Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 11.190(g) Related to Discretionary Peg Orders, 54166-54170 [2016-19315]
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
excessive. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow. The
Exchange believes that the proposed
rule changes reflect this competitive
environment because they modify the
Exchange’s fees in a manner that
encourages market participants to
provide liquidity and to send order flow
to the Exchange.
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 foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,17 and Rule
19b–4(f)(2) 18 thereunder. 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 to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
sradovich on DSK3GMQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2016–21 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2016–21. This file
number should be included on the
subject line if email is used. To help the
U.S.C. 78s(b)(3)(A)(ii).
18 17 CFR 240.19b–4(f)(2).
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2016–21, and should be submitted on or
before September 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19321 Filed 8–12–16; 8:45 am]
19:23 Aug 12, 2016
Dated: August 10, 2016.
Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2016–19455 Filed 8–11–16; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78510; File No. SR–IEX–
2016–11]
BILLING CODE 8011–01–P
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
will hold an Open Meeting on
Wednesday, August 17, 2016 at 2:00
p.m., in the Auditorium (L–002) at the
Commission’s headquarters building, to
hear oral argument in an appeal from an
initial decision of an administrative law
judge by respondent Larry C. Grossman.
On December 23, 2014, the ALJ found
that Grossman, the former principal of
a registered investment adviser, violated
certain antifraud, broker-dealer, and
investment adviser provisions of the
federal securities laws by, among other
things, making misrepresentations and
17 15
VerDate Sep<11>2014
omissions of material fact to his
advisory clients when he advised them
to invest in funds as to which he had
an economic conflict of interest. For
these violations, the ALJ ordered
Grossman to pay a $1.55 million civil
penalty, to pay approximately $3
million in disgorgement plus
prejudgment interest, and to cease and
desist from further violations of the
securities laws. The ALJ also barred him
from association with the securities
industry.
Respondent appealed, challenging
only the imposition of sanctions. The
issues likely to be considered at oral
argument include, among other things,
whether the five year statute of
limitations in 28 U.S.C. 2462 prohibits
us from imposing a civil penalty,
disgorgement, industry bar, or ceaseand-desist order, and, to the extent that
it does not, what sanctions, if any, are
appropriate in the public interest.
For further information, please
contact Brent J. Fields from the Office of
the Secretary at (202) 551–5400.
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
11.190(g) Related to Discretionary Peg
Orders
August 9, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
4, 2016, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) 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 self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
19 17
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
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 Securities Exchange
Act of 1934 (‘‘Act’’),4 and Rule 19b–4
thereunder,5 Investors Exchange LLC
(‘‘IEX’’ or ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend Rule 11.190(g) to optimize and
enhance the effectiveness of the quote
instability calculation in determining
whether a crumbling quote exists, to: (i)
Provide that the quote instability
calculation would not include IEX
protected quotations; (ii) reduce the
time period that a crumbling quote
condition remains in effect from ten to
two milliseconds; (iii) add two new
quote stability variables, together with
their respective coefficients; and (iv)
modify the quote instability coefficients
and quote instability threshold included
in the quote instability calculation,
pursuant to subparagraph (1)(D)(iii)
thereof. 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
The text of the proposed rule change
is available at the Exchange’s Web site
at www.iextrading.com, 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 statement [sic] 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
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
Overview
The purpose of the proposed rule
change is to amend Rule 11.190(g) to
modify the quote instability coefficients
4 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
6 17 CFR 240.19b–4(f)(6)(iii).
5 17
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and quote instability threshold included
in the quote instability calculation
specified in subparagraph (g)(1) for
purposes of determining whether a
crumbling quote exists. When the
Exchange determines that a crumbling
quote exists in a particular security for
Protected Quotations from the national
best bid (‘‘Protected NBB’’),
Discretionary Peg buy orders are
restricted from exercising price
discretion to trade against interest above
the NBB. Similarly, when the Exchange
determines that a crumbling quote exists
in a particular security for Protected
Quotations from the national best offer
(‘‘Protected NBO’’), Discretionary Peg
sell orders are restricted from exercising
price discretion to trade against interest
below the NBO.
