Notice2026-09258
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX Rule 11.190(g)
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Published
May 11, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 90 (Monday, May 11, 2026)</title>
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[Federal Register Volume 91, Number 90 (Monday, May 11, 2026)]
[Notices]
[Pages 25638-25642]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09258]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105383; File No. SR-IEX-2026-14]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX
Rule 11.190(g)
May 6, 2026.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on April 30, 2026, Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\4\
and Rule 19b-4 thereunder,\5\ the Exchange is filing with the
Commission a proposed rule change to amend IEX Rule 11.190(g)(1) to
incrementally optimize the effectiveness of the proprietary
mathematical calculation used to make quote instability determinations
for certain orders. 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.\6\
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ 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>
and at the principal office of the Exchange.
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
The purpose of the proposed rule change is to amend IEX Rule
11.190(g)(1) to incrementally optimize the proprietary mathematical
calculation used to make quote instability determinations for certain
orders (i.e., to assess the probability of a ``crumbling quote''--an
imminent change to the current Protected NBB \7\ to a lower price or
the current Protected NBO \8\ to a higher price for a particular
security). This calculation is referred to as the ``crumbling quote
indicator'' or ``CQI''. The System \9\ uses the CQI to make quote
instability determinations for all Discretionary Limit (``D-Limit'')
\10\ and Corporate Discretionary Peg (``C-Peg'') \11\ orders, and for
Discretionary Peg (``D-Peg'') \12\ and primary peg (``P-Peg'') \13\
orders unless the User \14\ submitted the D-Peg or P-Peg order with an
instruction that the System apply the Quote Imbalance Indicator \15\
instead of the CQI to the order.
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\7\ See IEX Rule 1.160(cc).
\8\ See IEX Rule 1.160(cc).
\9\ See IEX Rule 1.160(nn).
\10\ See IEX Rule 11.190(b)(7).
\11\ See IEX Rule 11.190(b)(16).
\12\ See IEX Rule 11.190(b)(10).
\13\ See IEX Rule 11.190(b)(8).
\14\ See IEX Rule 1.160(qq).
\15\ See IEX Rule 11.190(g)(2). This rule filing will have no
impact on the Quote Imbalance Indicator's inputs or rules.
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Description of CQI Functionality
The Exchange has made incremental changes to optimize and enhance
the effectiveness of the CQI in determining whether a crumbling quote
exists several times since Exchange launch.\16\ Each change to the CQI
was designed to incrementally increase the coverage \17\ of the
System's quote instability determinations in predicting whether a
particular quote is unstable by adjusting the logic underlying the
quote instability calculation and introducing enhanced functionality
designed to increase the number of crumbling quotes identified, while
maintaining the CQI's accuracy rate \18\ in predicting the direction
and timing of the next price change in the NBB or NBO, as applicable.
The incrementally increased coverage is designed to increase protection
from adverse selection associated with latency arbitrage during periods
of quote instability to applicable D-Limit, C-Peg, D-Peg and P-Peg
orders.
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\16\ See Securities Exchange Act Release 34-78510 (August 9,
2016), 81 FR 54166 (August 15, 2016) (SR-IEX-2016-11); Securities
Exchange Act Release No. 80202 (March 10, 2017), 82 FR 14058 (March
16, 2017) (SR-IEX-2017-06); Securities Exchange Act Release No.
83048 (April 13, 2018), 83 FR 17467 (April 19, 2018) (SR-IEX-2018-
07); Securities Exchange Act Release No. 96416 (December 1, 2022),
87 FR 75099 (December 7, 2022) (SR-IEX-2022-06); Securities Exchange
Act Release No. 99990 (April 18, 2024), 89 FR 31236 (April 24, 2024)
(SR-IEX-2024-07).
\17\ ``Coverage'' means the percentage of all ``adverse'' NBBO
changes per symbol (lower for bids, higher for offers) that were
predicted by the CQI (meaning the CQI was ``on'' at the time of the
adverse NBBO change).
\18\ ``Accuracy rate'' means the percentage of time that the CQI
accurately predicted the direction of the next price change.
