Notice2025-14360
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish IEX Options LLC as a facility of Investors Exchange LLC
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
July 30, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 144 (Wednesday, July 30, 2025)</title>
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[Federal Register Volume 90, Number 144 (Wednesday, July 30, 2025)]
[Notices]
[Pages 35940-35946]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14360]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103551; File No. SR-IEX-2025-17]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Establish
IEX Options LLC as a facility of Investors Exchange LLC
July 25, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 17, 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 Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 \3\
and Rule 19b-4 thereunder,\4\ the Exchange is filing with the
Commission a proposed rule change to establish IEX Options LLC (``IEX
Options'' or the ``Company'') as a facility of the Exchange, as that
term is defined in Section 3(a)(2) of the Act,\5\ that will operate the
Exchange's market for the listing and trading of options issued by the
Options Clearing Corporation (``OCC'').\6\ The Exchange also proposes
to adopt the Operating Agreement of IEX Options LLC (``IEX Options LLC
Agreement''), in the form attached as Exhibit 5 hereto, prior to the
commencement of operations by IEX Options LLC as a Facility of the
Exchange that operates a market for the trading of options. Pursuant to
the Operating Agreement, the Exchange will be the sole member of IEX
Options. IEX Group, Inc. (``IEXG''), in turn, is the sole member of the
Exchange and thus the sole indirect owner of IEX Options. The Exchange
has designated this proposal as non-controversial and provided the
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the
Act.\7\
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\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ Under the Act, the term ```facility' when used with respect
to an exchange includes its premises, tangible or intangible
property whether on the premises or not, any right to the use of
such premises or property or any service thereof for the purpose of
effecting or reporting a transaction on an exchange (including,
among other things, any system of communication to or from the
exchange, by ticker or otherwise, maintained by or with the consent
of the exchange), and any right of the exchange to the use of any
property or service.'' See 15 U.S.C. 78(c)(a)(2).
\6\ See Securities Exchange Act Release No. 102190 (January 14,
2025), 90 FR 7205 (January 21, 2025), SR-IEX-2025-02 (``Initial
Filing''); Securities Exchange Act Release No. 34-102663, 90 FR
12890 (March 13, 2025), Amendment No. 1 (``IEX Options Trading Rules
Proposal''), available at <a href="https://www.iexexchange.io/resources/regulation/rule-filings">https://www.iexexchange.io/resources/regulation/rule-filings</a>. Amendment No. 1 superseded and replaced the
Initial Filing. On April 21, 2025, the Commission instituted
proceedings to determine whether to disapprove the proposed rule
change. Securities Exchange Act Release No. 34-102895 (April 21,
2025), 90 FR 17474 (April 25, 2025). On June 13, 2025, the Exchange
filed Amendment No. 2, which superseded and replaced Amendment No.
1. On June 17, 2025, the Exchange withdrew Amendment No. 2 and filed
Amendment No. 3, which superseded and replaced Amendment No. 2.
\7\ 17 CFR 240.19b-4(f)(6)(iii).
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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
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
As described in the IEX Options Trading Rules Proposal, the
Exchange is proposing to adopt rules to govern the listing and trading
of options issued by OCC on IEX Options, which rules will, upon
Commission approval, be incorporated into the Exchange's rulebook. In
connection with that Proposal, the Exchange proposes to establish IEX
Options, LLC, a Delaware limited liability company wholly owned by the
Exchange, as a Facility of the Exchange as that term is defined in
Section 3(a)(2) of the Act.\8\ The proposed IEX Options LLC Agreement,
together with the Third Amended and Restated Operating Agreement of
Investors' Exchange LLC, dated as of August 11, 2020 (``Exchange LLC
Agreement''),\9\ to the extent it is incorporated by reference into the
IEX Options LLC Agreement, are the source of governance and operating
authority for IEX Options, and therefore function in a similar manner
as articles of incorporation and bylaws function for a corporation. As
detailed below, the proposed IEX Options LLC Agreement provisions are
based upon, and are generally the same as, the provisions of the
Exchange LLC Agreement unless specified otherwise in this rule filing.
IEX notes that it is not novel for an affiliated entity registered as a
limited liability company under the laws of Delaware to be operated as
a facility of a national securities exchange.\10\
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\8\ 15 U.S.C. 78c(a)(2).
\9\ The Exchange LLC Agreement is available at: Governance
[verbar] Resources [verbar] IEX Exchange [verbar] IEX.
\10\ See, e.g., Securities Exchange Act Release No. 88806
(February 17, 2022), 87 FR 10401 (SR-BOX-2021-14) (February 24,
2022) (``BSTX Facility Approval Order'') (approving Boston Security
Token Exchange, LLC, a Delaware limited liability company affiliated
with BOX Exchange LLC, to operate as a facility of the BOX Exchange
LLC).
