Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, Relating to Auctions in IEX-Listed Securities, Dissemination of Auction-Related Market Data, and Trading Halts and Pauses, 37474-37479 [2017-16830]
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37474
Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / Notices
the financial markets. The Exchange
does not believe that the proposed
change to the Exchange’s tiered pricing
structure burdens competition, but
instead, enhances competition, as it is
intended to increase the
competitiveness of the Exchange.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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)
of the Act 18 and paragraph (f) of Rule
19b–4 thereunder.19 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.
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:
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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–
BatsBZX–2017–51 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–BatsBZX–2017–51. 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 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 will also 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–
BatsBZX–2017–51 and should be
submitted on or before August 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–16931 Filed 8–9–17; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81316; File No. SR–IEX–
2017–10]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing of Amendment No. 2 and Order
Granting Accelerated Approval of
Proposed Rule Change, as Modified by
Amendment No. 2, Relating to
Auctions in IEX-Listed Securities,
Dissemination of Auction-Related
Market Data, and Trading Halts and
Pauses
August 4, 2017.
I. Introduction
On April 20, 2017, Investors Exchange
LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f).
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II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 2
A. Overview
The Commission recently granted
IEX’s Form 1 application for registration
BILLING CODE 8011–01–P
20 17
18 15
change to adopt rules governing
auctions in IEX-listed securities,
provide for the dissemination of
auction-related market data, and
establish rules relating to trading halts
and pauses. The proposed rule change
was published for comment in the
Federal Register on May 9, 2017.3 The
Commission received one comment
regarding the proposal.4 IEX responded
to the comment on June 5, 2017.5 On
June 22, 2017, pursuant to Section
19(b)(2) of the Act,6 the Commission
extended the time for Commission
action on the proposal until August 7,
2017.7 IEX filed Amendment No. 1 to
the proposal on July 10, 2017. On July
19, 2017, IEX filed Amendment No 2 to
the proposal, which superseded and
replaced Amendment No. 1 in its
entirety.8 The Commission is publishing
this notice to solicit comment on
Amendment No. 2 to the proposed rule
change from interested persons and is
approving the proposed rule change, as
modified by Amendment No. 2, on an
accelerated basis.
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3 See Securities Exchange Act Release No. 80583
(May 3, 2017), 82 FR 21634 (May 9, 2017)
(‘‘Notice’’).
4 See letter from Joan C. Conley, Senior Vice
President and Corporate Secretary, Nasdaq, to Brent
J. Fields, Secretary, Commission, dated May 30,
2017 (‘‘Nasdaq Letter’’).
5 See letter from Sophia Lee, General Counsel,
IEX, to Brent J. Fields, Secretary, Commission,
dated June 5, 2017 (‘‘IEX Response’’).
6 15 U.S.C. 78s(b)(2).
7 See Securities Exchange Act Release No. 80998
(June 22, 2017), 82 FR 29355 (June 28, 2017).
8 As discussed more fully below, Amendment No.
2 revises the proposal to: (1) Clarify the process for
determining the auction match price; (2) modify
certain definitions used to determine the auction
match price to account for the requirement under
the National Market System Plan to Implement a
Tick Size Pilot Program (‘‘Tick Size Pilot’’) that
certain securities be traded in nickel increments; (3)
modify the process for affecting incremental
extensions of the period for accepting orders after
a Limit Up-Limit Down (‘‘LULD’’) trading pause;
and (4) make other conforming and clarifying
changes. To promote transparency of its proposed
amendment, when IEX filed Amendment No. 2 with
the Commission, it also submitted Amendment No.
2 as a comment letter to the file, which the
Commission posted on its Web site and placed in
the public comment file for SR–IEX–2017–10
(available at https://www.sec.gov/comments/sr-iex2017-10/iex201710-1865053-156219.pdf). The
Exchange also posted a copy of its Amendment No.
2 on its Web site (available at https://
iextrading.com/docs/rule-filings/SR-IEX-2017-10Amendment-2.pdf) when it filed Amendment No. 2
with the Commission.
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Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / Notices
as a national securities exchange.9 IEX’s
Form 1 application contained
provisions, including standards for
initial and continued listing on IEX, that
would allow IEX to act as a primary
listing exchange. In connection with its
plans to become a primary listing
exchange, IEX proposes to adopt new
rules to govern auctions in IEX-listed
securities and to amend certain related
rule provisions concerning the same. In
addition, IEX proposes to amend certain
of its rules governing trading halts and
the operation of certain aspects of LULD
trading pauses.
