Document ID: SEC-2017-1821-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange LLC
Posted Date: 2017-11-06T05:00Z

[Federal Register Volume 82, Number 213 (Monday, November 6, 2017)]
[Notices]
[Pages 51455-51457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24048]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81988; File No. SR-IEX-2017-38]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New 
Rule 6.210 Related to Ex-Dates for Securities Listed or Traded on the 
Exchange

October 31, 2017.
    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 October 27, 2017, the Investors Exchange LLC (``IEX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 adopt new Rule 6.210 (Ex-Dividend 
or Ex-Right Dates) related to ex-dates for securities listed or traded 
on the Exchange. The Exchange has designated this proposal as ``non-
controversial'' and provided the Commission with the notice required by 
Rule 19b-4(f)(6)(iii) under the Act.\6\
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CRF 240.19b-4.
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
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    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.

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 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
    On June 17, 2016 the Commission granted IEX's application for 
registration as a national securities exchange under Section 6 of the 
Act including approval of rules applicable to the qualification, 
listing and delisting of companies on the Exchange. The Exchange plans 
to begin a listing program in early 2018 and is proposing to adopt Rule 
6.210 related to ex-dates for securities listed on IEX.
    IEX Rule 2.160(c)(4) requires in substance that an Exchange Member 
must be a Member of a registered clearing agency registered with the 
Commission pursuant to Section 17A of the Act or clear transactions 
executed on the Exchange through another Member that is a Member of a 
registered clearing agency. In addition, IEX Rule 6.110(a) provides 
that every Exchange Member who is a Member of a registered clearing 
agency shall implement comparison and settlement procedures under the 
rules of such entity. Further, IEX Rule 11.250(a) provides that the 
Exchange maintains connectivity and access to the Universal Trade 
Capture of the National Securities Clearing Corporation (``NSCC'') for 
the transmission of executed transactions. Pursuant to these 
provisions, all IEX Members are either Members of the NSCC or clear 
transactions executed on the Exchange through another Member that is a 
Member of NSCC. Thus, IEX Members must comply with NSCC comparison and 
settlement procedures for all transactions executed on the Exchange.
    NSCC and other listing exchanges have rules related to securities 
settlement which specify the requirements and process for designation 
of so-called ``ex-dates'' in the event that the issuer of a security 
enters into certain types of corporate actions, including declaration 
of a dividend, and issuance of rights or warrants (i.e., the corporate 
action consideration).\7\ Generally, an issuer of securities will 
establish a record date to determine which security holders are 
entitled to the corporate action

[[Page 51456]]

