Notice2025-07105
Self-Regulatory Organizations; Investors Exchange LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Rules To Govern the Trading of Options on the Exchange for a New Facility Called IEX Options
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 25, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 79 (Friday, April 25, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 79 (Friday, April 25, 2025)]
[Notices]
[Pages 17474-17478]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-07105]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102895; File No. SR-IEX-2025-02]
Self-Regulatory Organizations; Investors Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Rules To
Govern the Trading of Options on the Exchange for a New Facility Called
IEX Options
April 21, 2025.
I. Introduction
On January 10, 2025, the Investors Exchange LLC (``IEX'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt rules to govern the trading of options on
IEX Options LLC (``IEX Options''), a new facility of the Exchange that
would be established in a separate rule filing. The proposed rule
change was published for comment in the Federal Register on January 21,
2025.\3\ On March 6, 2025, pursuant to Section 19(b)(2)(A)(ii)(I) of
the Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On March 12, 2025, the Exchange filed
Amendment No. 1 to the proposed rule change.\6\ The proposed rule
change as modified by Amendment No. 1 was published for comment in the
Federal Register on March 19, 2025.\7\ The Commission has received
comments on the proposed rule change.\8\ Pursuant to Section
19(b)(2)(B) of the Act,\9\ the Commission is hereby instituting
proceedings to determine whether to approve or disapprove the proposed
rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102190 (Jan. 14,
2025), 90 FR 7205 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2)(A)(ii)(I).
\5\ See Securities Exchange Act Release No. 102536, 90 FR 11866
(Mar. 12, 2025). The Commission designated April 21, 2025, as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ Amendment No. 1 is available on the Commission's website at:
<a href="https://www.sec.gov/comments/sr-iex-2025-02/sriex202502-580115-1667463.pdf">https://www.sec.gov/comments/sr-iex-2025-02/sriex202502-580115-1667463.pdf</a>.
\7\ See Securities Exchange Act Release No. 102663 (Mar. 13,
2025), 90 FR 12890 (``Amendment No. 1'').
\8\ Comments on the proposed rule change are available at
<a href="https://www.sec.gov/comments/sr-iex-2025-02/sriex202502.htm">https://www.sec.gov/comments/sr-iex-2025-02/sriex202502.htm</a>.
\9\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
The Exchange proposes to adopt rules in connection with its
proposed launch of IEX Options, which would be ``a fully automated
trading system built on the core functionality of the Exchange's
approved equities platform, and [operated] in a manner similar to that
of other options exchanges'' for the listing and trading of options
issued by the Options Clearing Corporation.\10\ As discussed in the
proposal, as modified by Amendment No. 1, the Exchange proposes to
operate IEX Options as a pro-rata options market with an access
delay.\11\ Specifically, IEX proposes ``to utilize a de minimis delay
on incoming order and quote messages designed to enable IEX to update
its view of the market prior to processing orders and quotes'' to
support an optional Options Risk Parameter (``ORP'') that would be
``designed to protect [registered market makers on IEX] from excessive
risk due to execution of stale quotes. . . .'' \12\
---------------------------------------------------------------------------
\10\ Amendment No. 1, supra note 7, at 12891.
\11\ See id. at 12891-92.
\12\ Id. at 12891.
---------------------------------------------------------------------------
With the notable exception of the novel options access delay and
ORP, the proposed rules for IEX Options are similar to the rules of
other options exchanges.\13\ The Exchange's rules applicable to the IEX
equities market contained in Chapters 1 through 16 of its rulebook
would apply to Options Members \14\ unless a proposed rule in proposed
Chapters 17 through 29,
[[Page 17475]]
applicable to the IEX Options market, applies.\15\
---------------------------------------------------------------------------
\13\ Specifically, the proposed rules for IEX Options are
substantially similar or substantively identical to rules of MEMX
LLC (``MEMX Options''), Cboe Exchange, Inc. (``Cboe''), Miami
International Securities Exchange, LLC (``MIAX''), NYSE American LLC
(``NYSE Amex'') and NYSE Arca, Inc. (``NYSE Arca'') options
exchanges, with material differences discussed in Amendment No. 1.
