Notice2025-07904
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Circumstances Under Which Post Only Orders May Remove Liquidity on Entry
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Published
May 7, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 87 (Wednesday, May 7, 2025)</title>
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[Federal Register Volume 90, Number 87 (Wednesday, May 7, 2025)]
[Notices]
[Pages 19359-19362]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-07904]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102961; File No. SR-IEX-2025-05]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
the Circumstances Under Which Post Only Orders May Remove Liquidity on
Entry
May 1, 2025.
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 23, 2025, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 modify its Post Only order type so
that it would only execute upon entry if it would receive price
improvement (as measured against the less aggressive of the order's
limit price or the contra-side Protected Quotation \6\) of at least
$0.01. The Exchange has designated this proposed rule change as ``non-
controversial'' under Section 19(b)(3)(A) of the Act \7\ and provided
the Commission with the notice required by Rule 19b-4(f)(6)
thereunder.\8\
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ See IEX Rule 1.160(bb).
\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4.
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The text of the proposed rule change is available at the Exchange's
website at <a href="https://www.iexexchange.io/resources/regulation/rule-filings">https://www.iexexchange.io/resources/regulation/rule-filings</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
[[Page 19360]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend IEX Rule 11.190(b)(20) to modify its
Post Only order type so that it would only execute upon entry if it
would receive price improvement (as measured against the less
aggressive of the order's limit price or the contra-side Protected
Quotation) of at least $0.01. IEX makes this proposal to further
encourage the posting of displayed liquidity on the Exchange.
IEX's Post Only parameter instruction will post a displayable, non-
routable order priced at or above $1.00 per share.\9\ Upon entry, a
Post Only order will not remove contra-side liquidity from the Order
Book \10\ except in two specific circumstances: (i) if the value of
such execution when removing liquidity equals or exceeds the value of
such execution if the order instead posted to the IEX Order Book and
subsequently provided liquidity, including the applicable fees charged
or rebates provided (the ``Sum of Fees'' \11\), or (2) if the incoming
Post Only order would lock a resting non-displayed order that includes
the Trade Now \12\ instruction, in which case the resting order
converts into an executable order that removes the displayed liquidity
adding Post Only order.
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\9\ See IEX Rule 11.190(b)(20).
\10\ See IEX Rule 1.160(p).
\11\ See IEX Rule 11.190(b)(20)(B).
\12\ See IEX Rule 11.190(b)(21).
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IEX proposes to replace the Sum of Fees calculation with an
alternative approach to assessing whether to match an incoming Post
Only order with a resting contra-side order notwithstanding the
Member's \13\ use of a Post Only order. Currently, the Sum of Fees
calculation determines at the time of a potential execution whether the
Sum of Fees when removing liquidity equals or exceeds the value of such
execution if the order instead posted to the IEX Order Book and
subsequently provided liquidity. The Exchange compares the price
improvement of the potential execution (i.e., available execution price
to trade on entry versus the limit price of the order) to the
difference between the sum of the fees charged for such execution and
the rebate that would be provided if the order posted to the IEX Order
Book and subsequently provided liquidity.\14\
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\13\ See IEX Rule 1.160(s).
\14\ See IEX Rule 11.190(b)(20)(B).
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To determine at the time of the potential execution whether the
value of such execution when removing liquidity equals or exceeds the
value of such execution if the order instead posted to the IEX Order
Book and subsequently provided liquidity, the Exchange uses the highest
possible rebate paid and highest possible fee charged for such
executions on the Exchange.\15\ Under IEX's current Fee Schedule,\16\
the Sum of Fees for a Post Only order that matches with a resting non-
displayed order will be $0.0032 (assuming the Member receives a rebate
of $0.0022, which is the highest rebate offered by IEX, and pays a
$0.0010 fee for the liquidity removing order), which means that any
Post Only order that would receive at least $0.005 price improvement
(e.g., if the spread is one cent wide and the Post Only order matches
with a resting Midpoint Peg \17\ order) will execute on entry instead
of posting to the Order Book.
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\15\ Id.
\16\ See <a href="https://www.iexexchange.io/resources/trading/fee-schedule">https://www.iexexchange.io/resources/trading/fee-schedule</a>.
\17\ See IEX Rule 11.190(b)(9).
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IEX believes that providing greater determinism in when a Post Only
order will remove liquidity on entry will enhance the utility of such
orders to Members. Specifically, Post Only orders are used by Members
seeking to add displayed liquidity on the Exchange in order to receive
a rebate, unless the economics of the order taking liquidity on entry
is preferable from a fee perspective. IEX believes its proposal to
replace the current Sum of Fees approach with an approach that requires
an incoming order to receive price improvement of at least $0.01 for it
to remove liquidity on entry will cause more Post Only orders to not
remove liquidity on entry and instead add displayed liquidity to the
Order Book, which would further incentivize the use of Post Only orders
by Members who are seeking to add displayed liquidity to the Exchange.