consideration--security holders of record on the record date are 
entitled to the corporate action consideration. Because virtually all 
securities transactions now settle on the second business day after 
trade date (``T+2'') pursuant to Rule 15c6-1 under the Act,\8\ a 
purchaser of a security on the business day prior to the record date 
will not be the security holder of record on the record date. For 
example, if the record date for XYZ's issuance of a dividend is 
December 19, 2017, a purchaser on December 18, 2017 will not be the 
holder or record until December 20, 2017. The purchaser will not be the 
holder of record on December 19, 2017 and therefore will not be 
entitled to the dividend.
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    \7\ See, e.g., NYSE Arca Equities Rule 7.4.
    \8\ The Commission recently adopted amendments to Rule 15c6-1(a) 
under the Act to shorten the standard, regular-way settlement cycle 
from T+3 to T+2 or the second business day after trade date. See, 
Securities Exchange Act Release No. 34-80295 (March 22, 2016), 82 FR 
15564 (March 29, 2017) (S7-22-16). The compliance date for the 
amendments was September 5, 2017.
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    Thus, to provide certainty as to which security holder will receive 
the corporate action consideration it is necessary to establish ``ex-
dates'' that denote the date on and after which a security will no 
longer trade with the corporate action consideration. Most listing 
exchanges, as well as the Financial Industry Regulatory Authority 
(``FINRA'') have such rules, which specify that generally a security 
will trade ``ex'' two [sic] business days [sic] prior to the record 
date. In the example above, XYZ would trade ``ex-dividend'' beginning 
on December 18, 2017.
    Accordingly, in connection with the planned launch of its listing 
program, the Exchange proposes to adopt Rule 6.210 to specify when 
transactions in securities traded ``regular'' shall be ``ex-dividend'' 
or ``ex-rights'' as the case may be. As proposed, Rule 6.210 provides 
that transactions in securities traded ``regular'' shall be ``ex-
dividend'' or ``ex-rights'' as the case may be, on the business day 
preceding the record date fixed by the company or the date of the 
closing of transfer books, except when the Board of Directors rules 
otherwise.\9\ Should such record date or such closing of transfer books 
occur upon a day other than a business day Rule 6.210 shall apply for 
the second preceding business day.
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    \9\ Exceptions would be expected to occur in circumstances where 
the listed company's corporate action consideration is relatively 
large (typically 25% or greater than the value of the security) or 
definitive information is not received by the Exchange sufficiently 
in advance of the record date, as required by IEX Rule 14.207(e)(6), 
to permit the designation of an ``ex-dividend'' or ``ex-rights'' 
date in accordance with Rule 6.210. In such cases, the ex-date would 
generally be on the first business day which is practical given the 
relevant circumstances.
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    As proposed, Rule 6.210 is substantially identical to NYSE Arca 
Rule 7.4-E with only a minor difference in that proposed Rule 6.210 
refers to ``securities'' rather than ``stocks'' to be inclusive of 
listed securities that are not strictly speaking characterized as 
stocks (e.g., rights and warrants).
    In connection with their ``ex-date'' rules, other listing exchanges 
disseminate relevant information regarding such corporate actions by 
their listed companies to market participants.\10\ Corporate action 
information regarding IEX listed companies will also be posted on the 
IEX Web site for viewing and download, without charge.
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    \10\ See, http://www.nyxdata.com/Data-Products/NYSE-Corporate-Actions?rfrby=sum# describing the NYSE Group Corporate Actions 
package of reports sold by NYSE Group regarding corporate actions 
for all equities listed on NYSE, NYSE MKT and NYSE Arca. See also, 
http://www.nasdaqtrader.com/Trader.aspx?id=dailylistpd describing 
the Nasdaq Daily List sold by Nasdaq that provides certain corporate 
action data for Nasdaq listed securities. See also, BAT BZX 
(``BATS'') Exchange corporate action reports available without 
charge at: https://www.bats.com/us/equities/market_statistics/corporate_action/.
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\11\ in general and furthers the 
objectives of Section 6(b)(5) \12\ of the Act 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 believes that the proposed rule change 
supports these objectives because it is designed to enable the Exchange 
to provide clarity to market participants on applicable ``ex-dates'' 
for securities listed on IEX in connection with corporate actions 
involving consideration to be paid or distributed to security holders.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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    Further, the Exchange believes that the proposed rule change is 
consistent with the protection of investors and the public interest 
because it provides authority to the Exchange to determine ex-dates in 
circumstances warranting a different ex-date than the business day 
preceding the record date fixed by the company or the date of closing 
of transfer books.
    Finally, the Exchange believes that the proposed rule change will 
serve to promote clarity and consistency among market participants 
thereby facilitating investor protection and the public interest.

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, as amended. The proposed rule 
change is not designed to address any competitive issues but rather to 
provide for the appropriate determination and dissemination of ex-
dates, to provide certainty as to which security holder will receive 
the corporate action consideration. The Exchange also believes that the 
proposed rule change will serve to promote clarity and consistency, as 
noted in the Statutory Basis section, thereby reducing burdens on 
competition and facilitating investor protection.

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 if consistent with the protection of investors 
and the public interest, the proposed rule change 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). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection

[[Page 51457]]

of investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay. The Commission believes 
that waiver of the operative delay is consistent with the protection of 
investors and the public interest because the Exchange's proposed rule 
change is substantially similar to a provision to another self-
regulatory organization's rules,\17\ and the Exchange's proposal does 
not raise any new or novel issues. Accordingly, the Commission hereby 
waives the 30-day operative delay requirement and designates the 
proposed rule change as operative upon filing.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ See NYSE Arca Rule 7.4-E.
    \18\ 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 to 
determine whether the proposed rule should be approved or disapproved.

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-2017-38 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-2017-38. 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. 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-2017-38, and should be 
submitted on or before November 27, 2017.

    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. 2017-24048 Filed 11-3-17; 8:45 am]
 BILLING CODE 8011-01-P