Notice2023-17109
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Pursuant to IEX Rule 15.110 To Amend IEX's Fee Schedule
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Published
August 10, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 153 (Thursday, August 10, 2023)</title>
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[Federal Register Volume 88, Number 153 (Thursday, August 10, 2023)]
[Notices]
[Pages 54373-54375]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98063; File No. SR-IEX-2023-08]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Pursuant to
IEX Rule 15.110 To Amend IEX's Fee Schedule
August 4, 2023.
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 July 25, 2023, 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 Exchange. 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 Act,\4\
and Rule 19b-4 thereunder,\5\ IEX is filing with the Commission a
proposed rule change to amend the Exchange's fee schedule applicable to
Members \6\ (the ``Fee Schedule'') pursuant to IEX Rule 15.110(a) and
(c), to modify the fees applicable to executions of and with displayed
orders for securities priced at or above $1.00 per share. Changes to
the Fee Schedule pursuant to this proposal are effective upon
filing,\7\ and will be operative on September 1, 2023.
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ See IEX Rule 1.160(s).
\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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The text of the proposed rule change is available at the Exchange's
website at <a href="http://www.iextrading.com">www.iextrading.com</a>, 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 Exchange 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 Exchange 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
The Exchange proposes to modify its Fee Schedule, pursuant to IEX
Rule 15.110(a) and (c), to modify the fees applicable to executions of
and with displayed orders with an execution price at or above $1.00 per
share. The Exchange currently does not charge Members a fee for an
execution at or above $1.00 per share that provides displayed liquidity
and charges Members $0.0009 per share for an execution at or above
$1.00 per share that removes displayed liquidity.\8\
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\8\ See Investors Exchange Fee Schedule, available at <a href="https://www.iexexchange.io/resources/trading/fee-schedule">https://www.iexexchange.io/resources/trading/fee-schedule</a>.
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As proposed, for executions at or above $1.00 per share, Members
that enter displayed orders that provide liquidity will receive a
rebate of $0.0004 per share and Members that enter orders that remove
displayed liquidity will be charged a fee of $0.0010 per share, unless
a lower fee applies.\9\ The proposed fee change would also apply to
executions when the adding and removing orders originated from the same
Member.
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\9\ As discussed infra, if a Retail order removes displayed
liquidity, the Retail order would not be charged a fee.
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The Exchange provides the following Fee Codes on execution reports
to Members for executions of and with displayed liquidity: ``ML'' for
orders that provide displayed liquidity, ``MLS'' for orders that
provide displayed liquidity that executes against an order that
originated from the same Member, ``TL'' for orders that remove
displayed liquidity, and ``TLS'' for orders that remove displayed
liquidity added by the same Member.\10\ These existing Fee Codes will
continue to apply.
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\10\ See supra note 8.
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Specifically, the Exchange is proposing to make the following
changes to its Fee Schedule:
<bullet> Replace the words ``Effective January 2, 2023'' at the top
of the Fee Schedule with the words ``Effective July 25, 2023'' and on
the line immediately after, add ``New underlined text and deletions in
brackets will be operative on September 1, 2023'' (to indicate the date
the fees in this proposal will be operative).
<bullet> Modify the first bullet point under the ``Transaction
Fees'' header to specify that all fees identify the cost ``or rebate''
per share executed. And add a sentence stating that ``Rebates are
indicated by parentheses ().''
<bullet> In the ``Base Rates'' table, change the fee for executions
at or above $1.00 per share for Fee Code ML from ``FREE'' to
``($0.0004)''.
<bullet> In the ``Base Rates'' table, change the fee for executions
at or above $1.00 per share for Fee Code TL from ``$0.0009'' to
``$0.0010''.
<bullet> In the ``Fee Code Combinations and Associated Fees''
table, change the fee for executions at or above $1.00 per share for
Fee Code ML from ``FREE'' to ``($0.0004)''.
<bullet> In the ``Fee Code Combinations and Associated Fees''
table, change the fee for executions at or above $1.00 per share for
Fee Code TL from ``$0.0009'' to ``$0.0010''.
<bullet> In the ``Fee Code Combinations and Associated Fees''
table, change the fee for executions at or above $1.00 per share for
Fee Code MLS from ``FREE'' to ``($0.0004)''.
<bullet> In the ``Fee Code Combinations and Associated Fees''
table, change the fee for executions at or above $1.00 per share for
Fee Code TLS from ``$0.0009'' to ``$0.0010''.