Discretionary Peg Order
The manner in which Discretionary
Peg orders operate is described in Rule
11.190(b)(10). Specifically, a
Discretionary Peg order is a nondisplayed, pegged order that upon entry
into the System, the price of the order
is automatically adjusted by the System
to be equal to the less aggressive of the
Midpoint Price or the order’s limit
price, if any. When unexecuted shares
of such order are posted to the Order
Book, the price of the order is
automatically adjusted by the System to
be equal to and ranked at the less
aggressive of the primary quote or the
order’s limit price and is automatically
adjusted by the System in response to
changes in the NBB (NBO) for buy (sell)
orders up (down) to the order’s limit
price, if any. In order to meet the limit
price of active orders on the Order Book,
a Discretionary Peg order will exercise
the least amount of price discretion
necessary from the Discretionary Peg
order’s resting price to its discretionary
price (defined as the less aggressive of
the Midpoint Price or the Discretionary
Peg order’s limit price, if any), except
during periods of quote instability (i.e.,
when a crumbling quote exists) as
defined in paragraph Rule 11.190(g).
In determining whether a crumbling
quote exists, the Exchange utilizes real
time relative quoting activity of
Protected Quotations and a proprietary
mathematical calculation (the ‘‘quote
instability calculation’’) to assess the
probability of an imminent change to
the current Protected NBB to a lower
price or Protected NBO to a higher price
for a particular security (‘‘quote
instability factor’’). When the quoting
activity meets predefined criteria and
the quote instability factor calculated is
greater than the Exchange’s defined
threshold (‘‘quote instability
threshold’’), the System treats the quote
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as not stable (‘‘quote instability’’ or a
‘‘crumbling quote’’). During all other
times, the quote is considered stable
(‘‘quote stability’’). The System
independently assesses the stability of
the Protected NBB and Protected NBO
for each security.
When the System determines that a
quote, either the Protected NBB or the
Protected NBO, is unstable, the
determination remains in effect at that
price level for ten (10) milliseconds. The
System will only treat one side of the
Protected NBBO as unstable in a
particular security at any given time.7
By not permitting resting Discretionary
Peg orders to execute at a price that is
more aggressive than the near-side
protected NBB or NBO (as applicable)
during periods of quote instability, the
Exchange System is intended to attempt
to protect such orders from unfavorable
executions when the market is moving
against them. Once the market has
moved and the Exchange System deems
the near-side Protected NBB or NBO (as
applicable) to be stable (pursuant to a
pre-determined, objective set of
conditions as described below),
Discretionary Peg orders are permitted
to exercise discretion up to (for buy
orders) or down to (for sell orders) the
midpoint of the NBBO in order to meet
the limit price of active orders on the
order book and thereby potentially
provide price improvement to such
active orders.
Quote stability or instability (also
referred to as a crumbling quote) is an
assessment that the Exchange System
makes on a real-time basis, based on a
pre-determined, objective set of
conditions specified in Rule
11.190(g)(1). Specifically, quote
instability, or the presence of a
crumbling quote, is determined by the
System when the following factors
occur:
(A) The Protected NBB and Protected
NBO are the same as the Protected NBB
and Protected NBO one (1) millisecond
ago; and
(B) the Protected NBBO spread is less
than or equal to the thirty (30) day
median Protected NBBO spread during
the Regular Market Session; and
(C) there are more Protected
Quotations on the far side, i.e., more
Protected Quotations on the Protected
NBO than the Protected NBB for buy
orders, or more Protected Quotations on
the Protected NBB than the Protected
NBO for sell orders; and
(D) the quote instability factor result
from the quote stability calculation is
greater than the defined quote
instability threshold.
7 See,
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Rule 11.190(g).
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(i) Quote Instability Factor. The
Exchange’s proprietary quote stability
calculation used to determine the
current quote instability factor is
defined by the following formula that
utilizes the quote stability coefficients
and quote stability variables defined
below:
1/ (1 + e ∧ ¥(C0 + C1 * N + C2 * F
+ C3 * N-1 + C4 * F¥1))
(a) Quote Stability Coefficients. The
Exchange utilizes the values below for
the quote stability coefficients.
(1) C0 = ¥2.39515
(2) C1 = ¥0.76504
(3) C2 = 0.07599
(4) C3 = 0.38374
(5) C4 = 0.14466
(b) Quote Stability Variables. The
Exchange utilizes the quote stability
variables defined below to calculate the
current quote instability factor.
1. N = the number of Protected
Quotations on the near side of the
market, i.e., Protected NBB for buy
orders and Protected NBO for sell
orders.
2. F = the number of Protected
Quotations on the far side of the market,
i.e., Protected NBO for buy orders and
Protected NBB for sell orders.
3. N¥1 = the number of Protected
Quotations on the near side of the
market one (1) millisecond ago.
4. F¥1 = the number of Protected
Quotations on the far side of the market
one (1) millisecond ago.
(ii) Quote Instability Threshold. The
Exchange utilizes a quote instability
threshold of 0.32.
