Notice2024-12365
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 and Rebates
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
June 6, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 110 (Thursday, June 6, 2024)</title>
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[Federal Register Volume 89, Number 110 (Thursday, June 6, 2024)]
[Notices]
[Pages 48458-48462]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-12365]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100257; File No. SR-IEX-2024-09]
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 and Rebates
May 31, 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 May 20, 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.
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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\ the Exchange 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 June 1,
2024.
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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 the
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
[[Page 48459]]
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 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 A and C securities.\9\ As
proposed, the Exchange will increase the rebate paid for executions of
displayed liquidity adding orders in Tape A and C 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 A or C securities from $0.0010 to $0.0020 per
share (unless a lower fee applies), and update the fee codes in the Fee
Schedule to reflect these changes. IEX is not proposing any changes to
executions that add or remove non-displayed liquidity in Tape A or C
securities, which will continue to be subject to the same fees
currently charged for such executions in Tape A and C securities. IEX's
proposed fee structure for executions of Tape A and C 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.\11\
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\8\ This fee proposal will not change the fees charged or fee
codes applied for Retail and Retail Liquidity Providing executions
of Tape A and C securities, which execute for free. Additionally,
while the fee proposal includes a fee code change for all other
executions of Tape A and C 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 A and C securities.
\9\ ``Tape A securities'' are securities listed on the New York
Stock Exchange, and ``Tape C securities'' are securities listed on
The Nasdaq Stock Market.
\10\ See supra note 8.
\11\ See, e.g., MEMX Equities Fee Schedule, (effective May 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> (offering rebates for adding
displayed liquidity of $0.0015 to $0.0033, depending upon trading
volume, and charging as much as $0.0030 to remove liquidity); 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> (offering rebates for adding displayed liquidity of
$0.0018 to $0.00305, depending upon trading volume, and charging as
much as $0.0030 to remove displayed liquidity).
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IEX is making this proposal to incentivize the posting of displayed
liquidity in Tape A and C 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 A and C securities priced at or above $1.00
per share. Further, the Exchange recently instituted identical fee
changes for Tape B securities to incentivize the posting of displayed
liquidity in Tape B securities.\12\ IEX is now proposing to make the
same fee changes for orders that add or remove displayed liquidity in
Tape A and C securities.
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\12\ See Securities Exchange Act Release No. 99989 (April 18,
2024), 89 FR 31231 (April 24, 2024) (SR-IEX-2024-06) (``Tape B Fee
Filing'').
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Fee Schedule Changes
IEX proposes to increase the rebate it pays for adding displayed
liquidity in Tape A and C securities from $0.0004 per share to $0.0014
per share for executions priced at or above $1.00 per share. Consistent
with the higher rebate IEX will pay for adding displayed liquidity in
Tape A and C securities, IEX proposes to increase the fee for removing
displayed liquidity in Tape A and C securities from $0.0010 per share
to $0.0020 per share.
``Sub-dollar'' \13\ executions of Tape A and C securities that add
displayed liquidity will continue to execute for free. Sub-dollar
executions of Tape A and C securities that remove displayed liquidity
will continue to be charged 0.09% of the Total Dollar Value (``TDV'')
of the execution.
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\13\ ``Sub-dollar'' refers to orders or executions priced at
less than $1.00 per share.
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IEX does not propose to change the fee ($0.0010 per share)
currently applicable to Discretionary Peg (``D-Peg''),\14\ Fixed
Midpoint Peg (``FM-Peg''),\15\ Midpoint Peg (``M-Peg),\16\ or Primary
Peg (``P-Peg'') \17\ orders that remove displayed liquidity in Tape A
or C 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 \18\). 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 \19\ 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 A or C security in one of the above-listed
circumstances.
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\14\ See IEX Rule 11.190(b)(10).
\15\ See IEX Rule 11.190(b)(19).
\16\ See IEX Rule 11.190(b)(9).
\17\ See IEX Rule 11.190(b)(8).
\18\ See IEX Rule 1.160(u).
\19\ See IEX Rule 11.230(a)(4)(D).
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Notwithstanding this exception, if an incoming Post Only \20\ order
for a Tape A or C security executes against a resting M-Peg or FM-Peg
order with the Trade Now \21\ 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 A or C 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 A and C securities.