Specifically, the proposal will allow
IEX to conduct the following auctions
for IEX-listed securities: (1) An opening
auction (‘‘Opening Auction’’); (2) a
closing auction (‘‘Closing Auction’’); (3)
an auction for an initial public offering
(‘‘IPO’’) or the launch of a new issue
(‘‘IPO Auction’’); (4) an auction
following a trading halt in a security
(‘‘Halt Auction’’); and (5) an auction to
re-open a security after such security is
subject to a LULD trading pause
(‘‘Volatility Auction’’) (collectively, the
‘‘IEX Auctions’’). The IEX Auctions will
utilize a double auction process that is
designed to maximize the number of
shares executed at a single price (the
‘‘Auction Clearing Price’’).10 The
proposal also provides for the
dissemination of auction-related market
data, establishes rules (in addition to
Volatility Auctions) relating to LULD
trading pauses, and authorizes IEX to
halt trading in securities listed or traded
on IEX under certain circumstances
when IEX deems it necessary to protect
investors and the public interest.
1. Auction Process
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IEX will offer the following new order
types specific to the IEX Auctions:
Market-on-Open (‘‘MOO’’); Limit-onOpen (‘‘LOO’’); Market-on-Close
(‘‘MOC’’); and Limit-on-Close
(‘‘LOC’’).11 To determine the Auction
9 See Securities Exchange Act Release No. 78101
(June 17, 2016), 81 FR 41142 (June 23, 2016) (File
No. 10–222) (‘‘Form 1 Order’’).
10 See Notice, supra note 3, 82 FR at 21634. The
proposed rules establish a series of steps that IEX
will follow to arrive to arrive at a single Auction
Clearing Price. See proposed IEX Rules
11.350(c)(2)(B), 11.350(d)(2)(B), 11.350(e)(2)(C),
11.350(f)(2)(E), and 11.350(f)(3)(B)(ii). IEX states
that its clearing price determination process is
similar to the clearing price determination process
used by The NASDAQ Stock Market LLC
(‘‘Nasdaq’’). See Notice, supra note 3, 82 FR at
21644.
11 See proposed IEX Rules 11.350(a)(20),
11.350(a)(21), 11.350(a)(24), and 11.350(a)(25).
MOO and LOO orders will be available for Opening
Auctions, IPO Auctions, and, in certain
circumstances, Halt Auctions, while MOC and LOC
orders will be available for Closing Auctions and,
in certain circumstances, Volatility Auctions. See
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Clearing Price, IEX Auctions will
consider orders that queue prior to the
auction match (the ‘‘Auction Book’’) and
orders resting on the Exchange’s order
book that are not on the Auction Book
and are available for continuous trading
(the ‘‘Continuous Book’’) (collectively,
the ‘‘Order Book’’).12 Orders resting on
the Order Book will be ranked and
maintained based on price-display-time
priority.13
2. IEX Auction Information
For each IEX Auction beginning at a
specified time, IEX will disseminate,
and update every one second thereafter,
the current status of price, size, order
imbalance, auction collar, and other
relevant auction-related information
(‘‘IEX Auction Information’’).14 IEX will
add IEX Auction Information to its Top
of Book Quote and Last Sale feed
(‘‘TOPS’’) and IEX Depth of Book and
Last Sale feed (‘‘DEEP’’), and to the IEX
Data Platform, which is available on
IEX’s public Web site.15 IEX Auction
Information will be available to IEX data
recipients, and on IEX’s public Web site,
free of charge.16
B. Opening Auctions
On each trading day, IEX will attempt
to conduct an Opening Auction for all
IEX-listed securities.17 IEX Users may
submit orders to IEX at the beginning of
the Pre-Market Session for participation
in the Opening Auction, and orders
designated for the Opening Auction
Book will be queued until the Opening
Auction match.18 Between the Opening
Auction Lock-in Time (two minutes
prior to the Opening Auction match,
i.e., 9:28 a.m.) 19 and the Opening
proposed IEX Rules 11.350(a)(20), 11.350(a)(21),
11.350(a)(24), and 11.350(a)(25).
12 See proposed IEX Rules 11.350(a)(1) and
11.350(a)(4). The proposal amends IEX Rule
11.190(a)(2)(E) to allow market orders with a timein-force of DAY to be entered in the Pre-Market,
thereby permitting such orders to queue in IEX’s
System for participation in the Opening Auction or
in a Halt Auction. See Notice, supra note 3, 82 FR
at 21636.
13 See proposed IEX Rule 11.350(b)(1). IEX
represents that its proposed auction priority is
substantially similar to the auction priority utilized
by Nasdaq and Bats BZX Exchange, Inc. (‘‘Bats’’).
See Notice, supra note 3, 82 FR at 21641.
14 See proposed IEX Rule 11.350(a)(9). See also
Notice, supra note 3, 82 FR at 21657.
15 See proposed IEX Rule 11.330(a)(1)–(3). See
also Notice, supra note 3, 82 FR at 21657.
16 See Notice, supra note 3, 82 FR at 21657 and
21667. IEX data recipients include IEX Members
and non-Members that have entered into an
agreement with IEX that permits them to receive
IEX data. See Notice, supra note 3, 82 FR at 21657
n.92.
17 See proposed IEX Rule 11.350(c)(2).
18 See proposed IEX Rule 11.350(c)(1)(A). IEX
Rule 1.160(z) defines ‘‘Pre-Market Session’’ as the
time between 8:00 a.m. and 9:30 a.m. Eastern Time.