Rule 11.190(g)(1)(D)(iii) provides that
the Exchange reserves the right to
modify the quote instability coefficients
or quote instability threshold at any
time, subject to a filing of a proposed
rule change with the SEC. The Exchange
is proposing such changes in this rule
filing.
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Changes to Quote Instability
Coefficients and Quote Instability
Threshold
The alternative trading system
(‘‘ATS’’) operated by the Exchange’s
affiliate, IEX Services LLC (‘‘IEX ATS’’)
offers a Discretionary Peg order type
that is identical to the Exchange’s
Discretionary Peg order type, including
the factors for determining when a
crumbling quote (or quote instability) is
present. IEX conducted an analysis of
the effectiveness of the existing factors
in predicting whether a crumbling quote
would occur, by reviewing randomly
selected market data from March
through June 2016. The results of the
analysis were verified by reviewing
randomly selected market data from July
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2016. Based on this analysis, the
Exchange has determined that further
optimization of the existing factors
would incrementally increase the
accuracy of the formula in predicting
whether a crumbling quote will occur.
The following describes the proposed
changes:
1. Rule 11.190(g) states that the
Exchange utilizes real time relative
quoting activity of Protected Quotations
in the quote instability calculation. As
proposed, the quote instability
calculation would not include IEX
protected quotations. The quote
instability calculation has been
optimized, subject to further proposed
enhancements, based on actual market
data from trading on the IEX ATS prior
to the launch of the Exchange with a
protected quotation. Accordingly, IEX
does not have data that includes IEX
protected quotations to consider in
optimization of the quote instability
calculation at this time.8
2. The Exchange also proposes to
reduce the time period that a crumbling
quote condition remains in effect from
ten to two milliseconds. Based on the
market data analysis, IEX found that
generally in the instances in which the
formula correctly predicted a crumbling
quote, the crumbling quote occurred
within two milliseconds. By reducing
the time period that the crumbling quote
condition remains on, IEX believes that
it will ameliorate the potential impact of
any false positives, because the
condition will remain on for a shorter
period of time.
3. The Exchange proposes to add two
new quote stability variables, ‘‘E’’ and
‘‘D’’, and their coefficients to the quote
instability factor calculation specified in
subparagraph (g)(1)(D)(i) of Rule 11.190.
Quote stability variable E is a Boolean
indicator that equals 1 if and only if the
last two received quotation updates
received by IEX have been quotations of
protected markets moving away from
the near side of the market on the same
side of the market (i.e., bids moving
lower or offers moving higher). Based on
the market data analysis, the Exchange
believes that inclusion of quote stability
variable E will help to make the quote
instability calculation more accurate in
predicting a crumbling quote. Quote
stability variable D is a measure of
whether the quotation updates received
by IEX from the Nasdaq Stock Market,
EDGX Exchange or BATS BZX Exchange
have been quotations moving away from
the near side of the market on the same
8 IEX may consider further enhancements that
include IEX’s protected quotation, subject to IEX
submitting a proposed rule change under Section
19(b) of the Act.
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side of the market (i.e., bids moving
lower or offers moving higher) in the
last one (1) millisecond. The value will
be either 0, 1, 2 or 3 depending on how
many of such exchanges (if any) meet
the quote stability variable D measure.
Based on the market data analysis, the
Exchange believes that when these three
exchanges move away from the near
side of the market on the same side of
the market, it is more likely that the
quote will crumble, and that inclusion
of quote stability variable D will help to
make the quote instability calculation
more accurate in predicting a crumbling
quote.
4. The Quote Stability Coefficients
specified in subparagraph (1)(D)(i) of
Rule 11.190(g) are proposed to be
modified to take into account the recent
market data analysis, as well as to add
new quote stability variables E and D.
The Exchange believes that the
modifications, as proposed, will
increase the accuracy of the quote
instability calculation.
5. The Exchange proposes to modify
and re-optimize the Quote Instability
Threshold specified in subparagraph
(1)(D)(ii) of Rule 11.190(g) based on the
recent market data analysis and the two
new quote stability variables. The
Exchange believes that the
modifications, as proposed, will
increase the accuracy of the quote
instability calculation.
