Order Granting Application of Investors' Exchange LLC for a Limited Exemption from Exchange Act Rule 10b-10(a)(2)(i)(A) pursuant to Rule 10b-10(f), 50035-50036 [2016-18020]
Download as PDF
<![CDATA[
Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
Equity Market Structure Advisory
Committee will hold a public meeting
on Tuesday, August 2, 2016, in the
Multipurpose Room, LL–006 at the
Commission’s headquarters, 100 F
Street NE., Washington, DC
The meeting will begin at 9:30 a.m.
(EDT) and will be open to the public.
Seating will be on a first-come, firstserved basis. Doors will be open at 9:00
a.m. Visitors will be subject to security
checks. The meeting will be webcast on
the Commission’s Web site at
www.sec.gov.
On July 13, 2016, the Commission
published notice of the Committee
meeting (Release No. 34–78308),
indicating that the meeting is open to
the public and inviting the public to
submit written comments to the
Committee. This Sunshine Act notice is
being issued because a majority of the
Commission may attend the meeting.
The agenda for the meeting will focus
on updates and potential
recommendations from the four
subcommittees.
For further information, please
contact Brent J. Fields from the Office of
the Secretary at (202) 551–5400.
Dated: July 26, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–18061 Filed 7–27–16; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78417]
Order Granting Application of
Investors’ Exchange LLC for a Limited
Exemption from Exchange Act Rule
10b–10(a)(2)(i)(A) pursuant to Rule
10b–10(f)
asabaliauskas on DSK3SPTVN1PROD with NOTICES
July 26, 2016.
I. Introduction
By letter dated July 19, 2016 (‘‘the
Application’’), Investors’ Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) requests a
limited exemption from the
requirements of Rule 10b–10(a)(2)(i)(A)
under the Securities Exchange Act of
1934 (‘‘Exchange Act’’) on behalf of
VerDate Sep<11>2014
18:42 Jul 28, 2016
Jkt 238001
Members 1 that execute trades on the
Exchange for their customers. As
discussed in the Application, IEX will
operate a fully automated electronic
order book with a continuous,
automated matching function that will
provide for strict price-display-time
priority execution (‘‘Trading System’’).2
The order book and the Exchange’s rules
provide for post trade anonymity
through settlement for trades executed
through IEX.3
II. Background 4
a. The Exchange
IEX is registered as a national
securities exchange under Section 6 of
the Exchange Act.5 The Members of the
Exchange consist of those broker-dealers
admitted to Membership and entitled to
enter orders in, and receive executions
through, the Exchange’s order book or
otherwise.
The Exchange will operate an order
book for orders with a continuous,
automated matching function, in
compliance with the Exchange’s rules
and Regulation NMS under the Act.6
Liquidity will be derived from orders to
buy and orders to sell submitted to the
Exchange electronically by its Members
from remote locations.
The order book and the Exchange’s
rules will provide for strict pricedisplay-time priority execution. Under
IEX Rule 11.220, orders will be
prioritized on a strict price-display-time
basis, first by price, then by display
(with displayed orders and displayed
portions of orders having precedence
over non-displayed orders and nondisplayed portions of orders at a given
price) and then by time. Incoming
orders are first matched for execution
1 Unless otherwise defined in this order, defined
terms used have the same meaning as described in
the Exchange Rules.
2 See IEX Rule 11.220. IEX represents that the
Exchange’s rules do not provide for any special
order type that would be an exception to the strict
price-display-time priority handling of orders as set
forth in IEX Rule 11.220.
3 As explained in the Application, the Exchange
does not request an exemption from Rule 10b–
10(a)(2)(i)(A) for when it reveals the identity of a
Member or a Member’s clearing firm: (i) For
regulatory purposes or to comply with an order of
a court or arbitrator; or (ii) when a Registered
Clearing Agency (such as the National Securities
Clearing Corporation) ceases to act for a Member or
the Member’s clearing firm, and determines not to
guarantee the settlement of the Member’s trades.
See IEX Rule 11.250(d)(2).
4 Background information is derived from the
Application.
5 See In the Matter of the Application of:
Investors’ Exchange, LLC for Registration as a
National Securities Exchange; Findings, Opinion,
and Order of the Commission, Exchange Act
Release No. 78101 (June 17, 2016), 81 FR 41141
(June 23, 2016).
6 See 17 CFR 242.600 et seq.
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
50035
against orders in the IEX order book.
