Notice2024-08682
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Fee Schedule Concerning Transaction Fees for Tape B Securities
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 24, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 80 (Wednesday, April 24, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 80 (Wednesday, April 24, 2024)]
[Notices]
[Pages 31231-31236]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08682]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99989; File No. SR-IEX-2024-06]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Fee Schedule Concerning Transaction Fees for Tape B
Securities
April 18, 2024.
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 April 8, 2024, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 the
Exchange's fee schedule applicable to Members \6\ (the ``Fee
Schedule'') pursuant to IEX Rule 15.110(a) and (c). Changes to the Fee
Schedule pursuant to this proposal are effective upon filing,\7\ and
will be operative on May 1, 2024.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 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
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 transaction fees applicable to
most \8\ displayed executions of Tape B securities.\9\ As proposed, the
Exchange will increase the rebate paid for executions of displayed
liquidity adding orders in Tape B securities with an execution price of
$1.00 per share or more from $0.0004 to $0.0014 per share, increase the
fee for executions of most \10\ displayed liquidity removing orders in
Tape B securities from $0.0010 to $0.0020 per share (unless a lower fee
applies), and introduce two new fee codes to reflect these fee changes.
IEX is not proposing any changes to executions that add or remove non-
displayed liquidity in Tape B securities, which will continue to be
subject to the same fees charged for executions in Tape A and C
securities.\11\ The Exchange notes that other exchanges also offer
different fees for Tape B executions that are designed to incentivize
the posting of displayed liquidity in Tape B securities.\12\ IEX's
proposed fee structure for executions of Tape B securities is less than
or in line with other exchanges, but with lower access fees and rebates
and without the use of any volume-based pricing.\13\
---------------------------------------------------------------------------
\8\ This fee proposal will not change the fees charged or fee
codes applied for Retail and Retail Liquidity Providing executions
of Tape B securities, which execute for free. Additionally, while
the fee proposal includes a fee code change for all other executions
of Tape B securities that are priced at less than $1.00 per share,
the fees charged for such executions will not change. Finally, as
described infra, certain pegged order types that by design are not
likely to interact with displayed liquidity will not be subject to
the increased fees charged for taking displayed liquidity in Tape B
securities.
\9\ ``Tape B securities'' are securities listed on any national
securities exchange other than the New York Stock Exchange or The
Nasdaq Stock Market.
\10\ See supra note 5.
\11\ As discussed below, IEX is proposing to introduce a new fee
code that will apply to non-displayed adding or removing executions
of Tape B securities, but the fees charged for these executions will
be unchanged.
\12\ See, e.g., MEMX Equities Fee Schedule (effective April 1,
2024), 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> (paying an ``additive rebate''
of $0.0002 per share for Tape B securities if the member satisfies a
volume threshold in its Tape B trades, but offering no similar
rebate for Tape A or C securities); Nasdaq Equity 7, Section
118(a)(1), available at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Equity%207#section_118_nasdaq_market_center_order_execution_and_routing">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Equity%207#section_118_nasdaq_market_center_order_execution_and_routing</a> (paying a supplemental rebate of $0.0001 per share for
Tape B displayed liquidity providing orders, but offering no similar
rebate for Tape A or C securities).
\13\ See, e.g., MEMX Equities Fee Schedule, supra, note 9
(offering rebates for adding displayed Tape B liquidity of $0.0015
to $0.0035, depending upon trading volume, and charging as much as
$0.0030 to remove Tape B liquidity); Nasdaq Equity 7, Section
118(a)(1), supra, note 9 (offering rebates for adding displayed Tape
B liquidity of $0.0028 to $0.0036, depending upon trading volume,
and charging as much as $0.0030 to remove Tape B liquidity).
---------------------------------------------------------------------------
IEX is making this proposal to incentivize the posting of displayed
liquidity in Tape B securities by increasing the rebate applied to
those orders, thereby promoting price discovery and market quality on
the Exchange, which the Exchange believes benefits all Members and
market participants. The Exchange periodically assesses its fee
structure. Based upon a recent assessment, the Exchange believes that
the proposed pricing change would further incentivize Members to submit
displayed orders in Tape B securities priced at or above $1.00 per
share.