2. Statutory Basis
IEX believes that the proposed rule
change is consistent with Section 6(b) 9
of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act,10
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. Specifically, and as
discussed above, the proposal is
designed to optimize and enhance the
effectiveness of the quote instability
calculation in determining whether a
crumbling quote exists. The Exchange
believes that the proposed changes are
designed to protect investors and the
public interest by enhancing the
accuracy of the Exchange’s quote
instability calculation in determining
whether a crumbling quote exists
thereby preventing Discretionary Peg
9 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
10 15
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sradovich on DSK3GMQ082PROD with NOTICES
orders from trading at prices more
aggressive than the near side of the
market (NBB for buy orders, NBO for
sell orders) to protect such orders from
unfavorable executions when the market
appears to be moving against them. The
Exchange believes that not including
IEX protected quotations in the quote
instability calculation is consistent with
the protection of investors and the
public interest because the calculation
is optimized based on actual market
data, and IEX does not yet have actual
market data that includes IEX protected
quotations to consider in optimization
of the quote instability calculation at
this time. The Exchange also believes
that it is consistent with the protection
of investors and the public interest to
reduce the time period that a crumbling
quote condition remains in effect from
ten to two milliseconds to ameliorate
the potential impact of any false
positives. Further, IEX believes that
adding the two new quote stability
variables, as well as the proposed
additions to and modification of the
quote instability coefficients and quote
instability threshold, as contemplated
by 11.190(g)(1)(D)(iii), is consistent with
the public interest and the protection of
investors because these changes are
designed to increase the accuracy of the
calculation.
As proposed, the new quote
instability calculation will continue to
be a fixed formula specified
transparently in IEX’s rules. The
Exchange is not proposing to add any
new functionality, but merely to revise
the fixed formula based on market data
analysis designed to increase the
accuracy of the formula in predicting a
crumbling quote, and as contemplated
by the rule.
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. The
proposed change will apply equally to
all IEX Members. The Commission has
already considered the Exchange’s
Discretionary Peg order type in
connection with its grant of IEX’s
application for registration as a national
securities exchange under Sections 6
and 19 of the Act.11 The proposed rule
change is designed to merely enhance
the accuracy of the quote instability
calculation specified in Rule 11.190(g)
and ameliorate the impact of any false
11 See Securities Exchange Act Release No. 34–
78101 (June 17, 2016), 81 FR 41142 (June 23, 2016)
(File No. 10–222).
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positives; therefore, no new burdens are
being proposed.
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) 12 of the Act and
Rule 19b–4(f)(6) 13 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 if consistent
with the protection of investors and the
public interest, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act and Rule 19b–4(f)(6) thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) 15 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),16 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay, and stated that the
proposed rule change will merely revise
the fixed formula specified in Rule
11.190(g) for predicting a crumbling
quote, as contemplated by the rule. The
Exchange noted that the proposed rule
change is designed to enhance the
accuracy of the quote instability
calculation and protect Members that
enter Discretionary Peg orders from
unfavorable executions when the market
is moving against such orders. Further,
the Exchange stated that waiver of the
operative delay will allow the Exchange
to implement the proposed rule change
to coincide with IEX’s launch of
exchange operations during a securityby-security phase-in period beginning
on August 19, 2016, thus enabling the
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
14 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.
15 17 CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii).
13 17
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54169
Exchange to provide the contemplated
protections to Members entering
Discretionary Peg orders from exchange
launch. The Commission notes that the
changes proposed by IEX are intended
to optimize the quote instability
equation contained in the discretionary
peg order type rule, and are not
intended to materially change the
operation of the rule or introduce new
functionality. Rather, the Exchange
intends the proposed changes to
increase the ability of the discretionary
peg order type to meet its stated
objectives as reflected in the Exchange’s
rule. Accordingly, the Commission
believes that waiver of the operative
delay is consistent with the protection
of investors and the public interest.
Therefore, the Commission hereby
waives the operative delay and
designates the proposed rule change
operative upon filing.17
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) 18 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2016–11 on the subject line.
Paper Comments
• 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–2016–11. This file
17 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
18 15 U.S.C. 78s(b)(2)(B).
E:\FR\FM\15AUN1.SGM
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54170
Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
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 Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–IEX–
2016–11 and should be submitted on or
before September 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19315 Filed 8–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78520; File No. SR–DTC–
2016–005]
sradovich on DSK3GMQ082PROD with NOTICES
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change
Regarding the Implementation of
Functionality To Submit a Cover of
Protect on Behalf of Another
Participant and the Removal of the
Option To Cover of Protect Directly
With Agent
August 9, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b–4 thereunder,2
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
19:23 Aug 12, 2016
Jkt 238001
notice is hereby given that on July 29,
2016, The Depository Trust Company
(‘‘DTC’’) 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 DTC. DTC filed
the proposed rule change pursuant to
Section 19(b)(2) of the Act.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change by DTC
would update its Procedures4 set forth
in the Guide to make changes to certain
options within its Participant
Subscription Offer Program (‘‘PSOP’’)5
and Participant Tender Offer Program
(‘‘PTOP’’) functions.6 Specifically, DTC
proposes to add an option called ‘‘Cover
of Protect on Behalf of Another
Participant’’ (‘‘CPAP’’) to both PSOP
and PTOP (‘‘PSOP/PTOP’’) that would
allow a Participant to tender
subscription rights (‘‘Rights’’) or
Securities through DTC to an agent
(‘‘Offer Agent’’),7 on behalf of another
Participant that needs to tender such
Rights or Securities in order to receive
the shares and/or consideration from (i)
a subscription rights offering (a ‘‘Rights
Offer’’); or (ii) a cash tender offer or
exchange offer (collectively, a ‘‘Tender/
Exchange Offer’’) (together with Rights
3 15
U.S.C. 78s(b)(2).