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As an exchange, IEX is required to provide ``fair access,'' meaning
fair and equal access to all qualified broker-dealers seeking to become
IEX Members that meet financial responsibility and other applicable
requirements, which also enables access to all investors who wish to
trade through those broker-dealers.\11\ As a Facility of the Exchange,
IEX Options would be subject to these ``fair access'' provisions, and
any proposed IEX Options Rules applicable to the Facility would also be
subject to review for compliance with such provisions. The proposed
ownership and governance structure of IEX Options, which mirror
requirements that have been applied consistently to all national
securities exchanges and is subject to review of the Commission,\12\
[[Page 35941]]
is designed to promote fair access and non-discriminatory standards for
trading across investors, broker members, and other market
participants. Nothing in this filing would impact the manner in which
the Exchange's current market for continuous matching and execution of
orders in equities operates.
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\11\ 15 U.S.C. 78f(b)(2).
\12\ See, e.g., Securities Exchange Act Release No. 34-78101,
pp. 20-21 (June 17, 2016), 81 FR 41142, 41146-47 (June 23, 2016)
(File No. 10-222) (``IEX Approval Order'') (approving IEX
application); Securities Exchange Act Release No.102853 (April 11,
2025) (File No. 10-244), 90 FR 16207 (``GIX Exchange Approval
Order''); Securities Exchange Act Release No.101777 (November 27,
2024), 89 FR 97092 (File No. 10-242) (``24X Exchange Approval
Order''); Securities Exchange Act Release No. 88808 (May 4, 2020),
85 FR 27451 (May 8, 2020) (File No. 10-237) (``MEMX Exchange
Approval Order''); BSTX Facility Approval Order, supra note 10;
Securities Exchange Act Release No. 68341 (December 3, 2012), 77 FR
73089 (December 7, 2012) (File No. 10-207) (``MIAX Exchange Approval
Order''); Securities Exchange Act Release No. 53382 (February 27,
2006), 71 FR 11271, 11256 (SR-NYSE-2005-77) (``Order Approving
NYSE's Merger with Archipelago Holdings'').
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Structure of the Company \13\
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\13\ References to ``the Company'' in the IEX Options LLC
Agreement refer to IEX Options.
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IEX Options would be a wholly-owned subsidiary of the Exchange, and
the Exchange Board (as well as each committee thereof) would have the
same authority, functions, and responsibilities with respect to IEX
Options as the Board (and its committees) have with respect to the
Exchange.\14\ Section 1(a) of proposed Art. III of the IEX Options LLC
Agreement makes clear that the Board would have the authority ``to do
any and all acts necessary, convenient or incidental to or for the
furtherance of'' managing the business and affairs of the Company. In
addition, the Board would have the authority to appoint, remove and
replace the Company's officers, employees or agents, and the authority
to delegate any of its powers to any officer, employee or agent, or any
committee appointed pursuant to Article V of the Exchange LLC Operating
Agreement.\15\ As a result, the Board's authority over and ability to
manage the business and affairs of IEX Options would be equivalent to,
and coextensive with, its authority with regard to managing the
business and affairs of the Exchange. Accordingly, the proposed IEX
Options LLC Agreement's governance provisions would be generally the
same in all material respects as those provided in the Exchange LLC
Agreement with the exception of certain conforming changes applicable
only to IEX Options, for example, providing that the effective and
operational dates in IEX Options LLC Agreement would refer to the
effective and operational dates of IEX Options, not the Exchange.\16\
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\14\ See proposed Art. III, Section 1(f) of the IEX Options LLC
Agreement. The Board and each committee would continue to be
selected and operate in accordance with the Exchange LLC Agreement.
\15\ See proposed Art. III, Section 1(a) of the IEX Options LLC
Agreement.
\16\ See id., proposed Art. VIII, Section 1.
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As proposed, IEX Options' ownership structure would be
substantially similar to that of its direct owner, the Exchange, but
for minor variances and corporate formalities designed to maintain the
separation of the organizational structure of IEX Options. For example,
by virtue of being wholly owned by the Exchange which is in turn wholly
owned by IEXG, IEX Options would have the same Commission-approved
restrictions on ownership and voting interests as the Exchange and
IEXG. These include ownership and voting limits that apply to the
direct or indirect ownership and voting control of IEXG, as the
Exchange's sole shareholder and IEX Options' sole indirect
shareholder.\17\ They also include limits on the amount of IEXG stock
that can be owned by any single Member.\18\ As a Facility of the
Exchange, IEX Options would be subject to the provision of the IEX
Rulebook with respect to ownership limitations applicable to Options
Members.\19\
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\17\ See Exchange LLC Agreement, supra, note 9, Section III.B.1,
pp. 16-17. See Third Amended and Restated Certificate of
Incorporation of IEX Group, Inc. (``IEXG Cert. of Incorp.''), TENTH
Section B(1), available at Governance [verbar] Resources [verbar]
IEX Exchange [verbar] IEX. No person, either alone or together with
related persons, may beneficially own more than 40% of any class of
capital stock of IEXG.