19 See proposed IEX Rule 11.350(a)(22).
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37475
Auction match, Auction Eligible Orders
on the Opening Auction Book may not
be canceled or modified (i.e., they are
‘‘locked in’’).20 Between the Opening
Auction Lock-in Time and the Opening
Auction match, IEX will reject Hyperaggressive Auction Orders upon entry.21
IEX represents that the rejection of
Hyper-aggressive Auction Orders after
the Lock-in Time is designed to
minimize the increase of imbalances or
large price swings resulting from
aggressively priced orders in the
Auction Book during the last minutes
leading into the auction.22 IEX will
accept LOO orders and limit orders with
a time-in-force of DAY or GTX that are
not Hyper-aggressive Orders until the
Opening Auction Lock-out Time (i.e., 10
seconds prior to the Opening Auction
match),23 which will allow Users to
continue to submit auction orders and
offset auction imbalances via orders
specifically designated for the Auction
Book in the minutes leading up to the
auction match.24 Incoming orders to the
Opening Auction Book that are received
between the Opening Auction Lock-out
Time (i.e., 10 seconds prior to the
Opening Auction match) and the
Opening Auction match will be rejected
upon receipt.25 IEX will begin to
disseminate IEX Auction Information
associated with the Opening Auction
starting at the Opening Auction Lock-in
Time, and will update it every one
second thereafter.26 Before IEX will
20 See proposed IEX Rules 11.350(a)(22) and
11.350(c)(1)(B).
21 See proposed IEX Rules 11.350(a)(22) and
11.350(c)(1)(B). For the Opening Auction, Hyperaggressive Auction Orders are MOO orders and
market orders with a TIF of DAY, as well as LOO
orders and limit orders with a TIF of DAY or GTX
to buy (sell) priced above (below) the latest upper
(lower) threshold of the Opening/Closing Auction
Collar calculated by the System. See proposed IEX
Rules 11.350(a)(8)(A) and 11.350(a)(27) (defining
‘‘Opening/Closing Auction Collar’’).
22 See Notice, supra note 3, 82 FR at 21666.
23 See proposed IEX Rule 11.350(a)(23).
24 See Notice, supra note 3, 82 FR at 21648. See
also proposed IEX Rules 11.350(a)(1)(A) and
11.350(c)(1)(B). IEX states that allowing Users to
offset imbalances on the Auction Book after the
Lock-in Time is designed to promote stability and
equilibrium leading into the auction match;
consequently, these orders may not be cancelled or
modified after entry. See Notice, supra note 3, 82
FR at 21648.
25 See proposed IEX Rules 11.350(a)(23) and
11.350(c)(1)(C). Orders submitted to the Continuous
Book after the Lock-out Time remain eligible for
execution on the Continuous Book and in the
upcoming Opening Auction match. See proposed
IEX Rule 11.350(a)(23). IEX states that the Lock-out
Time is designed to freeze the Auction Book and
to provide Users with an opportunity to offset any
remaining imbalance by submitting limit orders on
the Continuous Book. See Notice, supra note 3, 82
FR at 21648.
26 See proposed IEX Rule 11.350(c)(2)(A). See also
IEX Rule 11.350(a)(9).
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Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / Notices
perform the opening match in an IEXlisted security, the Opening Auction
price must be at or within the Opening/
Closing Auction Collar.27 IEX will apply
Opening Auction Contingency
Procedures if a disruption occurs that
prevents the execution of the Opening
Auction.28 These procedures are
designed to ensure the orderly and
timely opening of IEX-listed
securities.29
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C. Closing Auctions
On each trading day, IEX will attempt
to conduct a Closing Auction for all IEXlisted securities.30 Users will be able to
submit orders for participation in the
Closing Auction at the beginning of the
Pre-Market Session,31 or at the
beginning of the Order Acceptance
Period for an IPO Auction.32 The
Closing Auction Book consists of MOC
and LOC orders, which will be queued
until the Closing Auction match.33
Between the Closing Auction Lock-in
Time (i.e., 3:50 p.m. or 10 minutes prior
to the end of the Regular Market Session
on days that IEX is subject to an early
closing),34 and the Closing Auction
match, orders on the Closing Auction
Book may not be cancelled or
modified.35 Hyper-aggressive Auction
Orders submitted between the Closing
Auction Lock-in Time and the Closing
Auction match will be rejected upon
entry.36 LOC orders that are not Hyper27 See proposed IEX Rules 11.350(c)(2)(B)(iv),
11.350(a)(27) (defining ‘‘Opening/Closing Auction
Collar’’), and 11.350(a), Supplementary Material
.01. IEX states that the default 10% threshold used
to determine the Opening/Closing Auction Collar
will provide an appropriate range within which
price discovery may occur to maximize the number
of shares executed in the auction. See Notice, supra
note 3, 82 FR at 21646. IEX notes that a
modification of the default threshold percentage
values for the Opening/Closing Auction Collar
would be subject to the requirements of Section
19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule
19b–4 thereunder, 17 CFR 240.19b–4. See id. at
21646 n.51.