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\20\ See IEX Rule 11.190(b)(20).
\21\ 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).
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IEX is not proposing to change the fees charged or fee codes
applied to Retail \22\ or Retail Liquidity Provider \23\ orders that
execute in Tape A or C securities. Thus, a Retail order that takes
liquidity from a non-displayed order in a Tape A or C security will be
assigned Fee Code Combination TIR (free execution), and the non-
displayed order will be assigned Fee Code Combination MI (fee of
$0.0010 per share). Relatedly,
[[Page 48460]]
a Retail order that takes liquidity from a displayed odd lot order in a
Tape A or C security will be assigned Fee Code Combination TLR (free
execution), and the displayed odd lot order will be assigned Fee Code
Combination ML (rebate of $0.0014 per share).
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\22\ See IEX Rule 11.190(b)(15).
\23\ 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 A or C security.
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IEX also proposes to modify Fee Code Modifier ``K'' to reflect the
proposed fee changes. Currently, Fee Code Modifier K is only 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. With this proposed fee change, Fee Code Modifier K
would apply to any D-Peg, FM-Peg, M-Peg, or P-Peg order that removes
displayed liquidity (including orders for Tape A and C securities).
Therefore, IEX proposes to remove the words ``(Tape B)'' from the
description of Fee Code K.
To reflect the above-described fee changes, IEX proposes to make
the following changes to its Fee Schedule:
<bullet> Modify Fee Code Combination ML (Adds displayed liquidity)
to reflect the new rebate of $0.0014 per share for adding displayed
liquidity in Tape A and C securities (an increase from the current
rebate of $0.0004 per share).
<bullet> Modify Fee Code Combination MLY (Post Only order adds
liquidity against resting non-displayed order) to reflect the new
rebate of $0.0014 per share for adding displayed liquidity in Tape A
and C securities (an increase from the current rebate of $0.0004 per
share).
<bullet> Modify Fee Code Combination TL (Removes displayed
liquidity) to reflect the new fee of $0.0020 per share for removing
displayed liquidity in Tape A and C securities (an increase from the
current fee of $0.0010 per share).
<bullet> Modify Fee Code Combination TLY (Post Only order removes
displayed liquidity) to reflect the new fee of $0.0020 per share for
removing displayed liquidity in Tape A and C securities (an increase
from the current fee of $0.0010 per share).
<bullet> Modify Fee Code Combination TLW (Resting non-displayed
order removes liquidity against incoming Post Only order) to reflect
the new fee of $0.0020 per share for removing displayed liquidity in
Tape A and C securities (an increase from the current fee of $0.0010
per share).
<bullet> Introduce new Fee Code Combination TLK with the
description ``Discretionary Peg, Fixed Midpoint Peg, Midpoint Peg, or
Primary Peg order removes displayed liquidity.'' These executions of
Tape A and C securities would 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, which are the same fees charged for TLBK, the Fee Code
Combination that applies to D-Peg, FM-Peg, M-Peg, and P-Peg orders that
take displayed liquidity in Tape B securities. In addition, and as
described below, TLK will be modified by footnote 3 to the Fee Code
Combinations and Associated Fees table.
IEX also proposes to modify footnote 3 to reflect the updated
circumstances in which Fee Code Modifier ``K'' would apply. Currently,
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.
With the introduction of Fee Code Combination TLK, IEX proposes to
modify footnote 3 to reflect that neither Fee Code Combination TLBK nor
TLK would apply to any M-Peg and FM-Peg orders with Trade Now
functionality enabled that take liquidity from an incoming Post Only
order, and that such orders would be assigned Fee Code Combinations
TLWB and TLW, respectively. As discussed above, these executions would
incur a fee of $0.0020 per share for taking displayed liquidity in Tape
A, B, and C securities. IEX therefore proposes to modify footnote 3, so
that it reads as follows:
TLBK and TLK 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; such executions will be assigned
Fee Code Combinations TLWB and TLW, respectively.
2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \24\ of the Act in general and furthers the
objectives of Sections 6(b)(4) \25\ 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.
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\24\ 15 U.S.C. 78f.