terms not otherwise defined herein
have the meaning set forth in the Rules, By-Laws
and Organization Certificate of DTC (the ‘‘Rules’’),
available at https://www.dtcc.com/legal/rules-andprocedures.aspx and the Reorganizations Service
Guide (the ‘‘Guide’’), available at https://
www.dtcc.com/∼/media/Files/Downloads/legal/
service-guides/Reorganizations.pdf.
5 References in this rule filing to ‘‘PSOP’’ refer to
both the PSOP function within the DTC Participant
Terminal System (‘‘PTS’’) interface and the
equivalent ‘‘Rights Subscription’’ function within
the Participant Browser System (‘‘PBS’’) interface.
PSOP is a function that is used by Participants to
submit instructions including oversubscriptions,
submit protects, submit cover of protects, submit
cover of protects on behalf of another Participant,
and submit Rights sell instructions on Rights
Subscription events. PTS and PBS are user
interfaces for DTC’s Settlement and Asset Services
functions. PTS is mainframe-based and PBS is webbased with a mainframe back-end. Participants may
use either PTS or PBS, as they are functionally
equivalent.
6 References in this rule filing to ‘‘PTOP’’ refer to
both the PTOP function within the PTS interface
and the equivalent ‘‘Voluntary Tenders and
Exchanges’’ function within the PBS interface.
PTOP is a function that is used by Participants to
submit instructions, submit protects, submit cover
of protects, submit cover of protects on behalf of
another Participant, and submit withdrawals on
various Voluntary Reorganization events.
7 The Offer Agent is the fiscal agent of the offeror,
typically a bank or trust company that is designated
to coordinate the process of the Offer.
4 Capitalized
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
Offer, ‘‘Offer’’). DTC would also
eliminate an option called ‘‘Cover of
Protect Submitted Directly to Agent’’
(‘‘CPDA’’) from PSOP/PTOP that has
allowed a Participant to tender Rights or
Securities through DTC to be eligible to
receive the shares and/or consideration
from an Offer, when such Participant
submitted its initial acceptance directly
to the Offer Agent outside of DTC. In
addition, DTC proposes to make
ministerial changes to the text of the
Guide, as more fully described below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
DTC 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. DTC has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change by DTC
would update its Procedures set forth in
the Guide to make changes to certain
options within its PSOP and PTOP
functions. Specifically, DTC proposes to
add an option called CPAP to PSOP/
PTOP that would allow a Participant to
tender Rights or Securities through DTC
to an Offer Agent, on behalf of another
Participant that needs to tender such
Rights or Securities in order to receive
the shares and/or consideration from (i)
a Rights Offer; or (ii) a Tender/Exchange
Offer. DTC would also eliminate an
option called CPDA from PSOP/PTOP
that has allowed a Participant to tender
Rights or Securities through DTC to be
eligible to receive the shares and/or
consideration from an Offer, when such
Participant submitted its initial
acceptance directly to the Offer Agent
outside of DTC. In addition, DTC
proposes to make ministerial changes to
the text of the Guide, as more fully
described below.