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The CQI utilizes real time relative quoting activity of certain
Protected Quotations \19\ as reference data and a
[[Page 25639]]
``quote instability calculation'' in which nine separate ``quote
instability rules'' \20\--each with specific conditions based on either
the price, size, or price and size of the Signal Exchanges to assess
the probability of a crumbling quote. Each of these rules can trigger a
quote instability determination for either the NBB (for buy orders) the
NBO (for sell orders), or both, of a particular security, meaning the
System treats the quote as unstable and the CQI is on at that price
level for two milliseconds.\21\ During all other times, the quote is
considered stable, and the CQI is off. The System independently
assesses the stability of the Protected NBB and Protected NBO for each
security.
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\19\ Specifically, IEX utilizes real time relative quoting
activity of Protected Quotations from the ``Signal Exchanges'',
which are the following eleven exchanges: Cboe BZX Exchange
(``BATS''), Cboe BYX Exchange (``BATY''), Cboe EDGA Exchange
(``EDGA''), Cboe EDGX Exchange (``EDGX''), MIAX Pearl (``EPRL''),
MEMX LLC (``MEMX''), the Nasdaq Stock Market (``XNGS''), Nasdaq BX
(``XBOS''), Nasdaq PHLX (``XPHL''), the New York Stock Exchange
(``XNYS''), and NYSE Arca (``ARCX''). See IEX Rule 11.190(g).
\20\ See IEX Rule 11.190(g)(1)(C).
\21\ The nine rules are designed to work together in determining
whether a quote instability determination is triggered, and all nine
rules are applicable to an order subject to the CQI. Users cannot
elect that only some of the rules would apply.
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The CQI includes four categories of rules designed to predict
whether the Protected NBB or Protected NBO is unstable, as follows:
<bullet> Disappearing bids (or offers)--This category includes four
rules that focus on whether one or more of the Signal Exchanges is no
longer disseminating a bid or offer at the Signal Best Bid \22\ or
Signal Best Offer \23\ as applicable; \24\
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\22\ ``Signal Best Bid'' means the highest Protected Bid of the
Signal Exchanges. See IEX Rule 11.190(g)(2)(B)(i).
\23\ ``Signal Best Offer'' means the lowest Protected Offer of
the Signal Exchanges. See IEX Rule 11.190(g)(2)(B)(v).
\24\ See IEX Rule 11.190(g)(2)(C)(i).
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<bullet> Recent changes in quote size--This category includes two
rules that focus on whether there is an imbalance in the size of bids
and offers at the Signal Best Bid or Signal Best Offer; \25\
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\25\ See IEX Rule 11.190(g)(2)(C)(ii).
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<bullet> Locked or crossed market--This category includes one rule
that focuses on situations where the Signal Best Bid and Signal Best
Offer are locked or crossed; \26\ and
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\26\ See IEX Rule 11.190(g)(2)(C)(iii).
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<bullet> Quotation Changes--This category includes two rules that
focus on changes to the Signal Best Bid or Signal Best Offer.\27\
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\27\ See IEX Rule 11.190(g)(2)(C)(iv).
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On a security-by-security basis, if the specified conditions of any
of the quote instability rules are met, then the rule is deemed to be
``True'' for that security. Each rule also must be active before it can
trigger a quote instability determination. When one or more quote
instability rules is deemed to be True and any of such rules are
active,\28\ the System will treat the quote as unstable.
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\28\ The Exchange maintains an activation value for each quote
instability rule, which is used to determine if each rule is active.
Each rule's activation value is computed (on a security-by-security
basis for both the Bid side and the Offer side) in real time as a
function of the number of times the quote moves to a less aggressive
price within the two milliseconds following the time the rule was
True and the total number of times the rule was True. Whenever the
activation value for a given rule exceeds a fixed predetermined
activation threshold specific to that rule, the rule is active
(i.e., it is eligible to trigger a quote instability determination
when True). If a rule's activation value is below its activation
threshold, it will not trigger a quote instability determination
when True. See IEX Rule 11.190(g)(1)(D) for a description of
activation value calculations and functionality.
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IEX Rule 11.190(g)(3) provides that IEX reserves the right to
modify the quote instability calculations as appropriate, subject to a
filing of a proposed rule change with the SEC. Pursuant to this
provision, IEX identified a modification to the CQI that it believes
will enhance its effectiveness, as described below.