\18\ See IEXG Cert. of Incorp., supra note 17. No Member, either
alone or together with related persons, may own more than 20% of any
class of capital stock of IEXG.
\19\ See IEX Rule 2.210 (``No Affiliation between Exchange and
any Member''). Specifically, no person alone or together with
related persons may own more than 40% of any class of stock in IEXG,
unless the Board and the Commission approve a waiver. In addition,
no Member of the Exchange alone or together with related persons may
own more than 20% of any class of stock in IEXG unless the
Commission approves otherwise. Further, no person, alone or together
with related persons, may directly or indirectly vote or cause the
voting of more than 20% of the voting power of the IEXG, unless the
Board and the Commission approve a waiver. See IEXG Cert. of
Incorp., TENTH Section B(2.2), supra note 17; IEX Approval Order,
Section III.B.1, supra note 13.
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The day-to-day management of IEX Options would be conducted by the
officers of IEX Options. In addition, the Chief Regulatory Officer
(``CRO'') of the Exchange, who reports to the Regulatory Oversight
Committee (``ROC'') of the Exchange's Board of Directors, would serve
as the CRO of IEX Options. IEX Options' regulatory functions (such as
disciplinary proceedings, membership matters, proposed rule changes,
and other regulatory matters) performed by Exchange staff reporting to
the CRO for the Exchange would be handled in the same manner for IEX
Options. And with respect to the funding and capitalization of IEX
Options, proposed Article IV, Section 4 of IEX Options LLC Agreement
would specify that IEX Options and the Exchange have entered into an
expense sharing agreement.
IEX has separately filed a proposed rule change to establish the
trading rules for the IEX Options.\20\ Upon effectiveness of all
applicable rule filings filed with the Commission, IEX Options would
begin operating as a Facility of the Exchange that IEX Members \21\ can
qualify to use for the continuous matching and execution of orders in
options. These proposals, as discussed herein, are based on established
parameters that the Commission has historically applied to all national
securities exchanges to ensure compliance with the requirements of the
Act, particularly Section 6(b)(1),\22\ and are designed to ensure that
IEX Options is able to carry out its regulatory obligations to enforce
compliance by its members and persons associated with its members with,
and to operate in a manner consistent with, the provisions of the Act,
the rules and regulations thereunder, and the IEX Options Rules.
Furthermore, all IEX rules are subject to review and approval by the
Commission to ensure that they do not unfairly discriminate among
member firms.\23\
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\20\ See IEX Options Trading Rules Proposal, supra note 6.
\21\ See IEX Rule 1.160(s). IEX intends to allow any Member of
the Exchange to transact on IEX Options if they meet certain
qualifications. See IEX Options Trading Rules Proposal, supra note
6, Rule 2.160 and Chapter 18.
\22\ 15 U.S.C. 78f(b)(1).
\23\ 15 U.S.C. 78f(b)(5). See also Exchange LLC Agreement, supra
note 9, Art. X, Section 1(a); and proposed Art. VII, Section 1(a) of
the IEX Options LLC Agreement.
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The Governance of the Company
The proposed governance rules are designed to help ensure the role
of IEX Options, as a Facility of the Exchange, as a neutral platform to
facilitate trading for others, as well as the independence of its
regulatory function to discharge the oversight responsibilities under
the Act. The IEX Options LLC Agreement provides that the Exchange's
Board of Directors would oversee the business and affairs of IEX
Options based on the applicable requirements for establishing and
operating IEX Options as a Facility of the Exchange under Section 6 of
the Act, including, that the IEX Options Rules shall be designed to
protect investors and the public interest; and the Exchange shall be so
organized and have the capacity to carry out the purposes of the Act
and to enforce compliance by its members and persons associated with
its members.
As proposed and discussed below, IEX Options would be subject to
regulatory oversight by the Exchange's
[[Page 35942]]
regulatory function. These provisions, including an independent
regulatory program, ``are designed to minimize the potential that a
person or entity can improperly interfere with or restrict the ability
of IEX to effectively carry out its regulatory oversight
responsibilities under the Act.'' \24\ In addition, the IEX Options'
Rules ``provide it with the ability to comply, and with the ability to
enforce compliance by its members and persons associated with its
members, with the provisions of the Act, the rules and regulations
thereunder, and the rules of IEX.'' \25\ Further, the ownership and
voting restrictions discussed above applicable to Options Members
support these objectives by limiting the ability of one or more Options
Members to interfere with or attempt to influence the ability of the
Exchange to effectively carry out its regulatory oversight
responsibilities under the Act.\26\
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\24\ See IEX Approval Order, supra note 12, pp. 20-21 (stating
that ``[t]he Commission believes that IEX's and IEXG's proposed
governance provisions are consistent with the Act, including Section
6(b)(1), which requires, in part, an exchange to be so organized and
have the capacity to carry out the purposes of the Act.'').