[[Page 31232]]
Fee Schedule Changes
IEX proposes to increase the rebate it pays for adding displayed
liquidity in Tape B securities from $0.0004 per share to $0.0014 per
share for executions priced at or above $1.00 per share. ``Sub-dollar''
\14\ executions of Tape B securities that add displayed liquidity will
continue to execute for free. Consistent with the higher rebate IEX
will pay for adding displayed liquidity in Tape B securities, IEX
proposes to increase the fee for removing displayed liquidity in Tape B
securities from $0.0010 per share to $0.0020 per share. Sub-dollar
executions of Tape B securities that remove displayed liquidity will
continue to be charged 0.09% of the Total Dollar Value (``TDV'') of the
execution.
---------------------------------------------------------------------------
\14\ ``Sub-dollar'' refers to orders or executions priced at
less than $1.00 per share.
---------------------------------------------------------------------------
IEX does not propose to change the fee ($0.0010 per share)
currently applicable to Discretionary Peg (``D-Peg''),\15\ Fixed
Midpoint Peg (``FM-Peg''),\16\ Midpoint Peg (``M-Peg),\17\ or Primary
Peg (``P-Peg'') \18\ orders that remove displayed liquidity in Tape B
securities. IEX notes that each of these four order types is designed
to execute within the spread (i.e., at a price between the NBBO \19\).
IEX understands that Members and other market participants typically
use these order types with the expectation that they will either add or
remove non-displayed liquidity, and that they will not execute against
displayed liquidity. However, these four order types may execute
against displayed orders in certain ``edge case'' scenarios, such as
when a resting D-Peg order is invited to Recheck the Order Book \20\
and matches with a displayed odd lot order, or when an incoming M-Peg
order matches with a displayed order standing its ground in a locked or
crossed market. Currently, in these circumstances, the non-displayed
pegged order is charged the same fee (i.e., $0.0010 per share) as if it
traded with a non-displayed order (Fee Code Combination TL). To provide
greater fee determinism to its Members and consistent with current
practice, IEX proposes to continue charging $0.0010 per share for D-
Peg, FM-Peg, M-Peg, and P-Peg orders that remove displayed liquidity in
a Tape B security in one of the above-listed circumstances.
---------------------------------------------------------------------------
\15\ See IEX Rule 11.190(b)(10).
\16\ See IEX Rule 11.190(b)(19).
\17\ See IEX Rule 11.190(b)(9).
\18\ See IEX Rule 11.190(b)(8).
\19\ See IEX Rule 1.160(u).
\20\ See IEX Rule 11.230(a)(4)(D).
---------------------------------------------------------------------------
Notwithstanding this exception, if an incoming Post Only \21\ order
for a Tape B security executes against a resting M-Peg or FM-Peg order
with the Trade Now \22\ instruction, IEX proposes to charge the M-Peg
or FM-Peg order a fee of $0.0020 per share, not the $0.0010 per share
fee that would otherwise apply had the M-Peg or FM-Peg order executed
against a displayed order for a Tape B security. IEX is proposing to
make this distinction because Members that include a Trade Now
instruction on their M-Peg or FM-Peg orders have thereby specified
their willingness to match with incoming Post Only orders, and thus
indicated their willingness to pay the $0.0020 per share fee IEX will
charge for taking displayed liquidity in Tape B securities.
---------------------------------------------------------------------------
\21\ See IEX Rule 11.190(b)(20).
\22\ When an incoming Post Only order matches a resting order
with a Trade Now instruction, the resting order converts into an
executable order that removes liquidity against the incoming Post
Only order, and the incoming Post Only order becomes the liquidity
adding order. See IEX Rule 11.190(b)(21). A Trade Now instruction
cannot be added to a D-Peg or P-Peg order. See IEX Rules
11.190(b)(8) and 11.190(b)(10).
---------------------------------------------------------------------------
IEX is not proposing to change the fees charged or fee codes
applied to Retail \23\ or Retail Liquidity Provider \24\ orders that
execute in Tape B securities. Thus, a Retail order that takes liquidity
from a non-displayed order in a Tape B security will be assigned Fee
Code Combination TIR (free execution), and the non-displayed order will
be assigned Fee Code Combination MIB (fee of $0.0010 per share).
Relatedly, a Retail order that takes liquidity from a displayed odd lot
order in a Tape B security will be assigned Fee Code Combination TLR
(free execution), and the displayed odd lot order will be assigned Fee
Code Combination MLB (rebate of $0.0014 per share).
---------------------------------------------------------------------------
\23\ See IEX Rule 11.190(b)(15).
\24\ See IEX Rule 11.190(b)(14). Retail Liquidity Provider
orders can only match with Retail orders and will always be assigned
Fee Code Combination MIA (free execution), irrespective of if the
execution is a Tape B security.