Proposal
IEX conducted an analysis of the efficacy of CQI in predicting
whether a crumbling quote would occur, by reviewing randomly selected
market data from January and February 2026. These results were then
validated by testing different randomly selected dates from the same
time period. Based upon this analysis, IEX proposes to update the
Signal Best Bid \29\ and Signal Best Offer \30\ reference price
definitions to which the CQI rules are applied (and a conforming change
to two of the rules) to include IEX's Protected Quotation in addition
to the eleven Signal Exchanges' Protected Quotations. As described in
more detail below, IEX testing indicates that adding IEX's Protected
Quotation to the Signal Best Bid and Signal Best Offer reference price
computations would increase the CQI's coverage with comparable
accuracy.
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\29\ Signal Best Bid is currently defined as the highest
Protected Bid of the Signal Exchanges. See IEX Rule
11.190(g)(1)(B)(i).
\30\ Signal Best Offer is currently defined as the lowest
Protected Offer of the Signal Exchanges. See IEX Rule
11.190(g)(1)(B)(v).
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Specifically, IEX proposes to add the term ``Input Exchanges'' to
the preamble to IEX Rule 11.190(g), defined as the Signal Exchanges
plus IEX. And IEX proposes to modify the definitions of two quote
instability variables, Signal Best Bid and Signal Best Offer, so that
each definition specifies that for purposes solely of the CQI,\31\ the
Signal Best Bid and Signal Best Offer are the highest Protected Bid and
lowest Protected Offer, respectively, of the Input Exchanges.
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\31\ No changes are proposed to the terms ``Signal Best Bid''
and ``Signal Best Offer'' as applicable to the Quote Imbalance
Indicator, see IEX Rule 11.190(g)(2)(A)(i).
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IEX is not proposing any changes to the other values, reference
prices, or inputs to the CQI or any substantive changes to its nine
quote instability rules. In other words, IEX is merely proposing to
update the reference variables Signal Best Bid and Signal Best Offer by
adding IEX to the Signal Best Bid and Signal Best Offer. IEX is not
proposing to include itself in the Signal Exchanges. Therefore the
various CQI rules which assess quoting patterns across the Signal
Exchanges would not reflect IEX's quote. These existing CQI rules,
which each compare the results of a mathematical calculation to
specified reference price variables, will continue to operate in the
same manner as currently specified, other than minor conforming change
as described below.
The proposed changes to these reference prices used by the CQI are
designed to increase the CQI's coverage by accounting for times that
IEX's Protected Quotation is at or more aggressive than the highest
Protected Bid and/or lowest Protected Offer of the Signal Exchanges.
IEX's quote ``presence'' (i.e., time with a quotation on both sides of
the national best bid and national best offer,\32\ or NBBO) has
significantly increased in the last few years, and IEX now has a higher
quote presence than all but two of the Signal Exchanges.\33\
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\32\ 17 CFR 242.600(b)(60) of Regulation NMS.
\33\ During the fourth quarter of 2025, in securities comprising
the Russell 3000 Index, IEX had a quote on both sides of the NBBO on
average 32.7% of the time during regular trading hours (i.e., 9:30
a.m. through 4:00 p.m.).
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Accordingly, IEX believes that including IEX in the Signal Best Bid
and Signal Best Offer reference data would enhance coverage of the
System's quote instability determinations in predicting whether a
particular quote is unstable because it would enable generation of a
quote instability determination under additional circumstances, such as
when IEX is one of the Input Exchanges with a quote at the Signal Best
Bid or Signal Best Offer and thereby provide greater protection for IEX
displayed orders. For example, assume the following:
1. Nasdaq, EDGX, and IEX each have a displayed order at the NBB of
15.10, which is each of their Protected Bid and also the Signal Best
Bid.
2. The Nasdaq and EDGX displayed orders move to 15.09, which is now
the Signal Best Bid. Although IEX still has a displayed order at 15.10
its quote is not included in the Signal Best Bid so the Signal Best Bid
is not at 15.10.
3. CQI Rule DB1 specifies that it will be ``true'' if Delta Bids is
greater than one (1). The Signal will fire if it is true and active.
[[Page 25640]]
4. Delta Bids is defined as: number of these three (3) exchanges
(BATS, EDGX, and Nasdaq) that had a Protected Bid equal to the Signal
Best Bid within the preceding one (1) millisecond (or within the time
period since the start time of the current Signal Best Bid if shorter),
but for which the exchange's Protected Bid is no longer equal to the
Signal Best Bid.
5. Signal Best Bid is defined as the highest Protected Bid of the
Signal Exchanges. It does not include IEX's Protected Bid under current
rules.
