Document ID: SEC-2017-1490-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2017-09-06T04:00Z

[Federal Register Volume 82, Number 171 (Wednesday, September 6, 2017)]
[Notices]
[Pages 42141-42143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18796]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81502; File No. SR-IEX-2017-28]

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

August 30, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b19b-4 thereunder,\3\ notice is 
hereby given that, on August 16, 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 modify its Fee Schedule, pursuant 
to IEX Rule 15.110(a) to adopt pricing for orders that execute pursuant 
to Rule 11.231 (Regular Market Session Opening Process for Non-IEX-
Listed Securities). Changes to the Fee Schedule pursuant to this 
proposal are effective upon filing, and will be operative once the 
Exchange begins conducting the Regular Market Session Opening Process 
for Non-IEX-Listed Securities (the ``Opening Process'').\6\ 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 CFR 240.19b-4.
    \6\ See, IEX Trader Alert #2017-027 available at https://www.iextrading.com/trading/alerts/2017/027/.
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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 Exchange recently filed and the Commission approved a 
proposed rule change to Rule 11.231, which modified the Opening Process 
for non-IEX-listed securities.\7\ The Exchange proposes to update its 
Fee Schedule, pursuant to IEX Rule 15.110(a) and (c), to add a new Fee 
Code ``X'' to identify the fee applicable to certain orders that 
execute in the Opening Process. More specifically, orders that execute 
in the Opening Process will receive the new Fee Code X on execution 
reports as follows:
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    \7\ See Securities Exchange Act Release No. 81195 (July 24, 
2017), 82 FR 35250 (July 28, 2017) (SR-IEX-2017-11).
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     Execution reports for non-displayed orders resting on the 
Continuous Order Book that execute in the Opening Process will receive 
new Fee Code X rather than Fee Code I.\8\
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    \8\ The Exchange notes that orders taking or adding non-
displayed liquidity prior to or after the Opening Process, will 
continue to receive Fee Close I, either alone or in conjunction with 
other applicable Fee Codes.
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     Execution reports for displayed orders resting on the 
Continuous Order Book that execute in the Opening Process will continue 
to receive Fee Code L and will also receive new Fee Code X.
     Execution reports for all orders on the Cross Book \9\ 
that execute in the Opening Process will receive new Fee Code X.
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    \9\ See Rule 11.231(a).
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    The Exchange is proposing to charge fees that are analogous to 
existing fees for orders that execute in the Opening Process. 
Accordingly, non-displayed orders on the Continuous Order Book and 
orders on the Cross Book that are executed in the Opening Process will 
receive Fee Code X on their execution reports and will be subject to a 
fee of $0.0009 per share (or 0.30% of total dollar value of the 
transaction calculated as the execution price multiplied by the number 
of shares executed in the transaction for shares executed below $1.00). 
Further, orders that were displayed on the Continuous Order Book during 
the Pre-Market Session \10\ that are executed in the Opening Process 
will receive new Fee Code X and existing Fee Code L, and will not be 
charged a fee because, pursuant to the IEX Fee Schedule, to the extent 
a Member receives multiple Fee Codes on an execution, the lower fee 
shall apply.\11\
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    \10\ See Rule 1.160(z).
    \11\ See IEX Fee Schedule, Transaction Fees, bullet three.
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    The Exchange notes that the Internalization Fee, Displayed Match 
Fee for non-displayed orders that remove displayed liquidity, and the 
exception to the Non-Displayed Match Fee for displayable orders that 
remove non-displayed resting interest upon entry are not applicable to 
the Opening

[[Page 42142]]

