Notice2023-26004
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
November 27, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 226 (Monday, November 27, 2023)</title>
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[Federal Register Volume 88, Number 226 (Monday, November 27, 2023)]
[Notices]
[Pages 82936-82939]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-26004]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98994; File No. SR-IEX-2023-12]
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
November 20, 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 November 7, 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 Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ IEX is
filing with the Commission a proposed rule change to amend its Fee
Schedule,\6\ pursuant to IEX Rule 15.110(a) and (c) (the ``Fee
Schedule''), to revise the fees applicable to transactions that add or
remove non-displayed liquidity from the same
[[Page 82937]]
Member,\7\ and to make conforming changes to the ``Fee Code Modifiers''
and ``Fee Code Combinations and Associated Fees'' sections of the Fee
Schedule. Changes to the Fee Schedule pursuant to this proposal are
effective upon filing,\8\ and the Exchange plans to implement the
changes on January 1, 2024.
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ See the IEX Fee Schedule at <a href="https://www.iexexchange.io/resources/trading/fee-schedule">https://www.iexexchange.io/resources/trading/fee-schedule</a> for the complete list of fee code
combinations and their corresponding fees.
\7\ See IEX Rule 1.160(s).
\8\ 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 amend its Fee Schedule, pursuant to IEX
Rule 15.110(a) and (c), to revise the fees applicable to transactions
that add or remove resting non-displayed liquidity from the same Member
(the ``internalization fee''). Currently such executions are free. As
proposed, they would be subject to existing fees applicable to adding
or removing non-displayed liquidity by different Members. IEX also
proposes to revise the Fee Schedule to delete Fee Code Modifier ``S''
that applies when a Member executes against resting liquidity added by
such Member and to make conforming changes to the ``Fee Code
Combinations and Associated Fees'' section of the Fee Schedule. Changes
to the Fee Schedule pursuant to this proposal are effective upon
filing,\9\ and the Exchange plans to implement the changes on January
1, 2024.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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As proposed, IEX will remove Fee Code Modifier S and the seven (7)
Fee Code Combinations that contain Fee Code Modifier S from the IEX Fee
Schedule. As described below, two (2) of the seven (7) Fee Code
Combinations (MIS and TIS) currently result in a free execution for
both the adding and removing orders of an execution, and as proposed
will be replaced with existing Fee Code Combinations that do not
include Fee Code Modifier S and thereby be subject to the regular fees
for adding or removing non-displayed liquidity specified in such Fee
Code Combinations. The remaining five (5) Fee Code Combinations would
be replaced with existing Fee Code Combinations that do not include Fee
Code Modifier S but would not result in a fee change.
<bullet> Fee Code Combination MIS, which applies when a Member adds
resting non-displayed liquidity that executes against such Member's
removing interest and is currently free, would be deleted; such
executions would be subject to Fee Code Combination MI, which results
in a fee of $0.0010 per share for executions priced at or above $1.00
per share or 0.10% of the total dollar value of the transaction for
executions priced below $1.00 per share.
<bullet> Fee Code Combination TIS, which applies when a Member
removes resting non-displayed liquidity added by such Member and is
currently free, would be deleted; such executions would be subject to
Fee Code Combination TI, which results in a fee of $0.0010 per share
for executions priced at or above $1.00 per share or 0.10% of the total
dollar amount of the transaction for executions priced below $1.00 per
share.
<bullet> Fee Code Combination MLS, which applies when a Member's
order adds displayed liquidity that executes against such Member's
removing interest, would be deleted; such executions would be subject
to Fee Code Combination ML and would continue to result in a rebate of
$0.0004 per share for executions priced at or above $1.00 per share or
no fee (i.e., free) for executions priced below $1.00 per share.
<bullet> Fee Code Combination TLS, which applies when a Member
removes displayed liquidity added by such Member, would be deleted;
such executions would be subject to Fee Code TL, which would continue
to result in a fee of $0.0010 per share for executions priced at or
above $1.00 per share or 0.09% of the total dollar value of the
transaction for executions priced below $1.00 per share.
<bullet> Fee Code Combinations TLSR and TISR, which apply when a
Retail \10\ order removes displayed or non-displayed liquidity,
respectively, from orders entered by the same Member, would be deleted;
such executions would be subject to Fee Code Combinations TLR and TIR,
respectively, and would continue to result in a free execution, like
all other executions of Retail orders.
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\10\ See IEX Rule 11.190(b)(15).
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<bullet> Fee Code Combination MISA, which applies when a Retail
Liquidity Provider \11\ order adds non-displayed liquidity that
executes against a Retail order entered by the same Member, would be
deleted; such executions would be subject to Fee Code Combination MIA,
which would continue to result in a free execution, like all other
executions of Retail Liquidity Provider orders.