28 See proposed IEX Rule 11.350(c)(4)(A).
29 See Notice, supra note 3, 82 FR at 21649 and
21666.
30 See proposed IEX Rule 11.350(d)(2).
31 See note 18, supra.
32 See proposed IEX Rule 11.350(d)(1)(A). The
Order Acceptance Period for an IPO Auction begins
at 8:00 a.m., unless otherwise specified. See
proposed IEX Rule 11.350(a)(29)(A).
33 See proposed IEX Rule 11.350(d)(1)(A).
34 See proposed IEX Rule 11.350(a)(22).
35 See proposed IEX Rule 11.350(d)(1)(B).
However, between the Closing Auction Lock-in
Time and five minutes before the Closing Auction
match, On-Close orders may be cancelled if the
User requests that IEX correct a legitimate error in
the order (e.g., side, size, symbol, price, or
duplication of an order). On-Close orders may not
be cancelled or modified at or after five minutes
before the Closing Auction match for any reason.
See proposed IEX Rule 11.350(d)(1)(C).
36 See proposed IEX Rule 11.350(d)(1)(B). For the
Closing Auction, Hyper-aggressive Auction Orders
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aggressive Auction orders will be
accepted until the Closing Auction
Lock-out Time (i.e., 10 seconds prior to
the Closing Auction match).37 IEX
believes that rejecting Hyper-aggressive
Auction Orders for the Closing Auction
after the Lock-in Time, while allowing
LOC orders that are priced within the
auction collar to be entered and eligible
for execution in the Closing Auction
until the Lock-out Time, will allow
Users to continue to submit orders and
offset imbalances on the Closing
Auction Book in the minutes leading up
to the auction match while attempting
to avoid increasing auction imbalances
resulting from aggressively priced
orders in the Auction Book during the
last ten minutes of the auction
process.38 Orders eligible for the Closing
Auction Book received between the
Closing Auction Lock-out Time and the
Closing Auction match will be
rejected.39 At the beginning of the
Closing Auction Lock-in Time, and
updated every one second thereafter,
IEX will disseminate IEX Auction
Information associated with the Closing
Auction.40 Before IEX will perform the
closing match in an IEX-listed security,
the Closing Auction price must be
within the Opening/Closing Auction
Collar.41 When a disruption occurs that
prevents the execution of the Closing
Auction, IEX will apply either its
Primary Closing Auction Contingency
Procedures or its Secondary Closing
Auction Contingency Procedures.42
These procedures are designed to ensure
the orderly and timely closing of IEXlisted securities.43
D. IPO Auctions
IEX will conduct an IPO Auction for
an initial public offering or for the
launch of a new issue.44 Users will be
able to submit Auction Eligible Orders
for an IPO Auction beginning at the start
are MOC and LOC orders to buy (sell) priced above
(below) the latest upper (lower) threshold of the
Opening/Closing Auction Collar calculated by the
System. See proposed IEX Rule 11.350(a)(8)(B).
37 See Notice, supra note 3, 82 FR at 21650 and
proposed IEX Rule 11.350(a)(23) (defining ‘‘Lockout Time’’). IEX notes that the Lock-out Time for
the Closing Auction is designed to provide Users
with an opportunity to offset any remaining
imbalance during a period of relative stability
(while the Auction Book is locked) by submitting
limit orders to the Continuous Book. See Notice,
supra note 3, 82 FR at 21650.
38 See Notice, supra note 3, 82 FR at 21650.
39 See proposed IEX Rule 11.350(d)(1)(D).
40 See proposed IEX Rule 11.350(d)(2)(A).
41 See proposed IEX Rules 11.350(d)(2)(B)(iv),
11.350(a)(27) (defining ‘‘Opening/Closing Auction
Collar’’), and 11.350(a), Supplementary Material
.01.
42 See proposed IEX Rule 11.350(d)(4).
43 See Notice, supra note 3, 82 FR at 21666.
44 See proposed IEX Rule 11.350(e).
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of IEX’s system hours (i.e., 8:00 a.m.),
unless otherwise specified.45 Such
orders will be queued, and may be
cancelled or modified, until the time of
the auction match.46 Thirty minutes
prior to the scheduled auction match,
IEX will begin to disseminate and
update every one second IEX Auction
Information associated with the IPO
Auction.47 IEX will generally attempt to
conduct an auction for corporate IPOs at
10:15 a.m. and an auction for new issues
at 9:30 a.m.48 If IEX is unable to
complete an IPO Auction before the end
of Post-Market Hours (i.e., 5:00 p.m.), all
open orders in the subject security on
the Order Book will be canceled.49
Likewise, if a disruption occurs that
prevents the execution of an IPO
Auction, IEX will publicly announce
that the Order Acceptance Period for the
IPO Auction will be reset, cancel all
orders in that subject security, and
disseminate a new schedule for the
Order Acceptance Period and auction
match.50
E. Halt Auctions
IEX may initiate trading halts under
certain circumstances in which the
Exchange deems it necessary to protect
investors and the public interest.51
Following a trading halt in an IEX-listed
security pursuant to proposed IEX Rules
11.280(g)(1), (4), or (5), IEX will conduct
a Halt Auction.52 IEX Users will be able
45 See proposed IEX Rule 11.350(a)(29)(A) and
Notice, supra note 3, 82 FR at 21652. The Order
Acceptance Period may be automatically or
manually extended under certain circumstances.
