Document ID: SEC-2017-1546-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange LLC
Posted Date: 2017-09-18T04:00Z

[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43627-43629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19811]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81602; File No. SR-IEX-2017-29]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Fees Pursuant to Rule 15.110

September 13, 2017.
    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 August 30, 2017, 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 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 make a correction to the Exchange 
Fee Schedule related to fees for executions that involve taking resting 
interest with non-displayed priority with a displayable order. The 
Exchange proposes to implement the change beginning on September 1, 
2017. 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 240.19b-4.
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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 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, pursuant to IEX 
Rule 15.110 (a) and (c), to make a correction related to the fees for 
executions that involve taking non-displayed resting interest with a 
displayable order. Subject to certain exceptions, the Exchange charges 
$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 non-displayed interest \6\ for 
both the liquidity providing and liquidity removing order (the ``Non-
Displayed Match Fee'').\7\ One such exception relates to certain 
displayable orders that remove non-displayed liquidity upon entry. The 
Exchange Fee Schedule provides that the Non-Displayed Match Fee is not 
charged for displayable orders \8\ that remove non-displayed liquidity 
upon entry if, on a monthly basis, at least 90% of the liquidity 
removing MPID's aggregate executed shares of displayable orders added 
liquidity during the month

[[Page 43628]]

in question (the ``90% display discount'').\9\
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    \6\ Non-displayed priority refers to an order or portion of a 
reserve order that is booked and ranked with non-display priority on 
the Order Book. See Rules 11.190(b)(3) and 11.190(b)(2).
    \7\ This pricing is referred to by the Exchange as the ``Non-
Displayed Match Fee'' on the Fee Schedule with a Fee Code of `I' 
which is provided by the Exchange on execution reports.
    \8\ See Rule 11.190(b)(3).
    \9\ However, in such transactions, the non-displayed liquidity 
adding interest will be subject to the Non-Displayed Match Fee. The 
Exchange also does not charge a fee where the adding and removing 
order originated from the same Exchange Member.
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    On August 7, 2017, the Exchange filed an immediately effective rule 
change to reflect that the calculation used to determine if a Member's 
MPID(s) qualify for the 90% display discount is done on a per MPID 
basis (rather than a per Member basis, as originally reflected in the 
Fee Schedule).\10\ The Exchange recently identified several 
typographical errors in the parenthetical in the single asterisked 
footnote related to the Non-Displayed Match Fee that describes the 
calculation of the 90% display discount. While the single asterisked 
footnote appurtenant to the Non-Displayed Match Fee is itself correct 
regarding the conditions of the 90% display discount, the parenthetical 
contains several typographical errors (as described below) and thus 
does not accurately reflect the exact calculation of such fee. Further, 
the rule change filing adopting the IEX Fee Schedule accurately 
described the application of the 90% display discount.\11\
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    \10\ See Securities and Exchange Act Release No. 81346 (August 
8, 2017), 82 FR 37973 (August 14, 2017).
    \11\ See Securities Exchange Act Release No. 78550 (August 11, 
2016), 81 FR 54873 (August 17, 2016).
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    Specifically, the parenthetical, which was intended to describe the 
mechanical calculation of the 90% display discount, contains several 
typographical errors. It currently states that the 90% display discount 
is applicable if a Member's execution reports reflect that the sum of 
executions with Fee Code L and a Last Liquidity Indicator (FIX tag 851) 
of '1' (Added Liquidity) (i.e., collectively, the numerator), divided 
by the sum of executions with Fee Code L (i.e., the denominator), is at 
least 90% for the calendar month. As currently written, the calculation 
as described in the parenthetical would include an MPID's non-
displayable orders that take displayed liquidity in the denominator, 
because such orders would receive Fee Code ``L'' on their execution 
reports, which satisfies the conditions for inclusion in the 
denominator.\12\ Thus, the current parenthetical describing the 90% 
display discount is not reflective of the Exchange's Fee Schedule, in 