Process. As discussed below in the Statutory Basis section, the Opening 
Process is a bulk execution without explicit counterparties.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \12\ of the Act in general, and furthers the 
objectives of Sections 6(b)(4) \13\ 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. The Exchange notes that it operates in a highly 
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    IEX believes that its proposed pricing for the Opening Process is 
reasonable and equitable because the Exchange is proposing to charge 
fees analogous to those already in place for orders executed on the 
Exchange during continuous trading,\14\ while also accounting for 
orders on the Cross Book executed in the Opening Process. Specifically, 
non-displayed orders resting on the Continuous Order Book during the 
Pre-Market Session that are executed in the Opening Process, as well as 
orders on the Cross Book that are executed in the Opening Process, will 
be charged the Opening Match Fee (which is equal to the existing Non-
Displayed Match Fee), while displayed orders on the Continuous Order 
Book in the Pre-Market Session executed in the Opening Process will be 
subject to the existing Displayed Match Fee.
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    \14\ See Securities Exchange Act Release No. 78550 (August 11, 
2016), 81 FR 54873 (August 17, 2016) (SR-IEX-2016-09).
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    The Exchange believes that it is appropriate, reasonable, and 
consistent with the Act to charge the Opening Match Fee (which is equal 
to the existing Non-Displayed Match Fee) to orders on the Cross Book 
that are executed in the Opening Process, because such orders 
(regardless of display instruction) are queued and not displayed prior 
to or during the Opening Process.\15\ Furthermore, as noted above, such 
fee is consistent with the fee currently charged by the Exchange for 
taking and providing non-displayed liquidity.
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    \15\ The Exchange notes that to the extent such orders are 
unexecuted after the Opening Process, the Exchange would display 
such orders consistent with their display instructions.
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    While the Displayed Match Fee applicable to executions during 
continuous trading also applies to a non-displayed order that removes 
liquidity from a displayed resting order as counterparty, in the 
context of the Opening Process (which is a bulk execution of multiple 
buy and sell orders at a single price), the Exchange does not believe 
that it is appropriate to provide the Displayed Match Fee to non-
displayed orders that execute in the Opening Process because there are 
no explicit counterparties in a bulk execution. Similarly, the Exchange 
does not believe that the exception to the Non-Displayed Match Fee for 
displayable orders that take resting interest upon entry is applicable 
in the context of the Opening Process since such orders are not able to 
remove resting interest on entry in the Opening Process, because they 
are either queued on the Cross Book and not displayed, or resting 
displayed on the Continuous Order Book.\16\ Furthermore, as noted above 
the Opening Process is a bulk execution of multiple buy and sell orders 
at a single price, and thus there are no counterparties to distinguish 
between liquidity provider and liquidity takers, or their respective 
display status.\17\
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    \16\ The Exchange notes that it is possible for a displayed 
order to remove non-displayed liquidity in the Pre-Market Session; 
however, such execution would not be part of the Opening Process, 
and would be subject to the exchanges existing fee schedule.
    \17\ See Rule 11.231(a).
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    IEX also believes that it is appropriate, reasonable, and 
consistent with the Act not to charge a fee for the execution of an 
order that was displayed on the Continuous Order Book during the Pre-
Market Session prior to the Opening Process. As with the existing fee 
structure for execution of transactions including displayed liquidity, 
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, as with the existing Displayed Match Fee, 
not charging a fee for such a previously displayed order 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.
    Further, the Exchange notes that the proposed fees are 
nondiscriminatory because they will apply uniformly to all Members and 
all Members have the opportunity to submit both displayed and non-
displayed orders for execution in the Opening Process. In addition, the 
Exchange believes that the proposed fees for the Opening Process are 
appropriate, reasonable, and consistent with the Act, because such fees 
are within the range of transaction charged by other exchanges for the 
opening process for non-listed securities.\18\ Further, although orders 
that execute in the Opening Process may be subject to different fees, 
for the reasons discussed in the Purpose section, the Exchange notes 
that other exchanges also charge differential pricing for orders that 
execute in their opening process.\19\
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    \18\ For example, the Nasdaq Stock Market charges fees ranging 
from $0.0015-$0.00085 for orders executed in the Nasdaq Opening 
Cross, including capping such fees at $35,000 per month for certain 
members, which includes crosses for listed and non-listed securities 
(see, https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2). Similarly, Bats EDGX Exchange 
charges $0.0010 for orders executed in the EDGX opening or re-
opening process for non-listed securities priced above $1.00 (see, 
http://www.bats.com/us/equities/membership/fee_schedule/edgx/).
    \19\ Id.
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    Additionally, the Exchange believes that its proposed Fee Code X, 
to be provided on execution reports, will provide transparency and 
predictability to Members as to the applicable transaction fees, 
because Members can determine which Fee Code is applicable to the 
execution of a particular order in the Opening Process.
    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 and in general to protect investors 
and the public interest. Further, IEX believes that its proposal does 
not raise any new or novel issues that have not previously been 
considered by the Commission in connection with the existing IEX fees 
or the fees of other national securities exchanges.

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 impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

[[Page 42143]]

To the contrary, the Exchange believes that the proposed pricing 
structure will increase competition and hopefully draw additional 
volume to the Exchange for the Opening Process. The Exchange operates 
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. 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.
    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 execute in 
the Opening Process 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.

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)(ii) \20\ of the Act.
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    \20\ 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) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 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-2017-28 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-2017-28. 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-2017-28, and should be 
submitted on or before September 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18796 Filed 9-5-17; 8:45 am]
 BILLING CODE 8011-01-P