\25\ See IEX Approval Order, supra note 12, p. 81.
\26\ See IEXG Cert. of Incorp., supra note 17.
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As proposed, IEX Options would be a separate legal entity from the
Exchange. In respect of the corporate form, IEX Options would be
separately and adequately capitalized, with distinct assets, books and
records, and other appropriate corporate formalities as compared to the
Exchange. The discussion below describes the variances between the IEX
Options and Exchange LLC Agreements, which the Exchange believes
reflect minor changes and corporate governance formalities. Throughout
the IEX Options LLC Agreement, references to the ``LLC Member'' would
refer to the Exchange, instead of IEXG, as in the Exchange LLC
Agreement. Additionally, references to the Board (or Board of
Directors) would refer to the Exchange Board, just as they do in the
Exchange LLC Agreement because IEX Options would not have its own Board
of Directors.\27\
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\27\ As set forth above, IEX Options, as proposed, would not
have its own Board of Directors, but rather will be governed by the
Exchange's Board of Directors. Therefore, the Articles of the
Exchange LLC Agreement relating to the constitution, selection, and
functions of the Board of Directors are not replicated in the IEX
Options LLC Agreement. Instead, the proposed IEX Options LLC
Agreement, where relevant, describes the manner in which the
Exchange and its Board would provide governance and oversight of IEX
Options. See, e.g., proposed Arts. III, IV and VII of the IEX
Options LLC Agreement.
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References to meetings of the LLC Member in the Exchange LLC
Agreement \28\ would, in the corresponding provisions of the IEX
Options LLC Agreement, instead refer to meetings of the Board of
Directors of the Exchange, rather than meetings of the Board of
Directors of IEXG.\29\ Article X of the Exchange LLC Agreement
(``Exchange Authorities'') would, in the IEX Options LLC Agreement, be
renumbered as Article VII and renamed as ``Authorities of the Board
over the Company as a Facility of the Exchange'' to reflect that the
IEX Options LLC Agreement describes the Board's oversight of IEX
Options as a Facility of the Exchange. Similarly, references to the
Exchange in Article X of the Exchange LLC Agreement would, in the
corresponding provisions of the IEX Options LLC Agreement, be changed
to refer to the Company or the Company as a Facility of the Exchange,
as applicable.\30\
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\28\ See Exchange LLC Agreement, supra note 9, Art. IV.
\29\ See id., proposed Art. III, Sections 2 and 3 of the IEX
Options LLC Agreement.
\30\ See id., proposed Art. IV.
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Most of Articles III (Board of Directors), IV (LLC Member), and V
(Committees of the Board) of the Exchange LLC Agreement have not been
replicated in the IEX Options LLC Agreement because, as proposed, IEX
Options would not have its own separate board of directors and, as
previously noted, the Board and each Board committee would have the
same functions and responsibilities with respect to IEX Options as the
Board and such committees have with respect to the Exchange.\31\ For
the same reason, the Exchange proposes to not include in the IEX
Options LLC Agreement other similar provisions that pertain
specifically to the Board, such as the composition of the Board, terms
of Directors, nomination and election of Directors, and vacancies of
Directors.\32\ However, Exchange LLC Agreement Article III, Sections
1(a)-(e), which pertain to governance, have been replicated in the IEX
Options LLC Agreement, with edits to reflect that IEX Options is
governed by the Exchange Board. For example, references to the Board
have been changed to ``LLC Member'' to reflect that IEX Options does
not have its own board and is fully owned and controlled by the
Exchange and uses the Exchange Board.
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\31\ See id., proposed Art. III, Section 1(f). The Exchange does
propose to replicate Art. IV, Section 4 (Assignment) from the
Exchange LLC Agreement, which provides that the LLC Member (i.e.,
the Exchange) may not transfer or assign its ownership interest in
IEX Options unless such transfer or assignment is approved by the
Commission pursuant to Section 19 of the Exchange Act. See id.,
proposed Art. III, Section 6 and proposed Art. VIII, Section 12.
\32\ Specifically, the Exchange is not proposing to adopt
provisions in the IEX Options LLC Agreement that correspond to Art.
III, Sections 2 through 13, and 16 of the Exchange LLC Agreement
(Composition of the Board; Terms of Office; Nomination and Election;
Chairman of the Board; Vacancies; Removal and Resignation; Place and
Mode of [Board] Meetings; Exchange Member Meetings; Voting, Quorum
and Action by the Board; Presumption of Assent; Action in Lieu of
Meeting; Waiver of Notice; Compensation of Board and Committee
Members) because there is no separate board for IEX Options.