See proposed IEX Rule 11.350(e)(2)(B). In addition,
the Pre-Launch Period for an IPO may be extended
under certain circumstances. See proposed IEX
Rule 11.280(h)(8)(B). The underwriter, with the
concurrence of IEX, may determine to postpone and
reschedule the IPO at any point during the IPO
Auction process. See proposed IEX Rule
11.280(h)(8)(B).
46 See proposed IEX Rule 11.350(e)(1)(A)–(B) and
Notice, supra note 3, 82 FR at 21652.
47 See proposed IEX Rules 11.350(e)(2)(A) and
11.350(a)(5). The term ‘‘Post-Market Hours’’ or
‘‘Post-Market Session’’ refers to the time between
4:00 p.m. and 5:00 p.m. Eastern Time. See IEX Rule
1.160(aa).
48 See Notice, supra note 3, 82 FR at 21653.
49 See proposed IEX Rule 11.350(e)(1)(D).
50 See proposed IEX Rule 11.350(e)(4)(A).
51 See proposed IEX Rule 11.280(g). Proposed IEX
Rule 11.280(h) establishes the procedures that IEX
must follow to initiate or terminate a trading halt.
52 See proposed IEX Rule 11.350(e). Proposed IEX
Rule 11.280(g)(1) allows IEX to halt trading to
permit the dissemination of material news; IEX
Rule 280(g)(4) allows IEX to halt trading in an
American Depository Receipt (‘‘ADR’’) or other
security listed on IEX when the IEX-listed security
or security underlying the ADR is listed on or
registered with another national or foreign
securities exchange or market, and that exchange or
market, or a regulatory overseeing that exchange or
market, halts trading in the security for regulatory
reasons; and IEX Rule 11.280(g)(5) allows IEX to
halt trading in a security listed on IEX when IEX
requests information from the issuer relating to
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to submit Auction Eligible Orders for a
Halt Auction five minutes prior to the
scheduled auction match.53 Such orders
will be queued, and may be cancelled or
modified, until the time of the Halt
Auction.54 At the start of the Order
Acceptance Period for a Halt Auction,
IEX will begin to disseminate IEX
Auction Information associated with the
Halt Auction and will update that
information every one second
thereafter.55 If there is insufficient
crossing interest to conduct a Halt
Auction, no Halt Auction will occur and
the security will be transitioned to
continuous trading.56 If IEX is unable to
complete a Halt Auction before the end
of Post-Market Hours (i.e., 5:00 p.m.), all
open orders in the subject security on
the Order Book will be canceled.57
When a disruption occurs that prevents
the execution of a Halt Auction, IEX
will publicly announce that no Halt
Auction will occur, cancel all orders in
that subject security, and open the
security for trading without an
auction.58
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F. Volatility Auctions
IEX will conduct a Volatility Auction
to re-open an IEX-listed security after
that security is subject to a trading
pause pursuant to the National Market
System Plan to Address Extraordinary
Market Volatility (‘‘Limit Up-Limit
Down Plan’’ or ‘‘LULD Plan’’).59 Orders
may be submitted for a Volatility
Auction during a five-minute Order
Acceptance Period beginning
immediately after the dissemination of
the trading pause and are queued until
the auction match.60 Orders may be
material news, the issuer’s ability to meet IEX
listing qualification requirements, or any other
information necessary to protect investors and the
public interest.
53 See IEX Rule 11.350(a)(29)(B) and Notice,
supra note 3, 82 FR at 21652.
54 See proposed IEX Rule 11.350(e)(1)(A)–(B) and
Notice, supra note 3, 82 FR at 21652.
55 See proposed IEX Rules 11.350(e)(2)(A) and
11.350(a)(5). IEX will extend the Order Acceptance
Period automatically for one minute when there are
unmatched shares from market orders on the
Auction Book or the Indicative Clearing Price
differs by the greater of five percent or fifty cents
from any of the previous fifteen Indicative Clearing
Prices disseminations. See proposed IEX Rules
11.350(e)(2)(B)(i) and (ii) and 11.350(a)(9)(E)
(defining ‘‘Indicative Clearing Price’’).
56 See proposed IEX Rule 11.350(e)(2)(C).
57 See proposed IEX Rule 11.350(e)(1)(D). See also
IEX Rule 1.160(aa) (defining ‘‘Post-Market Hours’’).