6. Under current rules, in the scenario described above, DB1 would
not be true because both the Nasdaq and EDGX Protected Bids would be
equal to the Signal Best Bid of 15.09, i.e., would not meet the
condition that the number of Signal Exchanges that are no longer equal
to the Signal Best Bid is more than one. Notwithstanding IEX's
Protected Bid at 15.10, the Signal Best Bid would be 15.09.
7. However, with the proposed change, the Signal Best Bid would
include IEX's Protected Bid at 15.10 and thus the Signal Best Bid would
be 15.10. As a result, CQI Rule DB1 would be true because neither the
Nasdaq nor EDGX Protected Bid would be equal to the Signal Best Bid. As
a result CQI Rule DB1 would be true and fire if active.
IEX's market data analysis evidences that the inclusion of IEX's
Protected Quotation in the reference data used by the CQI would result
in an incremental enhancement to the efficacy of the CQI, while still
being ``on'' for only small portion of the trading day, as set forth in
the chart below:
Chart 1
------------------------------------------------------------------------
Metric CQI CQI Update
------------------------------------------------------------------------
Average time on \a\ (average 8.6 seconds......... 9.7 seconds.
of all symbols).
Average time on (volume 86.0 seconds........ 93.6 seconds
weighted).
Coverage (volume weighted) 70.1%............... 75.0%.
\b\.
Accuracy Rate (volume 67%................. 68%.
weighted) \c\.
% of the Day CQI is ``On'' 0.368%.............. 0.400%.
(volume-weighted).
% of the day D-Limit is 99.632%............. 99.600%.
available at specified
limit price.
------------------------------------------------------------------------
\a\ ``Time on'' means the average time CQI is on during a day per
symbol.
\b\ See supra note 28.
\c\ ``Accuracy'' means the percent of time that following CQI being
``on'' the NBB or NBO (as applicable) moves in the predicted direction
on the next price change.
Thus, IEX believes that the proposed change will incrementally
enhance the existing protection provided by D-Limit orders by providing
greater coverage (i.e., identifying more potentially crumbling quotes)
with comparable accuracy.
IEX also estimated the impact of the proposed change on standard
limit order executions by simulating the markouts \34\ for such
executions had the orders been subject to the protection of the current
CQI or the CQI as proposed to be updated (``CQI Update''). Assessment
of these executions is designed to simulate differences in adverse
selection protection from the current CQI and the CQI Update. As shown
in the chart below, both the current CQI and the CQI Update result in
substantially improved markouts over executions without CQI protection,
but the CQI Update would have provided incrementally enhanced
protection compared to the current CQI (as measured by markouts)
because it is better at identifying situations when adverse selection
is most likely:
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\34\ Markouts 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.
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Chart 2
CQI vs CQI Update Markout Comparison, Standard Lit Limit Orders
[January-February 2026, trade-to-mid, % of spread]
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1 ms \a\(%) 10 ms \a\(%) 100 ms \a\(%) 1000 ms \a\(%)
----------------------------------------------------------------------------------------------------------------
No CQI Protection............................... 13 6 3 -2
CQI............................................. 27 22 18 12
CQI Update...................................... 32 26 21 15
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\a\ Measured in milliseconds after trade time.
Similarly, IEX believes that the CQI Update will incrementally
enhance the existing protection the CQI offers pegged orders by
providing greater coverage (i.e., identifying more potentially
crumbling quotes) with comparable accuracy. IEX estimated the impact of
the CQI Update (compared to the existing CQI) on traditional midpoint
order executions by simulating the markouts had the orders been subject
to the protection of the current CQI or the CQI Update. Assessment of
these executions is designed to simulate differences in adverse
selection protection from CQI and CQI Update. As shown in the chart
below, both CQI and the CQI Update result in improved markouts over
executions without CQI protection, but the CQI Update would have
provided incrementally enhanced protection compared to the CQI (as
measured by markouts) because it is better at identifying situations
when adverse selection is most likely:
Chart 3
[[Page 25641]]
CQI vs CQI Update Markout Comparison, Midpoint Peg Orders
[January-February 2026, trade-to-Mid, % of spread]
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1000 ms
1 ms \a\(%) 10 ms \a\(%) 100 ms \a\(%) \a\(%)
----------------------------------------------------------------------------------------------------------------
No CQI Protection............................... 0.3 -0.5 -1.0 0.3
CQI............................................. 1.6 0.9 0.3 1.5
CQI Update...................................... 1.7 1.0 0.4 1.6
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\a\ Measured in milliseconds after trade time.