Pursuant to Art. III, Section 1(a), however, the Board shall have
the power to do any and all acts necessary, convenient or incidental
to or for the furtherance of managing the business and affairs of
the Company. In addition, to the fullest extent permitted by
applicable law, the IEX Options LLC Agreement, the Exchange LLC
Agreement, and the IEX Options Rules, the Board would have the
authority to appoint, remove and replace any officers, employees or
agents of the Company, and may delegate any of its powers to a
committee appointed pursuant to Art. V of the Exchange LLC Operating
Agreement, or to any officer, employee, or agent of the Company.
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The proposed IEX Options LLC Agreement would further provide that,
in discharging his or her responsibilities as a member of the Board of
Directors or as an officer or employee of IEX Options, each such
director, officer or employee shall comply with the federal securities
laws and the rules and regulations thereunder and shall cooperate with
the Commission, the Exchange, and IEX Options pursuant to its
regulatory authority.\33\ The IEX Options LLC Agreement, where relevant
and as set forth in more detail below, further describes the governance
and oversight roles the Exchange and its Board would provide for IEX
Options.\34\
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\33\ See proposed Art. III, Section 1(d) of the IEX Options LLC
Agreement.
\34\ See proposed Arts. III (Management), IV (Officers, Agents
and Employees), and VII (Authorities of the Board over the Company
as a Facility of the Exchange) of the IEX Options LLC Agreement.
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Proposed Article VIII, Section 1 of the IEX Options LLC Agreement
establishes that IEX Options will not operate as a Facility of the
Exchange until this rule filing is effective. In addition, the proposed
IEX Options LLC Agreement would authorize the Board to adopt rules and
amendments thereto that it ``deem[s] necessary or appropriate
pertaining to the Company as a Facility'' and further provides that any
such rules or amendments would become effective upon approval by the
Commission or otherwise as provided in the Exchange Act, and the rules
or amendments would become operative as of the date of Commission
approval or effectiveness unless the Exchange declared a later
operative date.\35\
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\35\ See proposed Art. VII, Section 1(a) of the IEX Options LLC
Agreement.
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[[Page 35943]]
Regulatory Oversight
The Exchange believes that by leveraging the existing regulatory
structure set forth in the Exchange LLC Agreement and proposed IEX
Options LLC Agreement, the Exchange would be able to carry out its
regulatory responsibilities for IEX Options in a manner consistent with
the Exchange Act. The proposed IEX Options LLC Agreement creates a
regulatory structure that is designed to ensure the independence of the
Exchange's regulatory oversight over IEX Options as a Facility of the
Exchange. Specifically, the IEX Options LLC Agreement would require
that, in light of the unique nature of the Company as a Facility of the
Exchange, the Board evaluate any proposal that comes before it by
taking into account factors such as (i) the potential impact on the
integrity of the national securities exchange; and (ii) whether the
proposal promotes just and equitable principles of trade with respect
to facilitating transactions in securities.\36\
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\36\ See proposed Art. III, Section 1(e) of the IEX Options LLC
Agreement. The Exchange LLC Agreement has a similar provision
regarding the Board's consideration of any proposal concerning the
Exchange. See Exchange LLC Agreement, supra note 9, Art. III,
Section 1(e).
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Article III, Section 1(d) of the IEX Options LLC Agreement would
require the Board, in managing the business and affairs of the Company,
to consider the applicable requirements for establishing and operating
the Company as a Facility of the Exchange under Section 6 of the
Exchange Act, including that the IEX Options Rules shall be designed to
protect investors and the public interest, and that the Exchange shall
be so organized and have the capacity to carry out the purposes of the
Exchange Act and to enforce compliance by its ``members'' as that term
is defined in Section 3 of the Exchange Act.
Article V, Section 6(c) of the Exchange LLC Agreement mandates that
the Board's ROC, as part of its role in overseeing the adequacy and
effectiveness of the Exchange's regulatory and SRO responsibilities,
assess the Exchange's regulatory performance, and assist the Board and
Board committees in reviewing the regulatory plan and the overall
effectiveness of the Exchange's regulatory functions. The Exchange LLC
Agreement also requires the Board take all steps reasonably necessary
to ensure that the CRO and senior regulatory personnel are able to act
independently of the commercial interests of the Exchange.\37\ In
addition, the Exchange LLC Agreement establishes procedures for
maintaining confidentiality of information and records relating to the
SRO function, and prohibitions on the use of confidential regulatory
information for any commercial or other non-regulatory purposes.\38\
For example, proposed Article VIII, Section 4 of the IEX Options LLC
Agreement, which is substantially similar to Article XI, Section 4, of
the Exchange LLC Agreement, specifies that the Exchange shall have
``complete and full access'' to the books and records of the Company
pertaining to the SRO function. These provisions would apply with equal
force to the Exchange's regulatory oversight of the Company. The
proposed IEX Options LLC Agreement provides that the Board and Board
committees will have the same authority, functions, and
responsibilities with respect to IEX Options as they do with respect to
the Exchange.\39\
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\37\ See Exchange LLC Agreement, supra note 9, Art. V, Section
6(c).