Therefore, IEX proposes to replace its Sum of Fees calculation with
an explicit and higher minimum price improvement requirement, such that
an incoming Post Only order will only remove contra-side liquidity if
the order would receive price improvement (as measured against the less
aggressive of the order's limit price or the contra-side Protected
Quotation) of at least $0.01. The following examples illustrate how the
System will determine whether to execute a Post Only order on entry:
Example 1:
<bullet> Market for security XYZ is $10.10 x $10.20.
<bullet> IEX has a displayed offer to sell 100 shares of XYZ for
$10.20 (``Order A'').
<bullet> IEX receives a Post Only order to buy 100 shares of XYZ
with a limit price of $10.22 (``Order B'').
<bullet> The System determines that the contra-side Protected
Quotation of $10.20 is less aggressive than Order B's limit price of
$10.22.
<bullet> The System uses the less aggressive price to determine how
much price improvement Order B would receive if it removed liquidity on
entry; in this case, if Order B removed Order A at $10.20, Order B
would receive $0.00 of price improvement. Because $0.00 is less than
$0.01, the System will not allow Order B to execute, and it will book
at $10.19 (pursuant to IEX's display price sliding rules).\18\
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\18\ See IEX Rule 11.190(h)(1)(A).
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Example 2:
<bullet> Market for security XYZ is $10.10 x $10.20.
<bullet> IEX has a non-displayed Midpoint Peg offer to sell 100
shares of XYZ for $10.15 (``Order A'').
<bullet> IEX receives a Post Only order to buy 100 shares of XYZ
with a limit price of $10.22 (``Order B'').
<bullet> The System determines that the contra-side Protected
Quotation of $10.20 is less aggressive than Order B's limit price of
$10.22.
<bullet> The System uses the less aggressive price to determine how
much price improvement Order B would receive if it removed liquidity on
entry; in this case, if Order B removed Order A at $10.15, Order B
would receive $0.05 of price improvement. Because $0.05 is greater than
$0.01, the System will allow Order B to execute on entry.
As described above, a Post Only order currently can execute on
entry if it receives $0.005 of price improvement (e.g., for stocks with
a spread of one cent if there is a resting Midpoint Peg order). As
proposed, a Post Only order for a security with a one-cent spread would
not match with a resting Midpoint Peg order on entry, because the price
improvement of $0.005 is less than $0.01. Thus, many Post Only orders
that currently execute on entry would instead post to the Order Book
and add displayed liquidity (unless they receive price improvement as
measured against the less aggressive of the order's limit price or the
contra-side Protected
[[Page 19361]]
Quotation of at least $0.01). IEX notes that requiring a minimum of
$0.01 price improvement to allow a Post Only order to execute on entry
is identical to how Nasdaq handles incoming post only orders,\19\ and
is consistent with the rules of NYSE Arca, which will execute an
incoming post only order if it receives price improvement of at least
one MPV,\20\ which for securities priced at or above $1.00 is equal to
$0.01.\21\ Additionally, IEX understands that all other exchanges that
compare the price improvement of executing a post only order on entry
to the sum of fees for that execution are in effect also requiring the
price improvement to be at least $0.01, because their sum of fees
(calculated as the highest possible rebate and take fee) always exceed
$0.005. Thus, prior to this rule change proposal, IEX was unique in
allowing a Post Only order to execute on entry with only $0.005 of
price improvement.\22\ Therefore, the Exchange does not believe that
this proposal raises any new or novel issues not already considered by
the Commission.
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\19\ See Nasdaq Rule 4702(b)(2)(A).
\20\ See NYSE Arca Rules 7.31-E(d)(3)(E)(i) and 7.31-E(e)(2)(A).
\21\ See IEX Rule 11.210(a)(1).
\22\ For example, Cboe BZX will execute a ``BZX Post Only
Order'' on entry if the price improvement exceeds the ``highest
possible rebate paid and highest possible fee charged for such
execution.'' See BZX Rule 11.9(c)(6). Generally, because BZX's
highest possible liquidity adding rebate is $0.0032 and highest
possible take fee is $0.0030, the order's price improvement must
exceed $0.0062 for it to execute on entry. Thus, the price
improvement must be at least $0.01 for BZX to execute a post only
order on entry.