---------------------------------------------------------------------------
IEX also proposes to introduce two new Fee Code Modifiers: ``B''
and ``K'' to reflect the proposed fee changes. Fee Code Modifier B
would be included on any execution report for an execution of a Tape B
security, with the exception of executions of Retail and Retail
Liquidity Provider orders, which will continue to execute for free, as
described above. In addition, Fee Code Modifier K would be included on
execution reports for D-Peg, FM-Peg, M-Peg, or P-Peg orders that remove
displayed liquidity in a Tape B security in the circumstances discussed
above.
IEX also proposes to add two new footnotes to the Fee Schedule: (i)
proposed Footnote 2, which would apply to Fee Code Modifier B, and (ii)
proposed Footnote 3, which would apply to Fee Code Combination TLBK.
Proposed Footnote 2 reads in full:
Fee Code B: Fee Code B applies to all executions of Tape B
securities, other than executions of Retail and Retail Liquidity
Provider orders and executions with Base Fee Codes X, O, C, H, and
P.\25\
---------------------------------------------------------------------------
\25\ Fee Code X applies to securities that trade in the Opening
Cross. Fee Codes O, C, H, and P are the Auction Match fee codes. As
reflected in proposed footnote 2, these fee codes will continue to
apply to Tape B securities.
---------------------------------------------------------------------------
And Proposed Footnote 3 reads in full:
TLBK will not apply to Midpoint Peg and Fixed Midpoint Peg
orders with Trade Now functionality enabled that take liquidity from
an incoming Post Only order for a Tape B security; such executions
will be assigned Fee Code Combination TLWB.
IEX proposes to add these Fee Codes to the Fee Code Modifiers table
on the IEX Fee Schedule as follows (internal footnotes omitted):
------------------------------------------------------------------------
Additional fee codes Description Fee
------------------------------------------------------------------------
B........................... Tape B security..... See Relevant Fee
Code Combinations
Below.
K........................... Discretionary Peg, See Relevant Fee
Fixed Midpoint Peg, Code Combinations
Midpoint Peg, or Below.
Primary Peg order
removes displayed
liquidity (Tape B).
------------------------------------------------------------------------
Additionally, IEX proposes to add nine new Fee Code Combinations to
the Additional Fee Code Combinations and Associated Fees table that
reflect the fees IEX proposes to assess for executions involving a Tape
B security: \26\
---------------------------------------------------------------------------
\26\ As described above, all nine of the following Fee Code
Combinations will be modified by proposed footnote 2.
---------------------------------------------------------------------------
[[Page 31233]]
<bullet> Fee Code Combination MIB would apply to an order that adds
non-displayed liquidity in a Tape B security. These executions will be
charged a fee of $0.0010 per share for executions at or above $1.00 and
0.10% of the TDV for sub-dollar executions.
<bullet> Fee Code Combination MLB would apply to an order that adds
displayed liquidity in a Tape B security. These executions will be paid
a rebate of $0.0014 per share for executions at or above $1.00 and
execute for free for sub-dollar executions.
<bullet> Fee Code Combination MLYB would apply to a Post Only order
that executes on entry with a contra-side order with the Trade Now
instruction in a Tape B security. These executions will be paid a
rebate of $0.0014 per share. Because the Exchange will disregard the
Post Only instruction on sub-dollar orders,\27\ IEX proposes to have
the ``Executions below $1.00'' column of the Additional Fee Code
Combinations and Associated Fees table column read ``N/A''.\28\
---------------------------------------------------------------------------
\27\ See IEX Rule 11.190(b)(20)(A).
\28\ An incoming sub-dollar order for a Tape B security with a
disregarded Post Only instruction will not trigger a resting order
with the ``Trade Now'' instruction to become the taking order and
will not be treated as the displayed liquidity adding order. Thus,
Fee Code Combination MLYB would never apply. If the incoming order
matched with a resting non-displayed or displayed order, it will
result in a Fee Code Combination of TLB or TIB, with fees of 0.09%
or 0.10% of TDV, respectively.
---------------------------------------------------------------------------
<bullet> Fee Code Combination TIB would apply to an order that
removes non-displayed liquidity in a Tape B security. These executions
will be charged a fee of $0.0010 per share for executions at or above
$1.00 and 0.10% of TDV for sub-dollar executions.