\38\ See id., Art. XI, Section 4.
\39\ See proposed Art. III, Section 1(f) of the IEX Options LLC
Agreement.
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In addition, the Exchange proposes certain differences between the
IEX Options LLC and Exchange LLC Agreements to make clear that the
Exchange would carry out regulatory functions and oversight of IEX
Options as a Facility of the Exchange. For example, proposed Art. III,
Section 1(d) of the IEX Options LLC Agreement specifies that, in
connection with managing the business and affairs of the Company, the
Board shall consider applicable requirements for establishing the
Company as a Facility of the Exchange, whereas the corresponding
provision in the Exchange LLC Agreement provides that the Board shall
consider applicable requirements for registration as a national
securities exchange (rather than as a facility). In addition,
consistent with the Company operating as a Facility of the Exchange,
the Exchange proposes to specify in proposed Article VIII, Section 4 of
IEX Options LLC Agreement that the Exchange shall have complete and
full access to the books and records of the Company, including those
that relate to the Exchange's regulatory oversight of the Company.
As part of the Exchange's regulatory oversight of the Company, the
Exchange CRO would also serve as the CRO of the Company as a Facility
of the Exchange.\40\ As specified in proposed Article IV, Section 9 of
IEX Options LLC Agreement, the Exchange CRO ``shall have general
supervision of the regulatory operations of the Company in the same
manner as with respect to the Exchange, including responsibility for
overseeing the surveillance, examination, and enforcement functions of
the Exchange with respect to the Company and for administering any
regulatory services agreements with another self-regulatory
organization to which the Exchange is a party that pertain to the
Company.'' As the senior executive and manager of the Exchange's
regulation staff, the CRO is knowledgeable of the Exchange's rules, IEX
Options' proposed rules, and the regulations applicable to them.
Accordingly, the CRO is well positioned to help ensure that the
Exchange, including the operation of IEX Options as a Facility of the
Exchange, continues to be so organized and has the capacity to carry
out the purposes of the Act, including to prevent inequitable and
unfair practices.
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\40\ See proposed Art. IV, Section 9 of the IEX Options LLC
Agreement. IEX expects some, but potentially not all, of the
officers of IEX Options would also be officers of the Exchange.
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Regulatory Jurisdiction Over Members
As a national securities exchange, IEX's operations are subject to
ongoing SEC oversight, including reviews to determine that the Exchange
is fulfilling its self-regulatory obligations. This comprehensive SEC
oversight will extend to IEX Options as a Facility of the Exchange. The
CRO would have responsibility for overseeing the surveillance,
examination, and enforcement functions of the Exchange with respect to
the Company.\41\ To assist it in complying with its regulatory
obligations, the Exchange intends to update its existing regulatory
services agreement (``RSA'') with the Financial Industry Regulatory
Authority (``FINRA'') \42\ to engage FINRA to conduct IEX Options-
related market surveillance, examination, investigation, and
enforcement functions on IEX's behalf. The amended RSA would enable the
Exchange to leverage FINRA's substantial regulatory resources and
experience in fulfilling its regulatory obligations with respect to IEX
Options. The Exchange would oversee FINRA's activities and would remain
directly responsible for the discharge of its SRO duties with respect
to IEX Options, as is the case today with respect to the Exchange.\43\
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\41\ See proposed Art. IV, Section 9 of the IEX Options LLC
Agreement.
\42\ See IEX Approval Order, supra note 12, Section III.B.4(b),
pp. 29-30.
\43\ See proposed Art. IV, Section 9 of the IEX Options LLC
Agreement, which provides that the CRO would be responsible ``for
administering any regulatory services agreements . . . to which the
Exchange is a party that pertain to the Company.''
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In addition, prior to IEX Options' commencement of operations, the
[[Page 35944]]
Exchange will join the existing options industry agreements pursuant to
Section 17(d) of the Act.\44\ Section 17(d) of the Exchange Act and the
related Exchange Act rules permit SROs to allocate certain regulatory
responsibilities to avoid duplicative oversight and regulation.
Exchange Act Rule 17d-2 \45\ permits SROs to allocate among each other
the responsibility to receive regulatory reports from, and examine and
enforce compliance with the Exchange Act, the rules and regulations
thereunder, and SRO rules by, firms that are members of more than one
SRO. These agreements include the Options Sales Practices Agreement and
the Options-Related Market Surveillance Agreement.\46\ The Exchange and
FINRA are also party to a bilateral Rule 17d-2 agreement that requires
minor modifications due to the proposed launch of IEX Options. The
Exchange intends to modify and seek Commission approval of the modified
bilateral Rule 17d-2 agreement prior to commencing operations for IEX
Options.
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\44\ 15 U.S.C. 78q(d).
\45\ 17 CFR 240.17d-2.
\46\ See IEX Options Trading Rules Proposal, supra note 6, 90 FR
at 12906.