The Exchange is not proposing to change the fees applicable to
executions of and with displayed orders with an execution price below
$1.00 per share, which would remain free for such orders that provide
displayed liquidity and 0.09% of the total dollar volume of the
execution for orders that take displayed liquidity. IEX is also not
proposing to make any changes to the fees applicable to the execution
of
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Retail \11\ orders that remove displayed liquidity, which will continue
to execute for free.
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\11\ See IEX Rule 11.190(b)(15).
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The current fees for orders that provide or take displayed
liquidity were adopted in 2021 and designed to attract displayed order
flow to the Exchange by offering a fee-based incentive to provide
displayed liquidity.\12\ The Exchange periodically assesses its fee
structure and based upon a recent assessment, the Exchange believes
that the proposed pricing change would further incentivize Members to
submit displayed orders in securities priced at or above $1.00 per
share. The proposed fee change is designed to incentivize posting
displayed liquidity on IEX in securities priced at or above $1.00 per
share in order to address competitive factors (as discussed more
thoroughly in the Statutory Basis section) and facilitate price
discovery and price formation, which the Exchange believes benefits all
Members and market participants.
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\12\ See Securities Exchange Act Release No. 91443 (March 30,
2021), 86 FR 17654 (April 5, 2021) (SR-IEX-2021-05).
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2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of section 6(b) \13\ of the Act in general, and furthers the
objectives of sections 6(b)(4) \14\ 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 believes that the proposed fee change is
reasonable, fair and equitable, and non-discriminatory. The Exchange
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. The Exchange believes
that the proposed fee structure will attract and incentivize displayed
order flow as well as order flow seeking to trade with displayed order
flow. Moreover, increases in displayed liquidity would contribute to
the public price discovery process which would benefit all market
participants and protect investors and the public interest.
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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed fee structure for providing
and removing displayed liquidity is reasonable and consistent with the
Act. Specifically, the Exchange believes that for securities that trade
at or above $1.00 per share, it is reasonable to provide a $0.0004 per
share rebate for providing displayed liquidity and to modestly increase
the fee for removing displayed liquidity to $0.0010 per share. As noted
above, the Exchange 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. Within
that context, charging $0.0010 per share for orders that remove
displayed liquidity (coupled with a $0.0004 per share rebate for orders
that add displayed liquidity) is designed to keep IEX's displayed
trading prices competitive with those of other exchanges. In this
regard, IEX notes that while many competing exchanges pay rebates to
provide displayed liquidity that are substantially higher than those
proposed, others charge fees to provide displayed liquidity for
securities that trade at or above $1.00 per share.\15\ Further, IEX
notes that for securities that trade at or above $1.00 per share, many
competing exchanges charge substantially higher fees to remove
displayed liquidity than those charged by IEX.\16\ Consequently, IEX
believes that the proposed fee structure for providing and removing
displayed liquidity is within the range charged by competing exchanges
and does not raise any new or novel issues not already considered by
the Commission in the context of other exchanges' fees.
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\15\ See e.g., Nasdaq BX Equity 7 Section 118(a) (up to $0.0030
fee per share to add displayed liquidity), available at <a href="https://listingcenter.nasdaq.com/rulebook/bx/rules/BX%20Equity%207">https://listingcenter.nasdaq.com/rulebook/bx/rules/BX%20Equity%207</a>; Cboe BYX
Equities Fee Schedule (up to $0.0020 fee per share to add displayed
liquidity, available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/byx/">https://www.cboe.com/us/equities/membership/fee_schedule/byx/</a>; Cboe EDGA Equities Fee Schedule (up to $0.0030
fee per share to add displayed liquidity, available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edga/">https://www.cboe.com/us/equities/membership/fee_schedule/edga/</a>.
\16\ See e.g., Cboe BZX Equities Fee Schedule (up to $0.0030 fee
per share to remove displayed liquidity), available at <a href="https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/">https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/</a>; MIAX
Pearl Equities Exchange Fee Schedule (up to $0.00295 fee per share
for liquidity removing executions), available at <a href="https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Equities_Fee_Schedule_07112023.pdf">https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Equities_Fee_Schedule_07112023.pdf</a>; MEMX Fee Schedule (up
to $0.0030 fee per share for liquidity removing executions),
available at <a href="https://info.memxtrading.com/fee-schedule/">https://info.memxtrading.com/fee-schedule/</a>; Nasdaq
Equity 7 Section 118(a) (up to $0.0030 fee per share for any
liquidity removing executions), available at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7</a>; New
York Stock Exchange Price List 2023 (up to $0.0030 per share for
liquidity removing executions), available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>.