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\11\ See IEX Rule 11.190(b)(14).
Thus, the only fees that would change under this proposal are for the
fees currently charged for orders that add or remove non-displayed
liquidity submitted by the same Member, which would now be charged the
same $0.0010 fee per share that is charged for all other orders that
add or remove non-displayed liquidity.\12\
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\12\ As noted above, for executions priced below $1.00 per
share, the fee would be 0.10% of the total dollar amount value of
the transaction. Also, as noted above, executions of Retail orders
and Retail Liquidity Provider orders will continue to be free of
charge.
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The internalization fee was initially adopted when IEX launched as
a national securities exchange and was designed to incentivize Members
(and their customers) to send orders to IEX that might otherwise be
internalized off exchange with the overall goals of, among other
things, enhancing order interaction on the Exchange with the resultant
benefit of exchange transparency, regulation, and oversight. While the
internalization fee initially applied to executions that added or
removed displayed and non-displayed interest from the same Member, it
currently only applies to executions that add or remove non-displayed
interest from the same Member.\13\ The Exchange believes that the
internalization fee was initially an appropriate means to incentivize
order entry on IEX, but that in the current market structure
environment there are myriad factors that impact order routing
decisions and the internalization fee has not operated as a meaningful
incentive. Consequently, IEX believes that impacted orders should be
subject to the
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same fee structure as other IEX executions.
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\13\ See Securities Exchange Act Release No. 91443 (March 30,
2021), 86 FR 17654 (April 5, 2021) (SR-IEX-2021-05), which revised
the application of the internalization fee, so that it only provided
a free execution when a Member added or removed non-displayed
interest from the same Member.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Section 6(b)(4) \15\ of the Act, in particular, in that
it is designed to provide for the equitable allocation of reasonable
fees among IEX Members and persons using its facilities. Additionally,
IEX believes that the proposed changes to the Fee Schedule are
consistent with the investor protection objectives of Section 6(b)(5)
\16\ of the Act, in particular, in that they are 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; and are not designed to permit
unfair discrimination between customers, brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4).
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes are reasonable,
fair and equitable, non-discriminatory, and consistent with the Act.
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 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.
As proposed, the fees for adding and removing non-displayed liquidity
will apply in an equal and nondiscriminatory manner to all Members. All
Members are eligible to enter non-displayed orders and orders that
remove non-displayed liquidity, and the proposed fee structure will
apply to all Members in the same manner.
IEX notes that other exchanges do not offer free executions for the
execution of orders entered by the same Member. Consequently, IEX does
not believe that its proposed fee structure for adding and removing
non-displayed liquidity entered by the same Member raises any new or
novel issues that the Commission has not already considered in the
context of other exchanges' fees.
In addition, the Exchange believes that it is reasonable and
consistent with the Act to delete Fee Code Modifier S and the Fee Code
Combinations and Associated Fees that include Fee Code Modifier S, as
described in the Purpose section, to reflect the proposed fee changes
and to provide information to Members on the relevant charges.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose 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 fees 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 easily direct their orders to
competing venues, including off-exchange venues, if its fees are viewed
as non-competitive. As proposed, IEX fees for executions that add or
remove non-displayed liquidity will continue to be below fees charged
by competing exchanges.\17\ Moreover, subject to the SEC rule filing
process, other exchanges could adopt similar fees.
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\17\ See e.g., Cboe BZX Equities Fee Schedule (up to $0.0030 fee
per share to remove non-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 non-displayed liquidity removing executions), available at
<a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_11012023.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_11012023.pdf</a>; MEMX Fee Schedule (up
to $0.0030 fee per share for non-displayed liquidity removing
executions), available at <a href="https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/">https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/</a>; Nasdaq Equity 7 Section
118(a) (up to $0.0030 fee per share for any non-displayed 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 non-displayed 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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The Exchange also 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. The proposed
fees will apply to all Members in the same manner, as discussed in the
Statutory Basis section. Accordingly, the Exchange does not believe
that these changes will have any impact on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 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#a3d1d6cfc68ec0cccecec6cdd7d0e3d0c6c08dc4ccd5"><span class="__cf_email__" data-cfemail="394b4c555c145a5654545c574d4a794a5c5a175e564f">[email protected]</span></a>. Please include
file number SR-IEX-2023-12 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-2023-12. 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
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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-2023-12 and should be submitted on
or before December 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26004 Filed 11-24-23; 8:45 am]
BILLING CODE 8011-01-P
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