When the Exchange describes in its proposal a proposed rule as being
``substantively identical'' to a rule of another exchange, the
Exchange states that means that the substance of the proposed IEX
Options rule is identical to the referenced rule of the other
exchange, with differences only to reflect terminology and
numbering. See id. at n. 14. When it describes a proposed rule as
``substantially similar'' to a rule of another exchange, the
proposal describes the relevant differences. See id.
\14\ IEX proposes to define an ``Options Member'' as ``a firm,
or organization that is registered with the Exchange pursuant to
Chapter 18 of [the Exchange's] Rules for purposes of participating
in options trading on IEX Options as an Options Order Entry Firm,
Options Market Maker, or Clearing Member.'' Proposed Rule 17.100
(defining ``Options Member'').
\15\ See, e.g., Exchange Rules 2.160 and 2.220.
---------------------------------------------------------------------------
Chapters 17 Through 21
The Exchange proposes to define relevant terms in proposed Rule
17.100, all of which are substantially similar to definitions included
in MEMX Options Rule 16.1.\16\ The Exchange proposes to set forth rules
governing participation on IEX Options in Chapter 18, which are
substantially similar to rules of MEMX Options and Cboe.\17\ In
addition, the Exchange proposes to adopt rules in Chapter 19 regarding
business conduct that are substantively identical to MEMX Options rules
and MIAX rules,\18\ rules in Chapter 20 regarding listing standards for
options traded on IEX Options that are substantively identical to MEMX
Options rules,\19\ and rules in Chapter 21 regarding halts, unusual
market conditions, extraordinary market volatility, obvious errors,
audit trails, and rules regarding prohibited and permissible transfers
of options positions off the Exchange that are substantially similar to
MEMX Options rules.\20\
---------------------------------------------------------------------------
\16\ See, e.g., Amendment No. 1, supra note 7, at 12894-96.
\17\ See Amendment No. 1, supra note 7, at 12892.
\18\ See id. at 12906.
\19\ See id. at 12905-06.
\20\ See id. at 12907.
---------------------------------------------------------------------------
Chapter 22--Trading System
The Exchange proposes to adopt rules in Chapter 22 regarding IEX
Options' trading system that are substantially similar or substantively
identical to rules from MEMX Options, NYSE Arca, and Cboe, with
material differences discussed in the proposal, as modified by
Amendment No. 1.\21\
---------------------------------------------------------------------------
\21\ See id. starting at 12897.
---------------------------------------------------------------------------
Latency Mechanism. Notably, the Exchange proposes a de minimis
hardware-based latency mechanism of 350 microseconds that would be
added to each incoming order and quote message as set forth in proposed
Rule 22.100(n).\22\ This latency mechanism is designed to allow the
Exchange to ``update its view of the market prior to processing orders
and quotes'' and to perform a quote instability calculation for the ORP
using that current market data.\23\
---------------------------------------------------------------------------
\22\ See id. at 12897. The Exchange will subject incoming order
and quote messages to a de minimis delay using coiled optical fiber.
See proposed Rule 11.510(a). See also Amendment No. 1, supra note 7,
at 12897, n. 66.
\23\ See Amendment No. 1, supra note 7, at 12897. See also infra
notes 45-49 and accompanying text for a discussion of the quote
instability calculation.
---------------------------------------------------------------------------
Order Priority. IEX Options would have a pro-rata allocation model
with execution priority dependent on the size and capacity of an
order.\24\ Resting quotes and orders would be prioritized according to
price, after which contracts would be allocated proportionally
according to size (in a pro-rata fashion), rounded down to the nearest
whole contract.\25\ Residual options contracts would be filled one at a
time based on price-size-time priority.\26\
---------------------------------------------------------------------------
\24\ See Amendment No. 1, supra note 7, at 12897. The proposed
pro-rata model is similar to the MIAX and NYSE Amex options
exchanges. See id.
\25\ See id. at 12900.
\26\ See id.