Orders that cannot be executed are
eligible for routing to away trading
centers, if consistent with the terms of
the orders.7 All trades will be executed
through the Exchange’s Trading System
on an anonymous basis. The transaction
reports produced by the Trading System
will indicate the details of transactions
executed in the Trading System but
shall not reveal the contra party
identities. Transactions executed in the
Trading System will also be cleared and
settled anonymously.8
The order book’s matching system
algorithm permits orders originated by
an IEX Member to execute against other
orders from the same participant on the
same basis as orders from other
Members. In the order book’s handling
of displayed orders, which is based on
strict price-display-time priority, a
Member could receive an execution
against itself, and under the Exchange’s
Rules, the Member would not know that
it was the contra-side of the trade at the
time of execution.
a. Rule 10b–10
Rule 10b–10 under the Exchange Act
generally requires broker-dealers
effecting a customer transaction in
securities (other than U.S. savings bonds
or municipal securities) 9 to provide a
written notification to its customer, at or
before completion of a securities
transaction, that discloses information
specific to the transaction. In particular,
under Rule 10b–10(a)(2)(i)(A), when a
broker-dealer acts as agent for a
customer, for some other person, or for
both a customer and some other person,
the broker-dealer must disclose ‘‘[t]he
name of the person from whom the
security was purchased, or to whom it
was sold, for such customer or the fact
that the information will be furnished
upon written request of such customer’’
(the ‘‘Contra-Party Identity
Requirement’’).
III. Relief Sought
As explained in the Application,
trades are executed with total
anonymity on IEX, where the identity of
the actual contra-party is not revealed
7 See IEX Rule 11.230. The Exchange understands
that the exemptive relief would not apply to any
situation in which the Trading System routes an
order to an away trading center for execution, as
such executions would be governed by the rules of
the away trading center.
8 Except for the conditions set forth in IEX Rule
11.250(d)(2). See supra note 3.
9 Municipal securities are subject to the
transaction confirmations requirements under Rule
G–15 of the Municipal Securities Rulemaking
Board.
E:\FR\FM\29JYN1.SGM
29JYN1
50036
Federal Register / Vol. 81, No. 146 / Friday, July 29, 2016 / Notices
when the trade is executed.10 Because of
this, Members will not know the
identity of the party to whom they sold
securities or from whom they purchased
securities. Without this information,
Members would not be able to comply
with the Contra-Party Identity
Requirement of Rule 10b–10. To permit
IEX Members to utilize the Exchange
without violating Rule 10b–10 under the
Exchange Act, on behalf of its Members,
is seeking an exemption under Rule
10b–10(f) from the Contra-Party Identity
Requirement of Rule 10b–10 when
Members execute transactions at IEX, as
described in the Application.
IV. Conclusion
Based on the facts and representations
contained in the Application, we find
that it is appropriate and in the public
interest and consistent with the
protection of investors to grant the
Exchange, on behalf of its Members, a
limited exemption from the ContraParty Identity Requirement in Rule 10b–
10(a)(2)(i)(A).
IT IS HEREBY ORDERED, pursuant to
Rule 10b–10(f) of the Exchange Act, that
IEX Members, based on the
representations and facts contained in
the Application, are exempt from the
requirements of Rule 10b–10(a)(2)(i)(A)
of the Exchange Act, to the extent that
Members execute trades for their
customers on the Exchange using the
IEX Trading System. This exemption is
limited to trades that Members execute
on IEX using the post trade anonymity
feature described in the Application.11
The foregoing exemption is subject to
modification or revocation if at any time
the Commission determines that such
action is necessary or appropriate in
furtherance of the purposes of the
Exchange Act.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–18020 Filed 7–28–16; 8:45 am]
asabaliauskas on DSK3SPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
10 Except for the conditions set forth in IEX Rule
11.250(d)(2). See supra note 3.
11 This exemption does not apply: (a) To orders
routed to an away trading center for execution; (b)
under the circumstances described in note 3 supra;
or (c) if the functionality of IEX’s order book were
to be changed to allow a broker-dealer to select or
influence against whom its orders will be executed
as described in the Application on page 5 and note
10.
12 17 CFR 200.30–3(32).
VerDate Sep<11>2014
18:42 Jul 28, 2016
Jkt 238001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78407; File No. SR–CBOE–
2016–057]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Tied to Stock
Orders
July 25, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 21,
2016, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change deletes
Rules 6.53(y), 6.77(e) and 15.2A. The
text of the proposed rule change is
provided below.
(additions are underlined; deletions are
[bracketed])
*
*
*
*
*
initiates the order, the Trading Permit
Holder has knowledge that the order is
coupled with an order(s) for the
underlying stock or a security
convertible into the underlying stock
(‘‘convertible security’’). The
representing Trading Permit Holder
must include an indicator on each tied
to stock order upon systemization,
unless:
(i) The order is submitted to the
Exchange as part of a qualified
contingent cross order (as defined in
this Rule 6.53) through an Exchangeapproved device;
(ii) the order is submitted to the
Exchange for electronic processing as a
stock-option order (as defined in Rule
6.53C); or
(iii) all of the component orders are
systematized on a single order ticket.