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The Exchange will announce the implementation date of the proposed
changes by Trader Alert at least ten days in advance of such
implementation date and within 90 days of effectiveness of this
proposed rule change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\23\ in general, and furthers the
objectives of Section 6(b)(5),\24\ in particular, in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Specifically, the Exchange
believes that the proposed rule change is consistent with the
protection of investors and the public interest, because it is designed
to encourage Members to add displayed liquidity on the Exchange. As
noted in the Purpose section, providing an explicit and higher price
improvement requirement of at least $0.01 for a Post Only order to
remove liquidity on entry would provide more determinism for Members
seeking to add liquidity to the Exchange. This in turn is designed to
encourage the posting of more displayed liquidity on the Exchange, and
to the extent that such an incentive is successful in increasing the
overall liquidity pool available at IEX, all market participants,
including takers of liquidity, will benefit. Thus, IEX believes this
proposal supports the purposes of the Act to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and in general, to protect investors and the public interest.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
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The Exchange further believes that the proposed change would
promote just and equitable principles of trade, remove impediments to,
and perfect the mechanism of, a free and open market and a national
market system, and protect investors and the public interest because
allowing a Post Only order to remove liquidity on entry only when it
would receive price improvement (as measured against the less
aggressive of the order's limit price or the contra-side Protected
Quotation) of at least $0.01 would promote higher-quality executions
and greater determinism for Members submitting Post Only orders,
thereby encouraging increased order flow to the Exchange and enhanced
trading opportunities for all market participants. Finally, the
Exchange notes that considering the economic benefit of an execution is
not a novel concept and believes that this proposed change would remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system by providing Members with greater price
improvement and greater certainty as to when an incoming Post Only
order would execute on entry, as well as by promoting competition among
equity exchanges.
In addition, as noted in the Purpose section, IEX's proposal to
replace its Sum of Fees calculation with a more deterministic price
improvement requirement is identical to functionality already available
on both NYSE Arca and Nasdaq.\25\ And because of the fees and rebates
charged by other exchanges, their sum of fees calculations effectively
require a minimum $0.01 price improvement for a post only order to
execute on entry.\26\ Thus, IEX does not believe that the proposed
change raises any new or novel material issues that have not already
been considered by the Commission in connection with existing order
types offered by other national securities exchanges, which supports
the purposes of the Act to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
in general, to protect investors and the public interest.
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\25\ See supra notes 19 and 20.
\26\ See supra note 22.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange does not believe that the proposed 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 proposal is designed to enhance IEX's competitiveness with other
markets by further incentivizing the posting of displayed liquidity on
the Exchange. As noted above, the Exchange believes the proposed rule
change would generally align order handling on IEX with trading
functionality on other equity exchanges and thus would promote
competition among exchanges by offering member organizations similar
functionality and order handling options to those available on other
exchanges. The Exchange also believes that, to the extent the proposed
change would increase opportunities for the posting of displayed orders
to IEX's Order Book, the proposed change would promote competition by
making the Exchange a more attractive venue for order flow and enhance
market quality for all market participants. Moreover, competing
exchanges have and can continue to adopt the same functionality
contained in this proposal, subject to the SEC rule change process, as
discussed in the Purpose and section.
The Exchange also does not believe that the proposed rule change
will impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act. All Members
are eligible to submit Post Only orders. Moreover, the proposal would
provide potential benefits to all Members, as discussed in the
Statutory Basis section, to the extent that allowing Post Only
[[Page 19362]]
orders incentivizes the provision of more displayed liquidity on IEX.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \27\ and Rule 19b-4(f)(6) \28\ thereunder.
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \29\ and Rule 19b-4(f)(6) \30\
thereunder.
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\27\ 15 U.S.C. 78(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(6).
\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \31\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\32\ the Commission
may designate a shorter time if such action is consistent with
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that it may
promptly change its rule to conform to how other exchanges treat Post
Only orders on entry. The Exchange states in its filing that the
proposal will provide Members more determinism and certainty as to the
circumstances in which a Post Only order will execute on entry by
eliminating the potential for such orders to execute upon entry on IEX
for less than $0.01 of price improvement. The Exchange further states
above that the proposal is ``designed to encourage the posting of more
displayed liquidity on the Exchange, and to the extent that such an
incentive is successful in increasing the overall liquidity pool
available at IEX, all market participants, including takers of
liquidity, will benefit.'' Accordingly, the Commission believes that
the Exchange's proposal does not raise any new or novel issues.
Therefore, the Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest. Accordingly, the Commission designates the proposed rule
change to be operative upon filing.\33\
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\31\ 17 CFR 240.19b-4(f)(6).
\32\ 17 CFR 240.19b-4(f)(6)(iii).
\33\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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#c4b6b1a8a1e9a7aba9a9a1aab0b784b7a1a7eaa3abb2"><span class="__cf_email__" data-cfemail="0c7e796069216f6361616962787f4c7f696f226b637a">[email protected]</span></a>. Please include
file number SR-IEX-2025-05 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-2025-05. 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-2025-05 and should be
submitted on or before May 28, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07904 Filed 5-6-25; 8:45 am]
BILLING CODE 8011-01-P
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