---------------------------------------------------------------------------
The Exchange also proposes to support priority overlays discussed
in proposed Rule 22.170(f),\27\ including Priority Customer
priority.\28\ The Specialist Participation Entitlement overlay would
provide a Specialist with priority over interest from other non-
Priority Customers for a certain percentage of contracts allocated at
the same price (entitling Specialists to a 60% allocation if there is
one other non-Priority Customer at the National Best Bid or National
Best Offer (``NBBO'') or 40% if there are two or more other non-
Priority Customers at the NBBO \29\) when quoting at the NBBO.\30\ The
Directed Market Maker Participation Entitlement overlay \31\ would
provide a Directed Market Maker with priority over interest from other
non-Priority Customers for a certain percentage of contracts allocated
at the same price (entitling the Directed Market Maker to a 60%
allocation if there is one other non-Priority Customer at the NBBO or
40% if there are two or more other non-Priority Customers at the NBBO)
when quoting at the NBBO. The Small-Size Order Entitlement overlay \32\
would provide a Specialist quoting at the NBBO with priority to execute
against the entire size of an order or quote of five or fewer contracts
that does not first execute against any Priority Customer orders at
that price, subject to certain conditions.\33\
---------------------------------------------------------------------------
\27\ Proposed Rule 22.170(f) is substantially similar to Cboe
Rule 5.32(a)(2), except that, unlike Cboe, in the event that a
Small-Size order is directed to a Specialist, the IEX Options
trading system would apply the Small-Size Order Entitlement to the
order and not the Directed Order guarantee, meaning the Specialist
will have priority to execute against the entire size of the order
that does not execute against any Priority Customer orders at that
price. See id. at 12900, n. 96.
\28\ See Amendment No. 1, supra note 7, at 12900.
\29\ These allocation entitlements are based on MIAX Rule
514(h)(1), after accounting for the additional priorities afforded
market makers on MIAX, as set forth in MIAX Rule 514(e).
\30\ See proposed Rule 22.170(f)(2). This overlay may only be in
effect if the Priority Customer overlay is also in effect. See
proposed Rule 22.170(f).
\31\ See proposed Rule 22.170(f)(2). This overlay may only be in
effect if the Priority Customer overlay is also in effect. See
proposed Rule 22.170(f).
\32\ See proposed Rule 22.170(f)(3).
\33\ See proposed Rule 22.170(f)(3)(A).
---------------------------------------------------------------------------
Chapter 23--Market Participants
Chapter 23 would govern registration and obligations of market
participants and includes rules that are substantially similar or
substantively identical to rules from MIAX, NYSE Amex, MEMX Options,
and Cboe, with the notable exception of the proposed ORP.\34\
---------------------------------------------------------------------------
\34\ See generally Amendment No. 1, supra note 7, at 12903-05.
---------------------------------------------------------------------------
An Options Member would be able to apply to register with the
Exchange as an Options market maker (``Market Maker'' or ``Options
Market Maker'') for the purpose of making transactions as a dealer-
specialist.\35\ Options Market Makers would be eligible to participate
on IEX Options as a Registered Market Maker or Specialist.\36\ Among
other things, a Registered Market Maker must provide continuous two-
sided quotations throughout the trading day in its appointed classes
for 60% of the time the Exchange is open for trading in the issue,\37\
while a Specialist must provide continuous two-sided quotations
throughout the trading day in its appointed classes for 90% of the time
the Exchange is open for trading in each issue,\38\ provided in both
instances that the options classes have a time to expiration of less
than nine months.\39\ Specialists would be subject to obligations in
addition to those applicable to Registered Market Makers.\40\ Both
Specialists and Registered Market Makers could also participate as
Directed Market Makers. Directed Market Makers would be subject to
enhanced quoting obligations compared to Registered Market Makers.\41\
---------------------------------------------------------------------------
\35\ See proposed Rule 23.100(a) and proposed Rule 17.100
(defining ``Market Makers (and Options Market Makers)'' as referring
collectively to Options Members registered as either a Registered
Market Maker or as a Specialist).
\36\ See Amendment No. 1, supra note 7, at 12892.
\37\ See proposed Rule 23.150(e)(2)(A).
\38\ See proposed Rule 23.150(e)(1)(A).
\39\ See proposed Rule 23.150, Supplementary Material .01 and
Amendment No. 1, supra note 7, at 12893.