\25\ 15 U.S.C. 78f(b)(4).
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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 A and
C securities without offering higher rebate incentives. As discussed in
the Purpose section, the Exchange recently instituted identical fee
changes for Tape B securities to incentivize the posting of displayed
liquidity in Tape B securities.\26\ Based upon the Tape B fee changes
and informal discussions with market participants, IEX believes that
Members and other market participants may be more willing to send
displayed orders in Tape A and C securities to IEX if the proposed fee
structure was adopted.
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\26\ See supra note 12.
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Accordingly, IEX has designed the proposed access fee and rebate to
attract and incentivize displayed orders in Tape A and C securities as
well as order flow seeking to trade with such displayed orders.
Moreover, increases in displayed liquidity of Tape A and C 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 \27\
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.\28\ 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.
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\27\ 17 CFR 242.610.
\28\ 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>.
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Accordingly, IEX has designed this proposed rebate to attract and
incentivize displayed order flow in Tape A and C securities as well as
order flow seeking to trade with displayed order flow in Tape A and C
securities. Moreover, increases in displayed liquidity of Tape A and C
securities would contribute to the public price discovery process which
would benefit
[[Page 48461]]
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 A and C 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 A and C securities and to
increase the fee for removing displayed liquidity in Tape A and C
securities from $0.0010 per share to $0.0020 per share, which is
designed to keep IEX's displayed trading prices for Tape A and C
securities competitive with those of other exchanges.\29\ In this
regard, IEX notes that while many competing exchanges pay rebates to
provide displayed liquidity in Tape A and C securities that are
substantially higher than those proposed, others charge fees to provide
displayed liquidity for Tape A and C securities that trade at or above
$1.00 per share.\30\ 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.\31\ And, as discussed in the Purpose section, this fee
proposal is identical to a recent fee change IEX made specifically for
Tape B securities.\32\ Consequently, IEX believes that the proposed fee
structure for providing and removing displayed liquidity in Tape A and
C 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.
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\29\ As discussed in the Purpose section, IEX's proposed rebate
of $0.0014 per share for displayed liquidity adding orders in Tape A
and C securities priced at $1.00 or more is below the rebate ranges
of $0.0015 to $0.0035 [sic] per share and $0.0018 to $0.00305 per
share paid by MEMX and Nasdaq, respectively, for displayed liquidity
adding orders. And IEX's proposed fee of $0.0020 per share 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
11.
\30\ See e.g., Nasdaq BX Equity 7 Section 118(a) ($0.0020 fee
per share to add displayed liquidity in Tape A and C 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 A and C 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 A and C 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>.
\31\ See e.g., Cboe BZX Equities Fee Schedule ($0.0030 fee per
share to remove displayed liquidity in Tape A and C 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 A and C 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_05012024.pdf">https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Equities_Fee_Schedule_05012024.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/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 to remove displayed liquidity in in Tape A and C 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 A and C 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>.
\32\ See supra note 12.
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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). 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 order for a Tape A or C security
executes against a resting M-Peg or FM-Peg order with the Trade Now
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 A or C 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 A and C securities.
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 A or C 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 A
and C securities.
The Exchange also believes that it is reasonable and consistent
with the Act not to modify its displayed fees for sub-dollar
executions. 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.\33\
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\33\ 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 in Tape
A and C 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
[[Page 48462]]
will be able to determine the Exchange fees for each execution in a
Tape A or C 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.\34\
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\34\ 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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Finally, as discussed above, to the extent that the current
regulatory structure effectively compels exchanges to offer financial
inducements to compete with other exchanges to obtain liquidity, the
proposed change is intended to increase IEX's ability to compete within
the existing regulatory structure pending changes to that structure,
and incentivize greater liquidity, which 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 among
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 A or C 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.
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) \35\ of the Act.
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\35\ 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) \36\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\36\ 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#7604031a135b15191b1b131802053605131558111900"><span class="__cf_email__" data-cfemail="b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2">[email protected]</span></a>. Please include
File Number SR-IEX-2024-09 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-2024-09. 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-2024-09 and should be
submitted on or before June 27, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12365 Filed 6-5-24; 8:45 am]
BILLING CODE 8011-01-P
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