An order is not ‘‘tied to stock’’ if it is
not coupled with an order(s) for the
underlying stock or convertible security
at the time of receipt or initiation (e.g.,
an option order that is received or
initiated to hedge a previously executed
stock transaction, an option transaction
or position that is hedged with a
subsequently received or initiated stock
order).]
. . . Interpretations and Policies:
.01–.02 No change.
*
*
*
*
*
Rule 6.77. Order Service Firms
(a)–(d) No change.
[(e) Order service firms must submit
reports pursuant to Rule 15.2A with
respect to the stock transactions it
executes on behalf of market-makers
pursuant to this Rule 6.77.]
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated Rules
[Rule 15.2A. Reports of Execution of
Stock Transactions
*
In a manner and form prescribed by
the Exchange, each Trading Permit
Holder must, on the business day
following the order execution date,
report to the Exchange the following
information for the executed stock or
convertible security legs of QCC orders,
stock-option orders and other tied to
stock orders that the Trading Permit
Holder executed on the Exchange that
trading day: (a) Time of execution, (b)
execution quantity, (c) execution price,
(d) venue of execution, and (e) any other
information requested by the Exchange.
A Trading Permit Holder may arrange
for its clearing firm to submit these
reports on its behalf; provided that if the
clearing firm does not report an
executed stock order, the Trading
Permit Holder will be responsible for
reporting the information.
. . . Interpretation and Policies:
*
*
*
*
Rule 6.53. Certain Types of Orders
Defined
One or more of the following order
types may be made available on a classby-class basis. Certain order types may
not be made available for all Exchange
systems. The classes and/or systems for
which the order types shall be available
will be as provided in the Rules, as the
context may indicate, or as otherwise
specified via Regulatory Circular.
(a)–(x) No change.
[(y) Tied to Stock Order. An order is
‘‘tied to stock’’ if, at the time the
Trading Permit Holder representing the
order on the Exchange receives or
PO 00000
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
Frm 00115
Fmt 4703
Sfmt 4703
E:\FR\FM\29JYN1.SGM
29JYN1
]]>Agencies
[Federal Register Volume 81, Number 146 (Friday, July 29, 2016)]
[Notices]
[Pages 50035-50036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18020]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78417]
Order Granting Application of Investors' Exchange LLC for a
Limited Exemption from Exchange Act Rule 10b-10(a)(2)(i)(A) pursuant to
Rule 10b-10(f)
July 26, 2016.
I. Introduction
By letter dated July 19, 2016 (``the Application''), Investors'
Exchange LLC (``IEX'' or the ``Exchange'') requests a limited exemption
from the requirements of Rule 10b-10(a)(2)(i)(A) under the Securities
Exchange Act of 1934 (``Exchange Act'') on behalf of Members \1\ that
execute trades on the Exchange for their customers. As discussed in the
Application, IEX will operate a fully automated electronic order book
with a continuous, automated matching function that will provide for
strict price-display-time priority execution (``Trading System'').\2\
The order book and the Exchange's rules provide for post trade
anonymity through settlement for trades executed through IEX.\3\
---------------------------------------------------------------------------
\1\ Unless otherwise defined in this order, defined terms used
have the same meaning as described in the Exchange Rules.
\2\ See IEX Rule 11.220. IEX represents that the Exchange's
rules do not provide for any special order type that would be an
exception to the strict price-display-time priority handling of
orders as set forth in IEX Rule 11.220.
\3\ As explained in the Application, the Exchange does not
request an exemption from Rule 10b-10(a)(2)(i)(A) for when it
reveals the identity of a Member or a Member's clearing firm: (i)
For regulatory purposes or to comply with an order of a court or
arbitrator; or (ii) when a Registered Clearing Agency (such as the
National Securities Clearing Corporation) ceases to act for a Member
or the Member's clearing firm, and determines not to guarantee the
settlement of the Member's trades. See IEX Rule 11.250(d)(2).
---------------------------------------------------------------------------
II. Background \4\
---------------------------------------------------------------------------
\4\ Background information is derived from the Application.
---------------------------------------------------------------------------
a. The Exchange
IEX is registered as a national securities exchange under Section 6
of the Exchange Act.\5\ The Members of the Exchange consist of those
broker-dealers admitted to Membership and entitled to enter orders in,
and receive executions through, the Exchange's order book or otherwise.
---------------------------------------------------------------------------
\5\ See In the Matter of the Application of: Investors'
Exchange, LLC for Registration as a National Securities Exchange;
Findings, Opinion, and Order of the Commission, Exchange Act Release
No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016).
---------------------------------------------------------------------------
The Exchange will operate an order book for orders with a
continuous, automated matching function, in compliance with the
Exchange's rules and Regulation NMS under the Act.\6\ Liquidity will be
derived from orders to buy and orders to sell submitted to the Exchange
electronically by its Members from remote locations.