<bullet> Fee Code Combination TIYB would apply to a Post Only order
priced at $1.00 or more that removes non-displayed liquidity in a Tape
B security on entry. These executions will be charged a fee of $0.0010
per share for executions at or above $1.00. Because the Exchange will
disregard the Post Only instruction on sub-dollar orders,\29\ IEX
proposes to have the ``Executions below $1.00'' column of the
Additional Fee Code Combinations and Associated Fees table read ``N/
A''.\30\
---------------------------------------------------------------------------
\29\ See supra note 24.
\30\ An incoming sub-dollar order with a disregarded Post Only
instruction that executes on entry with a resting non-displayed
order will result in a Fee Code Combination of TIB (``Removes non-
displayed liquidity (Tape B)'') on the execution report and be
charged the normal sub-dollar dark taking fee of 0.10% of the Total
Dollar Value (``TDV'').
---------------------------------------------------------------------------
<bullet> Fee Code Combination TLB would apply to an order that
removes displayed liquidity in a Tape B security. These executions will
be charged a fee of $0.0020 per share for executions at or above $1.00
and 0.09% of TDV for sub-dollar executions.
<bullet> Fee Code Combination TLBK would apply to a D-Peg, FM-Peg,
M-Peg, or P-Peg order that removes displayed liquidity in a Tape B
security. These executions will be charged a fee of $0.0010 per share
for executions at or above $1.00 and 0.09% of TDV for sub-dollar
executions. As described above, Fee Code Combination TLBK will be
modified by proposed footnote 2, which explains that M-Peg and FM-Peg
orders with a Trade Now instruction that execute against an incoming
Post Only order will be assigned Fee Code Combination TLWB, and will
not be assigned Fee Code Combination TLBK.
<bullet> Fee Code Combination TLYB would apply to a Post Only order
priced at $1.00 or more that removes displayed liquidity on entry in a
Tape B security. These executions will be charged a fee of $0.0020 per
share. Because the Exchange will disregard the Post Only instruction on
sub-dollar orders,\31\ IEX proposes to have the ``Executions below
$1.00'' column of the Additional Fee Code Combinations and Associated
Fees table read ``N/A''.\32\
---------------------------------------------------------------------------
\31\ See supra note 24.
\32\ An incoming sub-dollar order with a disregarded Post Only
instruction that executes on entry with a resting displayed order
will result in a Fee Code Combination of TLB (``Removes displayed
liquidity (Tape B)'') on the execution report and be charged the
normal sub-dollar lit taking fee of 0.09% of the TDV.
---------------------------------------------------------------------------
<bullet> Fee Code Combination TLWB would apply to a resting non-
displayed order with the Trade Now instruction that executes against an
incoming Post Only order priced at $1.00 or more per share. These
executions will be charged a fee of $0.0020 per share. Because the
Exchange will disregard the Post Only instruction on an incoming sub-
dollar orders,\33\ that order will not trigger a resting order with the
``Trade Now'' instruction to become the taking order. Therefore, Fee
Code Combination TLWB would never apply to a resting non-displayed
order that matches with an incoming sub-dollar order with a Post Only
instruction, and IEX proposes to have the ``Executions below $1.00''
column of the Additional Fee Code Combinations and Associated Fees
table column read ``N/A''.
---------------------------------------------------------------------------
\33\ See supra note 24.
---------------------------------------------------------------------------
2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \34\ of the Act in general and furthers the
objectives of Sections 6(b)(4) \35\ 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.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f.
\35\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
IEX has concluded that, in the context of current regulatory
requirements governing access fees and rebates, it is not able to
sufficiently compete with other exchanges for order flow in Tape B
securities without offering higher rebate incentives. Based on informal
discussions with market participants, IEX believes that Members and
other market participants may be more willing to send displayed orders
in Tape B securities to IEX if the proposed fee structure was adopted.
Accordingly, IEX has designed the proposed access fee and rebate to
attract and incentivize displayed orders in Tape B securities as well
as order flow seeking to trade with such displayed orders. Moreover,
increases in displayed liquidity of Tape B securities would contribute
to the public price discovery process which would benefit all market
participants and protect investors and the public interest.
As it has stated repeatedly, IEX believes that the existing access
fee level of $0.0030 per share set by Rule 610 of Regulation NMS \36\
heavily affects the way that exchanges compete for order flow and has
led to various market distortions and inefficiencies. It has also
created a collective action problem that substantially hinders the
ability of exchanges to compete by offering better execution quality
and without relying on high access fees and correspondingly high
rebates. The Commission can resolve this problem and help to promote
more displayed liquidity by adjusting the access fee cap to $0.0010 per
share, a level consistent with other market-based trading cost measures
and one favored by a broad spectrum of market participants and
virtually all institutional investors that have commented on this
issue.\37\ IEX hopes to be able to further adjust its transaction
prices in the near future to reflect a market-wide adoption of lower
access fees as a result of this critically-needed reform.