Based on the foregoing, IEX believes that the inclusion of IEX's
Protected Quotation in the Signal Best Bid and Signal Best Offer
calculations will incrementally enhance the effectiveness of the CQI in
predicting whether a crumbling quote will occur by better reflecting
the market activity in a particular security.
Conforming Changes
IEX also proposes to make two conforming changes to the CQI formula
set forth in IEX Rule 11.190(g)(1). First, IEX proposes to revise the
term ``Update'',\35\ a variable used by the CQI which refers to changes
in the price or size of a Signal Exchange's Protected Bid or Offer. To
reflect inclusion of IEX's Protected Quotation, IEX proposes to modify
the definition of Update to specify that for purposes solely of the
CQI, ``Update'' means any change in the price or size of an Input
Exchange's Protected Bid or Offer.\36\
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\35\ See IEX Rule 11.190(g)(1)(B)(vii).
\36\ Update is also used by the Quote Imbalance Indicator, see
IEX Rule 11.190(g)(2)(A)(i), but the proposed modification to the
definition are not applicable to the Quote Imbalance Indicator.
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Second, IEX proposes to revise two of the disappearing bids (and
offers) rules contained in Rule 11.190(g)(1)(C)(i)(c) and (d) as
follows (underlined and italicized language proposed to be added):
<bullet> Rule DB3 (DO3) assesses whether Delta Bids (Offers) is
greater than or equal to (1) one and Bids (Offers) is less than or
equal to (1) one. The rule's Activation Threshold is 0.30.
<bullet> Rule DB4 (DO4) assesses whether Delta Bids (Offers) is
greater than or equal to (1) one, Bids (Offers) is less than or equal
to (1) one, and the product of Signal Best Bid (Offer) and Aggregate
Best Bid (Offer) Size is less than $60,000. The rule's Activation
Threshold is 0.30.
These changes are necessitated because, with the inclusion of IEX
in the reference variables Signal Best Bid and Signal Best Offer (for
the CQI), but not in the reference variables Bids (the number of Signal
Exchanges for which the highest Protected Bid is equal to the Signal
Best Bid) and Offers (the number of Signal Exchanges for which the
lowest Protected Offer is equal to the Signal Best Offer), it is
possible that the value of ``Bids'' or ``Offers'' will be zero.
Implementation
The Exchange will announce the implementation date of the proposed
rule change by Trading 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
IEX believes that the proposed rule change is consistent with
Section 6(b) \37\ of the Act in general, and furthers the objectives of
Section 6(b)(5) of the Act,\38\ 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, 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. As discussed in the Purpose
section, the proposed change is based on the Exchange's analysis of
market data, which supports that the proposed change would
incrementally enhance the effectiveness of the CQI in providing
protection from adverse selection associated with latency arbitrage
during periods of quote instability to applicable D-Limit, C-Peg, D-Peg
and P-Peg orders.
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\37\ 15 U.S.C. 78f.
\38\ 15 U.S.C. 78f(b)(5).
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Further, as noted in Chart 1 in the Purpose section, IEX expects
that the proposed CQI Update would increase CQI's volume-weighted
coverage by 4.9% (from 70.1% to 75.0%) with a comparable accuracy rate.
Thus, the Exchange believes that the proposed change is consistent with
the Act because it is designed to increase the coverage of the CQI,
thereby providing additional protection from adverse selection
associated with latency arbitrage during periods of quote instability
to D-Limit, D-Peg, P-Peg, and C-Peg orders, thus protecting investors
and the public interest. Moreover, IEX's market data analysis, as
described in the Purpose section supports that with the proposed
change, the CQI would be ``on'' for only a small portion of the trading
day while providing robust protection in a narrowly tailored manner
that balances the ability of long-term investors to access liquidity in
the ordinary course.
Additionally, the Exchange believes that the proposed rule change
may result in more and larger sized displayed and non-displayed D-Limit
orders, as well as non-displayed D-Peg, P-Peg and C-Peg orders, being
entered on IEX as a result of the improved coverage and continued
accuracy of the CQI. To the extent more orders are entered, the
increased liquidity would benefit all IEX members and their customers.