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Regulatory Funds
``Regulatory Funds'' would remain a defined term in proposed
Article I of IEX Options LLC Agreement, but the definition would be
modified to reflect that IEX Options would not have its own regulatory
operations. Specifically, proposed Article I(t) defines ``Regulatory
Funds'' as ``fees, fines, or penalties derived from the regulatory
operations of the Exchange in enforcing IEX Options Rules related to
trading on or through the Company as a Facility of the Exchange.
`Regulatory Funds' shall not be construed to include revenues derived
from listing fees, market data revenues, transaction revenues, or any
other aspect of the commercial operations of the Exchange or the
Company, even if a portion of such revenues are used to pay costs
associated with the regulatory operations of the Company.''
Similarly, proposed Article VII, Section 4 of IEX Options LLC
Agreement (``Fees, Dues, Assessments, and Other Charges'') is almost
identical to Article X, Section 4 of the Exchange LLC Agreement, with
the exception that the IEX Options LLC Agreement would provide that any
regulatory funds resulting from enforcement of IEX Options Rules would
be applied to fund the Exchange's regulatory operations, including
those pertaining to the Company as a Facility of the Exchange. By
contrast, the Exchange LLC Agreement does not permit the Exchange to
distribute regulatory funds to its member, IEXG, because IEXG performs
no regulatory services for the Exchange or any of its facilities.
Because the Exchange would perform regulatory services, including
enforcement of the options rules, on behalf of the Company as a
Facility of the Exchange, the Exchange believes that it is appropriate
that any regulatory funds resulting therefrom be applied to fund the
Exchange's regulatory operations.
2. Statutory Basis
The Exchange believes that this proposed rule change is consistent
with Section 6(b) of the Act,\47\ in general, and furthers the
objectives of Section 6(b)(1),\48\ in particular, in that it enables
the Exchange, and the Company as a Facility of the Exchange, to be so
organized so as to have the capacity to be able to carry out the
purposes of the Act and to comply, and to enforce compliance by its
Members--whether they trade on the Exchange, IEX Options, or both--with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the Exchange.\49\ The Exchange also believes that this
filing furthers the objectives of Section 6(b)(5) of the Act \50\ in
that it is designed to facilitate transactions in securities, 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 regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and in general, to
protect investors and the public interest.
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\47\ 15 U.S.C. 78f(b).
\48\ 15 U.S.C. 78f(b)(1).
\49\ See, e.g., GIX Exchange Approval Order, supra note 12, 90
FR at 16208 (``[T]he Commission shall by order grant an application
for registration as a national securities exchange if the Commission
finds, among other things, that the proposed exchange is so
organized and has the capacity to carry out the purposes of the Act
and can comply, and can enforce compliance by its members and
persons associated with its members, with the provisions of the Act,
the rules and regulations thereunder, and the rules of the
exchange.'').
\50\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the existing ownership and
governance provisions, which have historically been applied to all
national securities exchanges, and are designed to mitigate inherent
conflicts of interest, support the Commission's ability to find that
the Company, as a Facility of the Exchange, is so organized as to be
able to meet the requirements of the Act.\51\ The Exchange believes the
provisions discussed above in the Purpose section, limiting an Options
Member to a maximum of 20% economic ownership and 20% voting ownership
of IEXG, and by extension, the Exchange or IEX Options, unless the
Commission approves otherwise, are consistent with the requirements of
the Act.\52\ Further, consistent with ownership provisions that have
been consistently approved by the Commission for IEX and other
exchanges, provisions that limit any person, either alone or together
with its related persons, from beneficially owning shares constituting
more than 40% of any class of capital stock of the exchange or exchange
owner, unless the Commission approves otherwise, are consistent with
the Exchange Act, particularly Section 6(b)(1) thereof, which requires,
in part, that an exchange be so organized and have the capacity to
carry out the purposes of the Act. These ownership and voting limits
provisions, which largely mirror those of other national securities
exchanges, are designed to provide the Exchange and IEX Options as its
Facility the ability to fairly and objectively carry out their
regulatory responsibilities under the Act, particularly with Section
6(b)(1) of the Exchange Act,\53\ by minimizing the potential that a
person or entity could improperly interfere with the Exchange's ability
to carry out its regulatory oversight responsibilities under the
Act.\54\ Accordingly, the Exchange does not believe that this proposed
structure, where an affiliated entity operates as a facility of a
national securities exchange, raises any new or novel issues not
already considered by the Commission.
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\51\ See supra note 12.
\52\ 15 U.S.C. 78f(b)(1); see IEX Approval Order, supra note 12,
Section III.B.1; c.f. Securities Exchange Act Release No. 59281
(January 22, 2009), 74 FR 5014, 5018-19 (January 28, 2009) (SR-NYSE-
2008-120) (``NYBX Order'') (Commission-approved exception to
exchange membership ownership restrictions to allow a member firm to
hold a 50% interest in a new facility of NYSE provided a number of
restrictions, procedures, and internal controls were adhered to for
the preservation of regulatory independence).