---------------------------------------------------------------------------
\36\ 17 CFR 242.610
\37\ See IEX comment letters on S7-30-22, Regulation NMS:
Minimum Pricing Increments, Access Fees, and Transparency of Better-
Priced Orders: <a href="https://www.sec.gov/comments/s7-30-22/s73022-20160364-328968.pdf">https://www.sec.gov/comments/s7-30-22/s73022-20160364-328968.pdf</a>; <a href="https://www.sec.gov/comments/s7-30-22/s73022-276579-672162.pdf">https://www.sec.gov/comments/s7-30-22/s73022-276579-672162.pdf</a>; <a href="https://www.sec.gov/comments/s7-30-22/s73022-434239-1076742.pdf">https://www.sec.gov/comments/s7-30-22/s73022-434239-1076742.pdf</a>.
---------------------------------------------------------------------------
[[Page 31234]]
Accordingly, IEX has designed this proposed rebate to attract and
incentivize displayed order flow in Tape B securities as well as order
flow seeking to trade with displayed order flow in Tape B securities.
Moreover, increases in displayed liquidity of Tape B securities would
contribute to the public price discovery process which would benefit
all market participants and protect investors and the public interest.
The Exchange believes that the proposed fee structure for providing
and removing displayed liquidity in Tape B securities 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 an increased rebate of $0.0014 per share for providing
displayed liquidity in Tape B securities and to increase the fee for
removing displayed liquidity in Tape B securities from $0.0010 per
share to $0.0020 per share, which is designed to keep IEX's displayed
trading prices for Tape B securities competitive with those of other
exchanges.\38\ In this regard, IEX notes that while many competing
exchanges pay rebates to provide displayed liquidity in Tape B
securities that are substantially higher than those proposed, others
charge fees to provide displayed liquidity for Tape B securities that
trade at or above $1.00 per share.\39\ 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.\40\ And, as discussed in the
Purpose section, other exchanges also offer specific fee incentives for
Tape B securities.\41\ Consequently, IEX believes that the proposed fee
structure for providing and removing displayed liquidity in Tape B
securities 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.
---------------------------------------------------------------------------
\38\ As discussed in the Purpose section, IEX's proposed rebate
of $0.0014 per share for displayed liquidity adding orders in Tape B
securities priced at $1.00 or more is below the rebate ranges of
$0.0015 to $0.0035 per share and $0.0028 to $0.0036 per share paid
by MEMX and Nasdaq, respectively, for displayed liquidity adding
orders. And IEX's proposed fee of $0.0020 for removing displayed
liquidity in Tape B securities priced at $1.00 or more is also below
the $0.0030 per share fee charged by both MEMX and Nasdaq for
displayed liquidity removing orders. See supra note 10.
\39\ See e.g., Nasdaq BX Equity 7 Section 118(a) ($0.0020 fee
per share to add displayed liquidity in Tape B securities priced at
or above $1.00 per share), 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 ($0.0020 fee per share to add displayed
liquidity in Tape B securities priced at or above $1.00 per share,
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 ($0.0030 fee per
share to add displayed liquidity in Tape B securities priced at or
above $1.00 per share, 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>.
\40\ See e.g., Cboe BZX Equities Fee Schedule ($0.0030 fee per
share to remove displayed liquidity in Tape B securities priced at
or above $1.00 per share), 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 ($0.00295 fee per share to remove displayed liquidity
in in Tape B securities priced at or above $1.00 per share),
available at <a href="https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_04012024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_04012024.pdf</a>;
MEMX Fee Schedule ($0.0030 fee per share to remove displayed
liquidity in in Tape B securities priced at or above $1.00 per
share), 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 to
remove displayed liquidity in in Tape B securities priced at or
above $1.00 per share), 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 2024 ($0.00275 fee per share to
remove displayed liquidity in in Tape B securities priced at or
above $1.00 per share), 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>.
\41\ See supra note 9.
---------------------------------------------------------------------------
Further, IEX believes that it is reasonable and consistent with the
Act not to modify the fees charged to D-Peg, FM-Peg, M-Peg, and P-Peg
orders that remove displayed liquidity (except for M-Peg and FM-Peg
orders with a Trade Now instruction that remove displayed liquidity
from an incoming Post Only order), even if it is in a Tape B security.