58 See proposed IEX Rule 11.350(e)(4)(B).
59 See proposed IEX Rule 11.350(f). See also, e.g.,
Securities Exchange Act Release Nos. 67091 (May
31, 2012), 77 FR 33498 (June 6, 2012) (approving
LULD Plan); 80455 (April 13, 2017), 82 FR 18519
(April 19, 2017) (approving thirteenth amendment
to LULD Plan).
60 See proposed IEX Rules 11.350(f)(1)(A),
11.350(a)(29)(C), and 11.350(f)(1)(B). The Order
Acceptance Period for a Volatility Auction may be
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canceled or modified at any time prior
to the auction match.61 IEX will begin
to disseminate IEX Auction Information
associated with the Volatility Auction
commencing at the start of the Order
Acceptance Period for such auction, and
will update that information every one
second thereafter.62 Before IEX will
perform the Volatility Auction match,
the Volatility Auction price must be at
or within the Volatility Auction
Collar.63 When a disruption occurs that
prevents the execution of the Volatility
Auction, IEX will apply its Volatility
Auction Contingency Procedures.64
In place of its normal Closing Auction
procedures, IEX will close an IEX-listed
security using a Volatility Auction when
the IEX-listed security is paused
pursuant to IEX Rule 11.280(e) at or
after the Closing Auction Lock-in Time,
or when the Order Acceptance Period
for a Volatility Auction for a security
paused before the Closing Auction LockTime pursuant to IEX Rule 11.280(e)
would otherwise be extended to a time
after the Closing Auction Lock-in
Time.65
In addition, IEX proposes several
amendments to IEX Rule 11.280 relating
to LULD trading pauses.66 In
Amendment No. 2, IEX states that it
intends to continue coordinating with
extended under certain circumstances. See
proposed IEX Rules 11.350(f)(2)(C) and (D).
61 See proposed IEX Rule 11.350(f)(1)(C).
62 See proposed IEX Rules 11.350(f)(2)(A) and
11.350(a)(5).
63 See proposed IEX Rules 11.350(f)(2)(B);
11.350(a)(31) (defining ‘‘Volatility Auction Collar’’);
11.350(a), Supplementary Material .02. IEX states
that its proposed Volatility Auction Collar
functionality is consistent with the commitment
made by each primary listing exchange set forth in
the twelfth amendment to the LULD Plan to file rule
changes with the Commission under Section 19(b)
of the Act to amend its respective trading practice
for automated re-openings following a trading pause
consistent with a standardized approach agreed to
by LULD Plan participants that would allow for
extensions of an LULD trading pause if equilibrium
cannot be met for a re-opening price within
specified parameters. See Securities Exchange Act
Release No. 79845 (January 19, 2017), 82 FR 8551
(January 26, 2017) (‘‘LULD Plan Twelfth
Amendment Approval Order’’) and Notice, supra
note 3, 82 FR at 21646.
64 See proposed IEX Rule 11.350(f)(2)(H).
65 See proposed IEX Rule 11.350(f)(3).
66 In particular, IEX proposes to amend IEX Rule
11.280 to provide that Auction Eligible Orders on
the Auction Book are not price slid or canceled due
to LULD price bands; that the Exchange may
declare an LULD trading pause for a NMS Stock
listed on the Exchange during a straddle state; and
that following a trading pause, the Exchange will
re-open trading in IEX-listed securities pursuant to
the procedures set forth in proposed IEX Rule
11.350(f). See proposed IEX Rules 11.280(e)(5)(F)
and (e)(7) and (8). In addition, the revised rule
indicates that trading in non-IEX-listed securities
will re-open upon receipt of the Price Bands from
the single plan processor responsible for
consolidation of information for the security. See
proposed IEX Rule 11.280(e)(8).
PO 00000
Frm 00060
Fmt 4703
Sfmt 4703
37477
other LULD Plan participants and the
Securities Information Processors
(‘‘SIPs’’) regarding the implementation
timeline of changes to the SIPs pursuant
to the twelfth amendment to the LULD
Plan to support dissemination of certain
data related to re-opening auctions after
LULD trading pauses.67
G. Additional Changes
IEX proposes to adopt several
additional provisions relating to IEX
Auctions. New IEX Rule 11.350(g) will
address the handling during Opening,
Closing, Halt, and Volatility Auctions of
short sale orders for covered securities
not marked short exempt when the
Short Sale Price Test of Rule 201 of
Regulation SHO (‘‘Short Sale Price
Test’’) is in effect.68
In addition, new IEX Rule 11.350(h)
will allow IEX to adjust the timing of or
suspend an IEX Auction with prior
notice to Users when, in IEX’s
judgment, the interests of a fair and
orderly market require such action. IEX
believes that this discretion is necessary
to give IEX latitude to adapt to quickly
changing, volatile market conditions
that may negatively impact market
participants.69
New IEX Rule 11.350(i) provides that,
for purposes of Rule 611(b)(3) of
Regulation NMS and section VI(D)(6) of
Tick Size Pilot, orders executed
pursuant to IEX Auctions may tradethrough or trade-at the price of any
other trading center’s Manual or
Protected Quotations if the transaction
that traded-at or constituted a tradethrough was a single-priced opening, reopening, or closing transaction at the
trading center.