(i) Protects and Covers
(a) Protects and Covers Outside of DTC
Subscription Rights Offering
A Rights Offer is the issuance of
Rights to each shareholder as of a record
date set by the issuer. Rights are issued
to each shareholder in proportion to the
number of shares it holds, and entitles
the shareholder to purchase additional
E:\FR\FM\15AUN1.SGM
15AUN1
]]>Agencies
[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54166-54170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19315]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78510; File No. SR-IEX-2016-11]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 11.190(g) Related to Discretionary Peg Orders
August 9, 2016.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on August 4, 2016, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 54167]]
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 Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the
Securities and Exchange Commission (``Commission'') a proposed rule
change to amend Rule 11.190(g) to optimize and enhance the
effectiveness of the quote instability calculation in determining
whether a crumbling quote exists, to: (i) Provide that the quote
instability calculation would not include IEX protected quotations;
(ii) reduce the time period that a crumbling quote condition remains in
effect from ten to two milliseconds; (iii) add two new quote stability
variables, together with their respective coefficients; and (iv) modify
the quote instability coefficients and quote instability threshold
included in the quote instability calculation, pursuant to subparagraph
(1)(D)(iii) thereof. 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\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
Web site at www.iextrading.com, 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 statement [sic] 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
Overview
The purpose of the proposed rule change is to amend Rule 11.190(g)
to modify the quote instability coefficients and quote instability
threshold included in the quote instability calculation specified in
subparagraph (g)(1) for purposes of determining whether a crumbling
quote exists. When the Exchange determines that a crumbling quote
exists in a particular security for Protected Quotations from the
national best bid (``Protected NBB''), Discretionary Peg buy orders are
restricted from exercising price discretion to trade against interest
above the NBB. Similarly, when the Exchange determines that a crumbling
quote exists in a particular security for Protected Quotations from the
national best offer (``Protected NBO''), Discretionary Peg sell orders
are restricted from exercising price discretion to trade against
interest below the NBO.
Discretionary Peg Order
The manner in which Discretionary Peg orders operate is described
in Rule 11.190(b)(10). Specifically, a Discretionary Peg order is a
non-displayed, pegged order that upon entry into the System, the price
of the order is automatically adjusted by the System to be equal to the
less aggressive of the Midpoint Price or the order's limit price, if
any. When unexecuted shares of such order are posted to the Order Book,
the price of the order is automatically adjusted by the System to be
equal to and ranked at the less aggressive of the primary quote or the
order's limit price and is automatically adjusted by the System in
response to changes in the NBB (NBO) for buy (sell) orders up (down) to
the order's limit price, if any. In order to meet the limit price of
active orders on the Order Book, a Discretionary Peg order will
exercise the least amount of price discretion necessary from the
Discretionary Peg order's resting price to its discretionary price
(defined as the less aggressive of the Midpoint Price or the
Discretionary Peg order's limit price, if any), except during periods
of quote instability (i.e., when a crumbling quote exists) as defined
in paragraph Rule 11.190(g).
In determining whether a crumbling quote exists, the Exchange
utilizes real time relative quoting activity of Protected Quotations
and a proprietary mathematical calculation (the ``quote instability
calculation'') to assess the probability of an imminent change to the
current Protected NBB to a lower price or Protected NBO to a higher
price for a particular security (``quote instability factor''). When
the quoting activity meets predefined criteria and the quote
instability factor calculated is greater than the Exchange's defined
threshold (``quote instability threshold''), the System treats the
quote as not stable (``quote instability'' or a ``crumbling quote'').
During all other times, the quote is considered stable (``quote
stability''). The System independently assesses the stability of the
Protected NBB and Protected NBO for each security.
When the System determines that a quote, either the Protected NBB
or the Protected NBO, is unstable, the determination remains in effect
at that price level for ten (10) milliseconds. The System will only
treat one side of the Protected NBBO as unstable in a particular
security at any given time.\7\ By not permitting resting Discretionary
Peg orders to execute at a price that is more aggressive than the near-
side protected NBB or NBO (as applicable) during periods of quote
instability, the Exchange System is intended to attempt to protect such
orders from unfavorable executions when the market is moving against
them. Once the market has moved and the Exchange System deems the near-
side Protected NBB or NBO (as applicable) to be stable (pursuant to a
pre-determined, objective set of conditions as described below),
Discretionary Peg orders are permitted to exercise discretion up to
(for buy orders) or down to (for sell orders) the midpoint of the NBBO
in order to meet the limit price of active orders on the order book and
thereby potentially provide price improvement to such active orders.
---------------------------------------------------------------------------
\7\ See, Rule 11.190(g).
---------------------------------------------------------------------------
Quote stability or instability (also referred to as a crumbling
quote) is an assessment that the Exchange System makes on a real-time
basis, based on a pre-determined, objective set of conditions specified
in Rule 11.190(g)(1). Specifically, quote instability, or the presence
of a crumbling quote, is determined by the System when the following
factors occur:
(A) The Protected NBB and Protected NBO are the same as the
Protected NBB and Protected NBO one (1) millisecond ago; and
(B) the Protected NBBO spread is less than or equal to the thirty
(30) day median Protected NBBO spread during the Regular Market
Session; and
(C) there are more Protected Quotations on the far side, i.e., more
Protected Quotations on the Protected NBO than the Protected NBB for
buy orders, or more Protected Quotations on the Protected NBB than the
Protected NBO for sell orders; and
(D) the quote instability factor result from the quote stability
calculation is greater than the defined quote instability threshold.