As discussed in the Purpose section, these four order types are
designed to interact with non-displayed liquidity, but in unexpected
circumstances can trade with displayed liquidity. IEX understands that,
in general, Members seek fee determinism, i.e., the ability to know in
advance the transaction fees that will apply to particular orders at
the time they send the orders, and a lack thereof could operate to
disincentive order flow. Consequently, IEX believes it is fair and
equitable to continue charging $0.0010 per share for displayed
liquidity removing executions of these four order types to avoid this
impact. Further, IEX notes that any Member can submit a D-Peg, FM-Peg,
M-Peg, or P-Peg order, and therefore this fee will apply equally to all
Members.
However, if an incoming Post Only \42\ order for a Tape B security
executes against a resting M-Peg or FM-Peg order with the Trade Now
\43\ instruction, IEX proposes to charge the M-Peg or FM-Peg order a
fee of $0.0020 per share, not the $0.0010 per share fee that would
otherwise apply had the M-Peg or FM-Peg order executed against a
displayed order for a Tape B security, as described in the preceding
paragraph. IEX is proposing to make this distinction because the Member
who included a Trade Now instruction on its M-Peg or FM-Peg order
specified its willingness to match with incoming Post Only orders, and
thus indicated its willingness to pay the $0.0020 per share fee IEX
will charge for taking displayed liquidity in Tape B securities.
---------------------------------------------------------------------------
\42\ See IEX Rule 11.190(b)(20).
\43\ When an incoming Post Only order matches a resting order
with a Trade Now instruction, the resting order converts into an
executable order that removes liquidity against the incoming Post
Only order, and the incoming Post Only order becomes the liquidity
adding order. See IEX Rule 11.190(b)(21).
---------------------------------------------------------------------------
Correspondingly, IEX believes that it is reasonable and consistent
with the Act to modify the fees charged to M-Peg and FM-Peg orders with
a Trade Now instruction that remove displayed liquidity from an
incoming Post Only order in a Tape B security. As discussed in the
Purpose section, the Member who included a Trade Now instruction on its
M-Peg or FM-Peg order specified its willingness to match with incoming
Post Only orders, and thus indicated its willingness to pay the $0.0020
per share fee IEX will charge for taking displayed liquidity in Tape B
securities.
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
Retail Liquidity Provider 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.\44\
---------------------------------------------------------------------------
\44\ See Securities Exchange Act Release No. 86619 (August 9,
2019), 84 FR 41769, 41771 (August 15, 2019) (SR-IEX-2019-05).
---------------------------------------------------------------------------
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
[[Page 31235]]
fees that is also not unfairly discriminatory.
First, the fees for adding and removing displayed liquidity in Tape
B securities 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 in a Tape B security. 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 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.\45\
---------------------------------------------------------------------------
\45\ See Securities Exchange Act Release No. 96494 (December 14,
2022), 87 FR 80266, 80292-93 (December 29, 2022) (File No. S7-30-
22).
---------------------------------------------------------------------------
Additionally, the Exchange believes that it is reasonable to add
footnote 2 to the Fee Codes section of the Fee Schedule to clarify that
only Fee Code Combinations that include new Fee Code B are for
executions of Tape B securities. Adding this footnote 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 (on IEX and market-wide) as well as
market quality and execution opportunities.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX believes that the proposed rule change will not 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. To the contrary, the proposed fee change is
designed to enhance IEX's competitiveness with other venues, as
described in the Statutory Basis section. In this context, the Exchange
does not believe that the proposed fees would burden competition on
competing venues or their participants. Moreover, as noted in the
Statutory Basis section, the Exchange believes that the proposed
changes do not raise any new or novel issues not already considered by
the Commission.
The Exchange believes that the proposed rule change will not 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 or if the security at issue is a Tape B security, and all
Members can submit any type of order for any type of security and will
be subject to the same fee for that type of order and security. 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 are designed
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 has become effective pursuant to Section
19(b)(3)(A)(ii) \46\ of the Act.
---------------------------------------------------------------------------
\46\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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) \47\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\47\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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#f587809990d8969a9898909b8186b5869096db929a83"><span class="__cf_email__" data-cfemail="e795928b82ca84888a8a82899394a7948284c9808891">[email protected]</span></a>. Please include
file number SR-IEX-2024-06 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-2024-06. 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-2024-06 and should be
submitted on or before May 15, 2024.
[[Page 31236]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\48\
---------------------------------------------------------------------------
\48\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-08682 Filed 4-23-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 24, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.