---------------------------------------------------------------------------
\6\ See 17 CFR 242.600 et seq.
---------------------------------------------------------------------------
The order book and the Exchange's rules will provide for strict
price-display-time priority execution. Under IEX Rule 11.220, orders
will be prioritized on a strict price-display-time basis, first by
price, then by display (with displayed orders and displayed portions of
orders having precedence over non-displayed orders and non-displayed
portions of orders at a given price) and then by time. Incoming orders
are first matched for execution against orders in the IEX order book.
Orders that cannot be executed are eligible for routing to away trading
centers, if consistent with the terms of the orders.\7\ All trades will
be executed through the Exchange's Trading System on an anonymous
basis. The transaction reports produced by the Trading System will
indicate the details of transactions executed in the Trading System but
shall not reveal the contra party identities. Transactions executed in
the Trading System will also be cleared and settled anonymously.\8\
---------------------------------------------------------------------------
\7\ See IEX Rule 11.230. The Exchange understands that the
exemptive relief would not apply to any situation in which the
Trading System routes an order to an away trading center for
execution, as such executions would be governed by the rules of the
away trading center.
\8\ Except for the conditions set forth in IEX Rule
11.250(d)(2). See supra note 3.
---------------------------------------------------------------------------
The order book's matching system algorithm permits orders
originated by an IEX Member to execute against other orders from the
same participant on the same basis as orders from other Members. In the
order book's handling of displayed orders, which is based on strict
price-display-time priority, a Member could receive an execution
against itself, and under the Exchange's Rules, the Member would not
know that it was the contra-side of the trade at the time of execution.
a. Rule 10b-10
Rule 10b-10 under the Exchange Act generally requires broker-
dealers effecting a customer transaction in securities (other than U.S.
savings bonds or municipal securities) \9\ to provide a written
notification to its customer, at or before completion of a securities
transaction, that discloses information specific to the transaction. In
particular, under Rule 10b-10(a)(2)(i)(A), when a broker-dealer acts as
agent for a customer, for some other person, or for both a customer and
some other person, the broker-dealer must disclose ``[t]he name of the
person from whom the security was purchased, or to whom it was sold,
for such customer or the fact that the information will be furnished
upon written request of such customer'' (the ``Contra-Party Identity
Requirement'').
---------------------------------------------------------------------------
\9\ Municipal securities are subject to the transaction
confirmations requirements under Rule G-15 of the Municipal
Securities Rulemaking Board.
---------------------------------------------------------------------------
III. Relief Sought
As explained in the Application, trades are executed with total
anonymity on IEX, where the identity of the actual contra-party is not
revealed
[[Page 50036]]
when the trade is executed.\10\ Because of this, Members will not know
the identity of the party to whom they sold securities or from whom
they purchased securities. Without this information, Members would not
be able to comply with the Contra-Party Identity Requirement of Rule
10b-10. To permit IEX Members to utilize the Exchange without violating
Rule 10b-10 under the Exchange Act, on behalf of its Members, is
seeking an exemption under Rule 10b-10(f) from the Contra-Party
Identity Requirement of Rule 10b-10 when Members execute transactions
at IEX, as described in the Application.
---------------------------------------------------------------------------
\10\ Except for the conditions set forth in IEX Rule
11.250(d)(2). See supra note 3.
---------------------------------------------------------------------------
IV. Conclusion
Based on the facts and representations contained in the
Application, we find that it is appropriate and in the public interest
and consistent with the protection of investors to grant the Exchange,
on behalf of its Members, a limited exemption from the Contra-Party
Identity Requirement in Rule 10b-10(a)(2)(i)(A).
IT IS HEREBY ORDERED, pursuant to Rule 10b-10(f) of the Exchange
Act, that IEX Members, based on the representations and facts contained
in the Application, are exempt from the requirements of Rule 10b-
10(a)(2)(i)(A) of the Exchange Act, to the extent that Members execute
trades for their customers on the Exchange using the IEX Trading
System. This exemption is limited to trades that Members execute on IEX
using the post trade anonymity feature described in the
Application.\11\
---------------------------------------------------------------------------
\11\ This exemption does not apply: (a) To orders routed to an
away trading center for execution; (b) under the circumstances
described in note 3 supra; or (c) if the functionality of IEX's
order book were to be changed to allow a broker-dealer to select or
influence against whom its orders will be executed as described in
the Application on page 5 and note 10.
---------------------------------------------------------------------------
The foregoing exemption is subject to modification or revocation if
at any time the Commission determines that such action is necessary or
appropriate in furtherance of the purposes of the Exchange Act.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(32).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18020 Filed 7-28-16; 8:45 am]
BILLING CODE 8011-01-P