\40\ See Amendment No. 1, supra note 7, at 12892-92.
\41\ See id. at 12892, n. 20. While a Registered Market Maker
must provide continuous two-sided quotations through the trading day
in its appointed issues for 60% of the time the Exchange is open for
trading in each issue, a Directed Market Maker would be required to
provide continuous two-sided quotations throughout the trading day
in issues for which it receives Directed Orders for 90% of the time
the Exchange is open for trading in each issue.
---------------------------------------------------------------------------
Options Risk Parameter. The Exchange proposes to offer a novel
options access delay and the ORP as an optional risk parameter that
would
[[Page 17476]]
supplement the standard risk tools available to Options Market
Makers.\42\ The Exchange would offer the ORP on a class-by-class basis,
which ``would enable the Exchange to utilize the ORP for classes with a
high potential for adverse selection, while excluding classes
presenting lower risk of adverse selection (such as classes with
relatively lower volumes).'' \43\ According to IEX, ``the ORP is
designed to enable Market Makers to provide tighter and deeper quotes
on IEX by providing protection from execution against stale quotes by
identifying when the best Protected Bid or best Protected Offer of the
Away Markets (as defined in Proposed Rule 22.160(a)(8)) in a particular
options series is sufficiently dislocated from the price of the
underlying security to indicate that the best Protected Bid or best
Protected Offer of the Away Markets in the options series is likely in
transition.'' \44\
---------------------------------------------------------------------------
\42\ See Amendment No. 1, supra note 7, at 12903.
\43\ Id.
\44\ Id.
---------------------------------------------------------------------------
The ORP would be informed by the Options Quote Indicator
(``Indicator'') based on the Black-Scholes options pricing model, which
would ``assess the probability of an imminent change to the current
best Protected Bid of the Away Markets to a lower price or of an
imminent change to the current best Protected Offer of the Away Markets
to a higher price for a particular listed options series (i.e., an
imminent adverse price change).'' \45\ To perform this assessment, the
Indicator would use both real time relative quoting activity of
protected quotations from eleven exchanges \46\ and a proprietary quote
instability calculation.\47\
---------------------------------------------------------------------------
\45\ Id. at 12903-04.
\46\ IEX refers to these exchanges as ``Signal Exchanges.'' See
IEX Rule 11.190(g).
\47\ See Amendment No. 1, supra note 7, at 12904.
---------------------------------------------------------------------------
According to the Exchange, when the quote instability calculation
``identifies an imminent adverse price change to the best Protected Bid
and/or best Protected Offer of the Away Markets in a particular listed
options series, it will generate a quote instability determination''
that ``may only be generated at least 200 microseconds after a prior
quote instability determination for a particular options series on the
same side of the market (i.e., affecting resting bids or offers).''
\48\ Further, ``[i]f a quote instability determination is generated for
an options series quoted by a Market Maker and the quote is above
(below) the price level of the quote instability determination, the
quote will be either cancelled or repriced to the price level of the
quote instability determination, as instructed by the Market Maker'' in
advance on its quote.\49\
---------------------------------------------------------------------------
\48\ Id.
\49\ Id.
---------------------------------------------------------------------------
The Exchange proposes to periodically determine three aspects of
the Indicator's formula--the frequency of calculation of implied
volatility,\50\ the quote instability threshold,\51\ and the delta
bound band that would determine which series are eligible for the
ORP.\52\ When determining the first two of these factors, the Exchange
states that it would consider ``the distribution of quote instability
determinations, the precision of quote instability determinations,
system capacity and performance, and client feedback.'' \53\ The
Exchange also would consider ``attributes like fill rates (resting and
taking) \54\ and markout data,\55\ as well as other factors it
determines are relevant based on operational experience in order to
optimize how both variables are set'' once the IEX Options trading
system begins operating.\56\ Any changes to the quote instability
threshold and the implied volatility calculation frequency would be
communicated by Trading Alert with at least 30 days' notice.\57\ In
addition, the Exchange proposes to periodically determine within a
range of 0 to 1, and announce by Trading Alert, the delta bound
band.\58\
---------------------------------------------------------------------------
\50\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.05.
