cboe EDGX, and 
therefore will not impair market participants or other market centers 
from competing, but would in fact allow the Exchange to compete with 
existing functionality offered by competing market centers.\35\ 
Moreover, there is no barrier to other exchanges adopting the same 
repricing functionality subject to the Commission rule filing process 
pursuant to Section 19(b) of the Act.
---------------------------------------------------------------------------

    \35\ See supra note 16.
---------------------------------------------------------------------------

    With regard to intra-market competition, the Exchange does not 
believe that the method of repricing Market Maker Peg orders will 
result in any burden on intra-market competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. To the 
contrary, as described in the Statutory Basis section, the proposed 
Market Maker Peg order type is an optional order type that would be 
available to IEX market makers that is designed so that market makers 
using Market Maker Peg orders will not be subject to any competitive 
advantage compared to market makers updating their own quotes, or other 
market participants using displayed orders. Furthermore, as discussed 
in the Statutory Basis section, the Exchange believes that offering the 
Market Maker Peg order to market makers exclusively is consistent with 
fair competition among brokers and dealers in that market makers have 
chosen to subject themselves to the obligations of IEX Rule 11.151, and 
the benefit conferred on such market participants by this order type is 
commensurate with the obligations. Furthermore, all Members are 
eligible to apply for registration as a market maker under IEX Rule 
11.150 on a fair and equal basis.

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 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 \36\ and Rule 19b-
4(f)(6) thereunder.\37\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 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.

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

[[Page 72654]]

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \38\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \39\ 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. The 
proposed rule change provides for the reintroduction of a Market Maker 
Peg Order type on the Exchange. The Exchange believes that waiver of 
the operative delay is consistent with the protection of investors and 
the public interest because IEX is restoring an order type previously 
available on IEX, which is substantially similar to order types offered 
on several other exchanges (discussed above), with the only difference 
being that this version of the Market Maker Peg order will apply the 
tighter market maker quoting requirement to all securities and will not 
apply wider limits for stocks in the Russell 1000[supreg] Index and a 
pilot list of Exchange Traded Products. IEX believes that allowing 
market makers to begin using the Market Maker Peg order type 
immediately upon effectiveness of this rule change will potentially 
increase liquidity on IEX to the benefit all investors, which will 
serve the public interest. The Commission believes that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest because the proposed rule change does not raise 
any novel issues, adopts the narrower limits for all securities and 
thus will result in prices closer to the NBB or NBO (as applicable) 
compared to the prior version of this order type, and may help increase 
displayed liquidity on IEX during periods of volatility. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal as operative upon filing.\40\
---------------------------------------------------------------------------

    \38\ 17 CFR 240.19b-4(f)(6).
    \39\ 17 CFR 240.19b-4(f)(6)(iii).
    \40\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 purpose of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \41\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     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-2021-17 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-2021-17. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing 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-2021-17 
and should be submitted on or before January 12, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27660 Filed 12-21-21; 8:45 am]
BILLING CODE 8011-01-P