And to the extent that more displayed D-Limit orders are entered, price
discovery and price formation will be enhanced on IEX and in the market
generally to the benefit of all IEX Members and market participants.
Furthermore, the Exchange notes that all Members and their customers
are eligible to use D-Limit, D-Peg, P-Peg and C-Peg orders, and
therefore all Members and their customers are eligible to benefit from
the proposed enhanced protections against adverse selection provided by
the CQI. Thus, the Exchange believes that application of the rule
change is equitable and not unfairly discriminatory.
Additionally, the Exchange notes that the CQI is a narrowly
tailored fixed formula specified transparently in IEX rules, that was
previously approved by the Commission.\39\ The Exchange is not
proposing to add any new functionality, but merely to enhance an SEC
approved quote instability calculation as described in the Purpose
Section. And as proposed, the CQI will continue to be a narrowly
tailored fixed formula specified transparently in IEX's rules. Thus,
IEX does not believe that the proposal raises any new or novel issues
that have not already been considered by the Commission, in that the
CQI
[[Page 25642]]
functionality was previously approved by the Commission.\40\
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\39\ See supra note 16.
\40\ See supra note 16.
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Also, IEX Rule 11.190(g)(3) specifically contemplates that the
Exchange will periodically modify the quote instability calculations as
appropriate, and the proposed rule change is consistent with this
provision.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, as discussed
in the Statutory Basis section, the proposal is designed to enhance
competition by incentivizing additional liquidity.
With regard to intra-market competition, the proposed changes to
the reference data used by the CQI would apply equally to all Members
on a fair, impartial and nondiscriminatory basis without imposing any
new burdens on the Members because D-Limit, D-Peg, P-Peg and C-Peg
orders are each optional order types, and the CQI is one of two choices
of Quote Dynamics \41\ that Members may apply to their eligible pegged
orders. The Commission has already approved the CQI \42\ and as
discussed in the Purpose and Statutory Basis sections, the proposed
rule change is designed to merely provide a narrowly tailored
enhancement; therefore, no new burdens are being proposed.
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\41\ See IEX Rule 11.190(g).
\42\ See supra note 16.
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With regard to inter-market competition, other exchanges are free
to adopt similar quote instability calculations subject to the SEC rule
filing process. In this regard, the Exchange notes that NYSE American
LLC until recently had a ``discretionary pegged order type'', see
former NYSE American LLC Rule 7.31E(h)(3)(D), which copied an earlier
iteration of the Exchange's quote instability calculation.\43\
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\43\ See Securities Exchange Act Release 34-99827 (March 21,
2024), 89 FR 21302 (March 27, 2024) (SR-NYSEAMER-2024-21) (modifying
NYSE American's discretionary pegged order type to remove its quote
instability calculation).
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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 designated this rule filing as non-controversial
under Section 19(b)(3)(A) \44\ of the Act and Rule 19b-4(f)(6) \45\
thereunder. Because the 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 and Rule 19b-
4(f)(6) thereunder.
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\44\ 15 U.S.C. 78s(b)(3)(A).
\45\ 17 CFR 240.19b-4(f)(6).
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The Exchange believes that the proposed rule change meets the
criteria of subparagraph (f)(6) of Rule 19b-4 \46\ because it would
neither significantly affect the protection of investors or the public
interest nor impose any significant burden on competition. Rather, the
proposed rule change is designed to benefit investors through a minor
enhancement to the CQI to incrementally optimize the proprietary
mathematical calculation used to make quote instability determinations
for certain orders, as described herein.
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\46\ 17 CFR 240.19b-4(f)(6).
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IEX notes that it has previously adopted several rule changes that
made other incremental enhancements to the quote instability
calculation specified in Rule 11.190(g)(1) through rule filings
pursuant to subparagraph (f)(6) of Rule 19b-4.\47\ The Exchange
believes that this proposed rule change is comparable or smaller in
scope to those earlier filings and does not raise any new or novel
issues not already considered by the Commission.
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\47\ See e.g., supra note 16.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \48\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\48\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188"><span class="__cf_email__" data-cfemail="e193948d84cc828e8c8c848f9592a1928482cf868e97">[email protected]</span></a>. Please include
file number SR-IEX-2026-14 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-2026-14. 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. 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-2026-14 and should be submitted on
or before June 1, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\49\
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\49\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-09258 Filed 5-8-26; 8:45 am]
BILLING CODE 8011-01-P
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