\51\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.04(2)(e). The quote instability threshold would be within a range
of 0-1. For example, a quote instability threshold of 1 would
indicate that the expected price change in the option resulting from
price movement in the underlying would be 100% of the current price
of the option. See Amendment No. 1, supra note 7, at 12904.
\52\ See proposed IEX Rule 23.150(h), Supplementary Material
.04(1)(q). The delta bound band would be within a range of 0-1. See
Amendment No. 1, supra note 7, at 12905.
\53\ Amendment No. 1, supra note 7, at 12904.
\54\ The Exchange states that ``[f]ill rate data measures the
degree to which incoming orders are able to execute against a
resting order on a venue and are a measure of the percent of shares
of an order that are filled (or executed) by such venue, adjusting
for factors such as the size of the order compared to the size of a
venue's displayed quote.'' Id. at n. 146.
\55\ The Exchange states that ``[m]arkouts measure the direction
and degree to which the market moved after an execution, and are
often measured as the difference between the execution price and the
midpoint of the NBBO at various time intervals after a trade.
Markouts are typically used as a way to measure the `quality' of a
trade. In particular, short-term markouts of several milliseconds
after the time of execution, are often used to assess whether an
order was subject to `adverse selection' that can occur when a
liquidity providing order is executed at a price that was about to
become stale as a result of certain speed-based trading
strategies.'' Id. at n. 147.
\56\ Id. at 12904.
\57\ See id.
\58\ See proposed IEX Rule 23.150(h), Supplementary Material
.04(1)(q). See also Amendment No. 1, supra note 7, at 12905, n. 150.
---------------------------------------------------------------------------
Chapters 24 Through 29
The Exchange proposes to adopt several chapters of rules that are
substantively identical to MEMX Options rules, including Chapter 24
regarding exercises and deliveries,\59\ Chapter 25 regarding records,
reports, and audits,\60\ Chapter 26 regarding discipline and summary
suspension,\61\ Chapter 27 regarding doing business with the
public,\62\ Chapter 28 regarding options order protection and locked
and crossed markets \63\ and Chapter 29 regarding margin
requirements.\64\
---------------------------------------------------------------------------
\59\ See Amendment No. 1, supra note 7, at 12906.
\60\ See id.
\61\ See id.
\62\ See id.
\63\ See id.
\64\ See id.
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
The Commission hereby institutes proceedings pursuant to Section
19(b)(2)(B) of the Act \65\ to determine whether the Exchange's
proposed rule change, as modified by Amendment No. 1, should be
approved or disapproved. Institution of proceedings does not indicate
that the Commission has reached any conclusions with respect to any of
the issues involved. Rather, the Commission seeks and encourages
interested persons to provide additional comment on the proposed rule
change to inform the Commission's analysis of whether to approve or
disapprove the proposed rule change.
---------------------------------------------------------------------------
\65\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\66\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\66\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
---------------------------------------------------------------------------
<bullet> Whether the Exchange has demonstrated how its proposal is
consistent with Section 6(b)(5) of the Act,\67\ which requires that the
rules of a national securities exchange be designed, among other
things, to promote just and equitable principles of trade, to remove
impediments to and
[[Page 17477]]
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 not be designed to permit unfair discrimination between customers,
issuers, brokers, or dealers;
---------------------------------------------------------------------------
\67\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
<bullet> Whether the Exchange has demonstrated how its proposal is
consistent with Section 6(b)(8) of the Act,\68\ which requires that the
rules of a national securities exchange not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act; and
---------------------------------------------------------------------------
\68\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
<bullet> Whether the Exchange has demonstrated how its proposal is
consistent with Section 19(b) of the Act,\69\ which requires, among
other things that each self-regulatory organization file with the
Commission copies of any proposed rule or any proposed change in,
addition to, or deletion from the rules of such self-regulatory
organization accompanied by a concise general statement of the basis
and purpose of such proposed rule change.