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In addition, IEX believes that it is reasonable and consistent with
the Act to apply the proposed fees to executions when the adding and
removing order originated from the same Member. IEX believes that the
same factors that support the proposed fees overall, are also
applicable to such executions. Specifically, IEX believes that the
incentives to send displayed orders to IEX (and orders seeking to
execute against displayed orders) will similarly provide an incentive
to Members to send orders to IEX that might otherwise be internalized
off-exchange, which may increase order interaction on IEX.
Internalization on IEX is not guaranteed, and the additional orders
that do not internalize are available to trade by all Members.
The Exchange also believes that it is reasonable and consistent
with the Act not to modify its displayed fees for sub-dollar executions
to synchronize those fees with the proposed fees for executions at or
above $1.00 per share. The Exchange believes that the existing fee
structure for such executions continues to be reasonably designed to
incentivize displayed order flow (and orders seeking to trade with
displayed order flow) in such securities.
Further, IEX believes that it is reasonable and consistent with the
Act not to change the fees applicable to the execution of Retail orders
that remove liquidity, which will continue to execute for free. In this
regard, the Exchange believes that the existing fee structure continues
to be reasonably designed to incentivize the entry of Retail orders,
and notes that the Commission, in approving IEX's Retail Price
Improvement Program, acknowledged the value of exchanges' offering
incentives to attract both retail investor orders and orders
specifically designated to execute only with retail orders.\17\
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\17\ See Securities Exchange Act Release No. 86619 (August 9,
2019), 84 FR 41769, 41771 (August 15, 2019) (SR-IEX-2019-05).
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The Exchange further believes that the proposed fee change is
consistent with the Act's requirement that the Exchange provide for an
equitable allocation of fees that is also not unfairly discriminatory.
First, the fees for adding and removing displayed liquidity will
apply on a per share basis in an equal and nondiscriminatory manner to
all Members, without regard to the volume of orders submitted by a
Member or other factors.
Second, because the fees would apply on a flat, per share basis--
like IEX's existing fees--they will continue to be fully deterministic,
in that a Member will be able to determine the Exchange fees for each
execution. IEX believes this aspect of its fee proposal will assist all
Members in making decisions about routing of orders without the
uncertainties associated with volume tiers or other requirements that
cannot
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be determined at the time of the trade. IEX notes that applying fees in
this way is consistent with the purpose of the Commission's proposal to
require that exchange fees be set in a manner such that the amount of a
fee or rebate related to each trade is determinable at the time of the
trade.\18\
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\18\ See Securities Exchange Act Release No. 96494 (December 14,
2022), 87 FR 80266, 80292-93 (December 29, 2022) (File No. S7-30-
22).
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Additionally, the Exchange believes that it is reasonable to modify
the first bullet under ``Transaction Fees'' to include a reference to
rebates and to specify that rebates are indicated by parentheses.
Updating this bullet point will avoid any potential confusion as to the
applicable fees and rebates for each execution.
Finally, to the extent the proposed change is successful in
incentivizing the entry and execution of displayed orders on IEX, such
greater liquidity will benefit all market participants by increasing
price discovery and price formation as well as market quality and
execution opportunities.
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. 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 between Members or
competing venues. Moreover, as noted in the Statutory Basis section,
the Exchange does not believe that the proposed changes raise any new
or novel issues not already considered by the Commission.
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 match or
on the volume of orders submitted by a Member but on the type of order
entered, and all Members can submit any type of order and will be
subject to the same fee for that type of order. IEX believes that
applying a flat, per share fee or rebate for each type of order avoids
imposing a burden on competition by ensuring that individual Members do
not gain a competitive advantage over other Members based solely on
their size or volume of orders they are able to submit to the Exchange.
Further, the proposed fee changes continue to be intended to encourage
market participants to bring increased order flow 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 is effective upon filing pursuant to
section 19(b)(3)(A) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7f0d0a131a521c1012121a110b0c3f0c1a1c51181009"><span class="__cf_email__" data-cfemail="b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce">[email protected]</span></a>. Please include
file number SR-IEX-2023-08 on the subject line.
Paper Comments
<bullet> 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-2023-08. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-IEX-2023-08 and should be
submitted on or before August 31, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17109 Filed 8-9-23; 8:45 am]
BILLING CODE 8011-01-P
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