[[Page 54168]]
(i) Quote Instability Factor. The Exchange's proprietary quote
stability calculation used to determine the current quote instability
factor is defined by the following formula that utilizes the quote
stability coefficients and quote stability variables defined below:
1/ (1 + e [caret] -(C0 + C1 * N +
C2 * F + C3 * N-1 + C4 *
F-1))
(a) Quote Stability Coefficients. The Exchange utilizes the values
below for the quote stability coefficients.
(1) C0 = -2.39515
(2) C1 = -0.76504
(3) C2 = 0.07599
(4) C3 = 0.38374
(5) C4 = 0.14466
(b) Quote Stability Variables. The Exchange utilizes the quote
stability variables defined below to calculate the current quote
instability factor.
1. N = the number of Protected Quotations on the near side of the
market, i.e., Protected NBB for buy orders and Protected NBO for sell
orders.
2. F = the number of Protected Quotations on the far side of the
market, i.e., Protected NBO for buy orders and Protected NBB for sell
orders.
3. N-1 = the number of Protected Quotations on the near
side of the market one (1) millisecond ago.
4. F-1 = the number of Protected Quotations on the far
side of the market one (1) millisecond ago.
(ii) Quote Instability Threshold. The Exchange utilizes a quote
instability threshold of 0.32.
Rule 11.190(g)(1)(D)(iii) provides that the Exchange reserves the
right to modify the quote instability coefficients or quote instability
threshold at any time, subject to a filing of a proposed rule change
with the SEC. The Exchange is proposing such changes in this rule
filing.
Changes to Quote Instability Coefficients and Quote Instability
Threshold
The alternative trading system (``ATS'') operated by the Exchange's
affiliate, IEX Services LLC (``IEX ATS'') offers a Discretionary Peg
order type that is identical to the Exchange's Discretionary Peg order
type, including the factors for determining when a crumbling quote (or
quote instability) is present. IEX conducted an analysis of the
effectiveness of the existing factors in predicting whether a crumbling
quote would occur, by reviewing randomly selected market data from
March through June 2016. The results of the analysis were verified by
reviewing randomly selected market data from July 2016. Based on this
analysis, the Exchange has determined that further optimization of the
existing factors would incrementally increase the accuracy of the
formula in predicting whether a crumbling quote will occur. The
following describes the proposed changes:
1. Rule 11.190(g) states that the Exchange utilizes real time
relative quoting activity of Protected Quotations in the quote
instability calculation. As proposed, the quote instability calculation
would not include IEX protected quotations. The quote instability
calculation has been optimized, subject to further proposed
enhancements, based on actual market data from trading on the IEX ATS
prior to the launch of the Exchange with a protected quotation.
Accordingly, IEX does not have data that includes IEX protected
quotations to consider in optimization of the quote instability
calculation at this time.\8\
---------------------------------------------------------------------------
\8\ IEX may consider further enhancements that include IEX's
protected quotation, subject to IEX submitting a proposed rule
change under Section 19(b) of the Act.
---------------------------------------------------------------------------
2. The Exchange also proposes to reduce the time period that a
crumbling quote condition remains in effect from ten to two
milliseconds. Based on the market data analysis, IEX found that
generally in the instances in which the formula correctly predicted a
crumbling quote, the crumbling quote occurred within two milliseconds.
By reducing the time period that the crumbling quote condition remains
on, IEX believes that it will ameliorate the potential impact of any
false positives, because the condition will remain on for a shorter
period of time.
3. The Exchange proposes to add two new quote stability variables,
``E'' and ``D'', and their coefficients to the quote instability factor
calculation specified in subparagraph (g)(1)(D)(i) of Rule 11.190.
Quote stability variable E is a Boolean indicator that equals 1 if and
only if the last two received quotation updates received by IEX have
been quotations of protected markets moving away from the near side of
the market on the same side of the market (i.e., bids moving lower or
offers moving higher). Based on the market data analysis, the Exchange
believes that inclusion of quote stability variable E will help to make
the quote instability calculation more accurate in predicting a
crumbling quote. Quote stability variable D is a measure of whether the
quotation updates received by IEX from the Nasdaq Stock Market, EDGX
Exchange or BATS BZX Exchange have been quotations moving away from the
near side of the market on the same side of the market (i.e., bids
moving lower or offers moving higher) in the last one (1) millisecond.
The value will be either 0, 1, 2 or 3 depending on how many of such
exchanges (if any) meet the quote stability variable D measure. Based
on the market data analysis, the Exchange believes that when these
three exchanges move away from the near side of the market on the same
side of the market, it is more likely that the quote will crumble, and
that inclusion of quote stability variable D will help to make the
quote instability calculation more accurate in predicting a crumbling
quote.