Finally, new IEX Rule 11.350(j)
specifies that, for purposes of the Rule,
references to a.m. and p.m. mean
Eastern Time.
III. Summary of Comments and IEX’s
Response
As noted above, the Commission
received one comment regarding the
proposal, and a response to the
67 See Amendment No. 2, supra note 8, at 44–45.
See also LULD Plan Twelfth Amendment Approval
Order, supra note 63, 82 FR at 8553–54 n.22
(expecting LULD participants to implement the
twelfth amendment no later than six months after
the date of the order); 80549 (April 28, 2017), 82
FR 20928 (May 4, 2017) (extending the time frame
to implement the LULD twelfth amendment to no
later than the end of the third quarter of 2017).
68 See proposed IEX Rule 11.350(g). IEX notes that
a security in an IPO Auction will never be subject
to the Short Sale Price Test because there will have
been no prior trading in the security. See Notice,
supra note 3, 82 FR at 21656–57.
69 See Notice, supra note 3, 82 FR at 21657.
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mstockstill on DSK30JT082PROD with NOTICES
comment from IEX.70 In its proposal,
IEX expresses its intention to
disseminate ‘‘substantially the same
information’’ as the IEX Auction
Information through the Consolidated
Quotation System operated by the
Consolidated Tape Association (‘‘CTA’’)
securities information processor,
‘‘pending approval by the Operating
Committee of the CTA.’’ 71 IEX states
that ‘‘[f]ollowing such approval, IEX
will amend Rule 11.330 to reflect this
additional means of dissemination.’’ 72
The commenter expresses the view that
any Commission approval of the current
proposal ‘‘should not be construed as
approval for dissemination of [IEX
Auction Information] data through the
CQS,’’ and that the Commission, if it
approves the proposal, should make
clear that its approval of the proposal
does not constitute an approval of the
inclusion of IEX Auction Information in
the CQS.73 The commenter further
states that ‘‘there are serious legal and
policy impediments to the
dissemination of IEX Auction
Information . . . through the facilities of
the CQ Plan,’’ and ‘‘that an opportunity
for public comment and formal action
by the Commission, either in the context
of a proposed CQ Plan amendment or a
proposed rule change, is needed to
ensure that these issues are given
adequate consideration.’’ 74 The
commenter acknowledges, however,
that this issue is not directly before the
Commission at this time.75
IEX submitted a letter in response to
the comment letter, which
acknowledges that the dissemination of
IEX Auction Information through the
CQS would require action by the CTA
Operating Committee.76 IEX states that
it would file a separate proposed rule
change with the Commission that would
be subject to notice and comment if it
decides to pursue such dissemination.77
The Commission believes that IEX’s
response addresses the concern raised
by the commenter. The Commission
notes that IEX’s proposal and proposed
rule text do not provide for the
dissemination of IEX Auction
Information through the facilities of the
CQ Plan. Accordingly, despite IEX’s
statement in the current proposal of its
intention to pursue such dissemination
in the future, the issue is not presently
70 See Nasdaq Letter, supra note 4; and IEX
Response, supra note 5.
71 See Notice, supra note 3, 82 FR at 21657.
72 See id. at 21657 n.134.
73 Nasdaq Letter, supra note 4, at 2.
74 Id. at 3.
75 Id. at 3 n.3.
76 See IEX Response, supra note 5, at 1.
77 See id. at 1–2.
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17:03 Aug 09, 2017
Jkt 241001
before the Commission as part of the
current proposal.
IV. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 2, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.78 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,79 which requires,
among other things, that the rules of a
national securities exchange be
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. This order approves the
proposed rule change in its entirety,
although only certain more significant
aspects of the proposed rules are
discussed below.
In its filing, IEX notes that its auctions
were designed based on its
understanding of how the auctions work
on other primary listing exchanges,
including the New York Stock
Exchange, NYSE Arca, Nasdaq, and
Bats.80 IEX further notes that its
proposed auctions contain a number of
attributes that are ‘‘substantially similar
to existing exchange auction models,
and will therefore be familiar’’ to
Users.81 In addition, the Commission
notes that the price determination
process in the IEX Auctions is
substantially similar to the opening
process that the Commission recently
approved IEX to use for non-IEX-listed
securities.82
IEX states that its proposal is integral
to its future operation of a listing
market,83 and that the proposed rules
will benefit issuers and investors by
allowing IEX to provide companies with
78 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
79 15 U.S.C. 78f(b)(5).
80 See Notice, supra note 3, 82 FR at 21634.
81 See id.
82 See IEX Rule 11.231 and Securities Exchange
Act Release No. 81195 (July 24, 2017), 82 FR 35250
(July 28, 2017) (order approving File No. SR–IEX–
2017–11).