that it is too broad in its description of the denominator of the 90% 
display discount.
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    \12\ See the Investors Exchange Fee Schedule, Fee Code `L', 
Taking Displayed Liquidity.
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    Accordingly, the Exchange proposes to correct the parenthetical in 
the single asterisked footnote appurtenant to the Non-Displayed Match 
Fee in the IEX Fee Schedule to correctly describe the mechanical 
calculation of the 90% display discount as follows (proposed new 
language is underlined; proposed deletions are in brackets):
     * $0.0009 (0.30% of TDVT for <$1.00), otherwise FREE if 
Taking Non-Displayed Liquidity with a Displayable Order and at least 
90% of TMVD, on a per MPID basis, was identified by IEX as Providing 
Displayed Liquidity (i.e., the [Member's] MPID's execution reports 
reflect that the sum of executions with Fee Code L and a Last Liquidity 
Indicator (FIX tag 851) of `1' (Added Liquidity) on orders with neither 
a Max Floor (FIX tag 111) equal to zero, nor a time-in-force (FIX tag 
59) of `3' (IOC) or `4' (FOK), divided by the sum of all executions on 
orders with neither a Max Floor (FIX tag 111) equal to zero, nor a 
time-in-force (FIX tag 59) of `3' (IOC) or `4' (FOK) [with Fee Code L], 
is at least 90% for the calendar month).
    As modified, the parenthetical would make clear that all of an 
MPID's executions that receive Fee Code L and a Last Liquidity 
Indicator of `1' (which together indicate that an order added displayed 
liquidity) on all of an MPID's displayable orders (which necessarily 
includes all orders that have neither a Max Floor value of zero,\13\ 
nor a time-in-force of immediate-or-cancel \14\ or fill-or-kill time 
\15\) contribute to the numerator of the 90% display discount. Further, 
the denominator would be equal to the sum of all executions of an 
MPID's displayable orders (i.e., all orders that have neither a Max 
Floor value of zero, nor a time-in-force of immediate-or-cancel or 
fill-or-kill time), regardless of the Fee Code and Last Liquidity 
Indicator. To provide additional clarity, the Exchange also proposes to 
revise the language describing the numerator to align such description 
with the proposed description of the denominator.
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    \13\ A Max Floor of zero is an instruction not to display any 
portion of an order.
    \14\ See IEX Rule 11.190(c)(1).
    \15\ See IEX Rule 11.190(c)(2).
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \16\ of the Act in general, and furthers the 
objectives of Sections 6(b)(4) \17\ 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. In addition, the Exchange believes that it is 
consistent with the Act to correct the Fee Schedule so that the Fee 
Schedule is accurate, avoiding any potential confusion among Members. 
The Exchange further believes that the correction to the Fee Schedule 
is reasonable, equitable, and not unfairly discriminatory because all 
similar situated Members will continue to be subject to the same fee 
structure. Moreover, the Exchange believes it is consistent with the 
Act to clarify the calculation used to determine the 90% display 
discount, so that the Exchange's Fee Schedule remains transparent and 
consistent with the expectations of its Members.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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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 proposed rule change is 
designed to correct an inadvertent error rather than a competitive 
issue. The Exchange does not believe the proposed rule change will 
result in a burden on intramarket competition because all Members will 
continue to be subject to the Non-Displayed Match Fee and will be 
eligible for the 90% display discount in the same manner on a fair and 
consistent basis. While different fees will be assessed in some 
circumstances, these different fees are not based on the type of Member 
entering the order and all Members can submit any type of order. 
Lastly, the Exchange operates in a highly competitive environment in 
which market participants can readily favor competing venues if fee 
schedules at other venues are viewed as more favorable.
    The Exchange also does not believe that the proposed rule change 
will result in any burden on intermarket competition because other 
venues are free to adopt comparable pricing.

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.

[[Page 43629]]

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) \18\ of the Act.
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    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-IEX-2017-29 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-2017-29. 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-2017-29, and should be 
submitted on or before October 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19811 Filed 9-15-17; 8:45 am]
 BILLING CODE 8011-01-P