---------------------------------------------------------------------------
\69\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
Of particular note, and as described above, the Exchange proposes
to offer the ORP as an optional risk parameter that would supplement
the standard risk tools available to Options Market Makers. The
Exchange describes the ORP as ``a narrowly-tailored approach designed
to appropriately balance the risks faced by market makers with the
legitimate objectives of liquidity takers by providing additional
optional risk protection to market makers and thereby encourage
aggressive quoting.'' \70\ The expected frequency with which the ORP
would cancel or reprice an NBBO quote on IEX is unclear and difficult
to assess, and the proposal does not yet provide any such estimate.
Accordingly, the characterization of ORP as a ``narrowly-tailored
approach'' merits further consideration as it is unclear how often the
ORP would be expected to cancel or change quotes. Additional
information about the ORP's operation can help inform whether the ORP
would contribute to fair and orderly markets and remove impediments to
and perfect the mechanism of a free and open market and a national
market system.
---------------------------------------------------------------------------
\70\ Amendment No. 1, supra note 7, at 12912.
---------------------------------------------------------------------------
As discussed above, the Exchange also proposes to give itself
discretion in its rules to change the values of three components of the
Indicator formula through Trading Alerts: (1) the quote instability
threshold,\71\ (2) the measuring period for calculating implied
volatility,\72\ and (3) the delta bound band.\73\ Both the quote
instability threshold and the delta bound band would be periodically
determined by the Exchange and set at a value within a range of 0 to
1.\74\ The measuring period for calculating implied volatility would be
a half-hour, though the Exchange could to pick a different, shorter
time-frame. The initial values selected by the Exchange for these
components would not be codified in the Exchange's proposed rule text,
and changes made to these values would not be filed with the Commission
as proposed rule changes. Instead, the changes would be communicated by
a Trading Alert.\75\ Nevertheless, the Exchange states that the
proposed latency mechanism is ``fully disclosed and codified in a
written rule of the exchange that has become effective pursuant to
Section 19 of the Act'' \76\ and that the proposed ORP ``is based on a
transparent formula specified in IEX's rules and related Trading
Alerts.'' \77\ How those components are periodically evaluated and
communicated publicly merits further consideration.\78\
---------------------------------------------------------------------------
\71\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.04(2)(e).
\72\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.05. As discussed above, the Exchange has proposed to calculate
implied volatility for all options series with the same underlying
whenever it receives an update to the best Protected Bid or best
Protected Offer of the Signal Exchanges for the underlying security.
The Exchange would perform this calculation ``[u]pon the first such
update of each half-hour of system operation (or such shorter time-
frame as communicated by Trading Alert with at least 30 days prior
notice).'' See proposed IEX Rule 23.150(h)(1) Supplementary Material
.05.
\73\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.04(1)(q).
\74\ See proposed IEX Rule 23.150(h)(1), Supplementary Material
.04(1)(q), .04(2)(e).
\75\ Unlike the changes to the quote instability threshold and
the measuring period for calculating implied volatility, which both
require at least 30 days of notice, the Exchange did not propose a
fixed advance notice period for changes to the delta bound band.
\76\ Amendment No. 1, supra note 7, at 12910.
\77\ Id. at 12911.
\78\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \79\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\80\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\81\
---------------------------------------------------------------------------
\79\ 17 CFR 201.700(b)(3).
\80\ See id.
\81\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposal is consistent with the Act.\82\
---------------------------------------------------------------------------
\82\ See 15 U.S.C. 78f(b)(5) and (8).
---------------------------------------------------------------------------
IV. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by May 16, 2025. Rebuttal
comments should be submitted by May 30, 2025. Although there do not
appear to be any issues relevant to approval or disapproval that would
be facilitated by an oral presentation of views, data, and arguments,
the Commission will consider, pursuant to Rule 19b-4, any request for
an opportunity to make an oral presentation.\83\
---------------------------------------------------------------------------
\83\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by an SRO. See Securities
Acts Amendments of 1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
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#2052554c450d434f4d4d454e5453605345430e474f56"><span class="__cf_email__" data-cfemail="a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de">[email protected]</span></a>. Please include
file number SR-IEX-2025-02 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 17478]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-IEX-2025-02. 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-2025-02 and should be
submitted on or before May 16, 2025.
Rebuttal comments should be submitted by May 30, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\84\
---------------------------------------------------------------------------
\84\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07105 Filed 4-24-25; 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 25, 2025.
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.