4. The Quote Stability Coefficients specified in subparagraph
(1)(D)(i) of Rule 11.190(g) are proposed to be modified to take into
account the recent market data analysis, as well as to add new quote
stability variables E and D. The Exchange believes that the
modifications, as proposed, will increase the accuracy of the quote
instability calculation.
5. The Exchange proposes to modify and re-optimize the Quote
Instability Threshold specified in subparagraph (1)(D)(ii) of Rule
11.190(g) based on the recent market data analysis and the two new
quote stability variables. The Exchange believes that the
modifications, as proposed, will increase the accuracy of the quote
instability calculation.
2. Statutory Basis
IEX believes that the proposed rule change is consistent with
Section 6(b) \9\ of the Act in general, and furthers the objectives of
Section 6(b)(5) of the Act,\10\ 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. Specifically, and as
discussed above, the proposal is designed to optimize and enhance the
effectiveness of the quote instability calculation in determining
whether a crumbling quote exists. The Exchange believes that the
proposed changes are designed to protect investors and the public
interest by enhancing the accuracy of the Exchange's quote instability
calculation in determining whether a crumbling quote exists thereby
preventing Discretionary Peg
[[Page 54169]]
orders from trading at prices more aggressive than the near side of the
market (NBB for buy orders, NBO for sell orders) to protect such orders
from unfavorable executions when the market appears to be moving
against them. The Exchange believes that not including IEX protected
quotations in the quote instability calculation is consistent with the
protection of investors and the public interest because the calculation
is optimized based on actual market data, and IEX does not yet have
actual market data that includes IEX protected quotations to consider
in optimization of the quote instability calculation at this time. The
Exchange also believes that it is consistent with the protection of
investors and the public interest to reduce the time period that a
crumbling quote condition remains in effect from ten to two
milliseconds to ameliorate the potential impact of any false positives.
Further, IEX believes that adding the two new quote stability
variables, as well as the proposed additions to and modification of the
quote instability coefficients and quote instability threshold, as
contemplated by 11.190(g)(1)(D)(iii), is consistent with the public
interest and the protection of investors because these changes are
designed to increase the accuracy of the calculation.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As proposed, the new quote instability calculation will continue to
be a fixed formula specified transparently in IEX's rules. The Exchange
is not proposing to add any new functionality, but merely to revise the
fixed formula based on market data analysis designed to increase the
accuracy of the formula in predicting a crumbling quote, and as
contemplated by the rule.
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. The proposed change will apply
equally to all IEX Members. The Commission has already considered the
Exchange's Discretionary Peg order type in connection with its grant of
IEX's application for registration as a national securities exchange
under Sections 6 and 19 of the Act.\11\ The proposed rule change is
designed to merely enhance the accuracy of the quote instability
calculation specified in Rule 11.190(g) and ameliorate the impact of
any false positives; therefore, no new burdens are being proposed.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 34-78101 (June 17,
2016), 81 FR 41142 (June 23, 2016) (File No. 10-222).
---------------------------------------------------------------------------
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) \12\ of the Act and Rule 19b-4(f)(6) \13\
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 if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\14\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay, and stated that the
proposed rule change will merely revise the fixed formula specified in
Rule 11.190(g) for predicting a crumbling quote, as contemplated by the
rule. The Exchange noted that the proposed rule change is designed to
enhance the accuracy of the quote instability calculation and protect
Members that enter Discretionary Peg orders from unfavorable executions
when the market is moving against such orders. Further, the Exchange
stated that waiver of the operative delay will allow the Exchange to
implement the proposed rule change to coincide with IEX's launch of
exchange operations during a security-by-security phase-in period
beginning on August 19, 2016, thus enabling the Exchange to provide the
contemplated protections to Members entering Discretionary Peg orders
from exchange launch. The Commission notes that the changes proposed by
IEX are intended to optimize the quote instability equation contained
in the discretionary peg order type rule, and are not intended to
materially change the operation of the rule or introduce new
functionality. Rather, the Exchange intends the proposed changes to
increase the ability of the discretionary peg order type to meet its
stated objectives as reflected in the Exchange's rule. Accordingly, the
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest. Therefore,
the Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\17\
---------------------------------------------------------------------------
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-IEX-2016-11 on the subject line.
Paper Comments
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-2016-11. This file
[[Page 54170]]
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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-IEX-2016-11 and should be
submitted on or before September 6, 2016.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19315 Filed 8-12-16; 8:45 am]
BILLING CODE 8011-01-P