\53\ 15 U.S.C. 78f(b)(1).
\54\ See, e.g., GIX Approval Order, supra note 12, pp. 16-18.
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The Exchange is the entity that will have and will exercise
regulatory oversight of IEX Options. As discussed above, the Exchange
believes that the requirement for Commission approval for certain
changes in ownership will help to ensure the independence of the
Exchange's regulatory oversight of IEX Options and facilitate the
ability of the
[[Page 35945]]
Exchange to carry out its regulatory responsibilities and operate in a
manner consistent with the Act. The Exchange further believes these
limits, which already apply to IEXG and the Exchange, continue to be
appropriate in connection with IEX Options as a Facility of the
Exchange, and are consistent with the requirements of the Act and
Section 6(b)(1) thereof, which requires, in part, that an exchange be
so organized and have the capacity to carry out the purposes of the
Act.\55\
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\55\ 15 U.S.C. 78f(b)(1).
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Subject to the Exchange's independent regulatory oversight, the
proposed Facility's directors, officers, and employees would have full
independent authority to manage the development, operations, business
and affairs of IEX Options.\56\ As discussed in the Purpose section,
the directors, officers, and employees of the Exchange and IEX Options
must give due regard to the preservation of the independence of the
self-regulatory functions of the Exchange and IEX Options,
respectively, and must not take any action that would interfere with
the effectuation of such regulatory functions (including disciplinary
matters) or interfere with their ability to carry out their regulatory
responsibilities under the Act.\57\ In addition, the Exchange has an
independent CRO who would oversee IEX Options' regulatory operations
and who reports to the ROC. The Exchange believes these provisions,
which are designed to maintain the independence of IEX Options'
regulatory function, are appropriate and consistent with the
requirements of the Act, particularly with Section 6(b)(1), which
requires, in part, an exchange to be so organized and have the capacity
to carry out the purposes of the Act.\58\
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\56\ See proposed Art. IV, Sections 1, 5-13 of the IEX Options
LLC Agreement.
\57\ See, e.g., IEX Approval Order, supra note 12, pp. 21-25.
\58\ 15 U.S.C. 78f(b)(1).
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Finally, the Exchange believes that the few variances between the
IEX Options LLC Agreement and the Exchange LLC Agreement described in
the Purpose section are consistent with the Exchange Act because they
reflect minor changes and corporate formalities designed to maintain
the separation of the organizational structure of IEX Options. The
Exchange believes that IEX Options' organizational structure will allow
it to promote just and equitable principles of trade while retaining
the regulatory independence required to prevent fraudulent and
manipulative acts and practices, all of which should perfect the
mechanism of a free and open market and a national market system that
protects investors and the public interest.
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. Given the substantial growth
of investors trading in standardized options,\59\ the Exchange believes
that providing a facility of a national securities exchange that can
list and trade options issued by OCC, subject to transparent rules
reviewed or approved by the Commission, allows for a well-regulated,
competitive market for the trading of options. Moreover, as noted
above, the provisions proposed herein are of the type that the
Commission has required consistently of every national securities
exchange that trades options.\60\ Consequently, the Exchange does not
believe that these provisions raise any new or novel issues not already
considered by the Commission.
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\59\ See, e.g., Staff Report on Equity and Options Market
Structure Conditions in Early 2021, (Oct. 14, 2021) at 16 n. 52
(discussing the substantial increase of investors trading in options
and noting that ``[b]y the end of the first quarter of 2020,
standardized listed options trading had grown to over 30 million
contracts a day on average, more than 50% higher than the 19.6
million contracts per day traded in December 2019''), available at
<a href="https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf">https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf</a>.
\60\ See, e.g., BSTX Exchange Approval Order, supra note 10;
MIAX Exchange Approval Order, supra note 12.
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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 creating a trading platform subject to SRO oversight on
which options issued by OCC can be listed and traded. Moreover, other
exchanges are free to adopt similar provisions subject to the
Commission's rule filing process.
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
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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 \61\ and
Rule 19b-4(f)(6) \62\ thereunder.\63\ 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.
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\61\ 15 U.S.C. 78s(b)(3)(A).
\62\ 17 CFR 240.19b-4(f)(6).
\63\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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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#0e7c7b626b236d6163636b607a7d4e7d6b6d20696178"><span class="__cf_email__" data-cfemail="4f3d3a232a622c2022222a213b3c0f3c2a2c61282039">[email protected]</span></a>. Please include
file number SR-IEX-2025-17 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-2025-17. 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 filing will be available for inspection and
copying at the principal office of the Exchange.
[[Page 35946]]
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-2025-17 and should
be submitted on or before August 20, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\64\
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\64\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14360 Filed 7-29-25; 8:45 am]
BILLING CODE 8011-01-P
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