83 The Commission notes that it has separately
approved rules for the qualification, listing, and
delisting of companies on IEX. See Form 1 Order,
supra note 9.
PO 00000
Frm 00061
Fmt 4703
Sfmt 4703
an additional listing option.84 IEX
believes that the operation of IEX
Auctions for securities listed on IEX
will assist in the price discovery process
and help to ensure a fair and orderly
market for securities listed on IEX.85 IEX
further believes that its auction is
designed to provide a transparent,
efficient, and robust process for
aggregating trading interest submitted
by a broad range of market participants
to be matched at a single clearing
price.86
IEX’s auction process is designed to
match orders at a single price that
maximizes the number of shares to be
executed.87 IEX has designed the IEX
Auctions to be conducted within
specified periods of time and in
accordance with specified order entry,
calculation, price, and execution
priority parameters. IEX may adjust the
timing of or suspend IEX Auctions with
prior notice to Users, whenever, in the
judgement of the Exchange, the interests
of a fair and orderly market so require.88
IEX’s auction rules are designed to
open, close, or re-open trading in each
IEX-listed security by matching as much
interest as possible at a price
determined through an objective process
set forth in the proposed rules.
Finally, the Commission believes that
the proposed rules relating to Volatility
Auctions are designed to further the
goal of establishing a standardized
approach for how primary listing
exchanges will conduct certain aspects
of an automated re-opening following an
LULD trading pause, which should help
to provide certainty for market
participants regarding how a security
would re-open following an LULD
trading pause, regardless of the listing
exchange.89
V. Solicitation of Comments on
Amendment No. 2
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 2 is consistent with the
Act. Comments may be submitted by
any of the following methods:
84 See
Notice, supra note 3, 82 FR at 21662.
id.
86 See id.
87 See id. at 21642.
88 See proposed IEX Rule 11.350(h).
89 See Securities Exchange Act Release Nos.
79846 (January 19, 2017), 82 FR 8548 (January 26,
2017) (order approving File No. SR–NYSEArca–
2016–130); 79884 (January 26, 2017), 82 FR 8968
(February 1, 2017) (order approving File No. SR–
BatsBZX–2016–61); and 79876 (January 25, 2017),
82 FR 8888 (January 31, 2017) (order approving File
No. SR–Nasdaq–2016–131).
85 See
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Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / 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–
IEX–2017–10 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–IEX–2017–10. 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 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–IEX–
2017–10, and should be submitted on or
before August 31, 2017.
mstockstill on DSK30JT082PROD with NOTICES
VI. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of the notice of Amendment
No. 2 in the Federal Register. The
Commission believes that the proposed
changes to the description of the process
for determining the Auction Clearing
Price that were included in Amendment
No. 2 add clarity to the price
determination process without
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17:03 Aug 09, 2017
Jkt 241001
materially changing the proposal from
what the Exchange originally filed.
Additionally, the Commission believes
that the proposed addition of a rounding
process to prevent certain Tick Size
Pilot securities from trading in an
impermissible increment eliminates a
potential conflict between the Tick Size
Pilot and IEX Auctions. Further, the
Commission believes that the proposed
modification of the process for affecting
incremental extensions of the period for
accepting orders after an LULD trading
pause will clarify the process and
ensure consistency with the
standardized approach agreed to by the
LULD Plan participants. The
Commission does not believe that any of
the changes proposed in Amendment
No. 2 introduce novel concepts, but
rather add detail to better reflect in the
proposed rule text how the proposed
IEX Auctions would work for IEX-listed
securities, and also reconciles the
proposed IEX Auctions with the ticksize requirements of the Tick Size Pilot.
Accordingly, for the reasons noted
above, the Commission finds good cause
for approving the proposed rule change,
as modified by Amendment No. 2, on an
accelerated basis, pursuant to Section
19(b)(2) of the Act.90
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,91 that the
proposed rule change (SR–IEX–2017–
10), as modified by Amendment No. 2,
is approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.92
Eduardo A. Aleman,
Assistant Secretary.
37479
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 26,
2017, the Chicago Stock Exchange, Inc.
(‘‘CHX’’ or ‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CHX proposes to amend the Rules of
the Exchange (‘‘CHX Rules’’) regarding
Qualified Contingent Trades (‘‘QCTs’’) 3
and related information recording
obligations by certain Participants.4 The
text of this proposed rule change is
available on the Exchange’s Web site at
https://www.chx.com/regulatoryoperations/rule-filings/, 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B and C below,
of the most significant parts of such
statements.
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
[FR Doc. 2017–16830 Filed 8–9–17; 8:45 am]
[Release No. 34–81315; File No. SR–CHX–
2017–12]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing of Proposed Rule Change
Regarding Qualified Contingent Trades
and Related Information Recording
Obligations by Certain Participants
The Exchange proposes to amend
CHX Rules to effect the following
changes:
• Clarify the operation of cross
orders 5 and Cross With Size handling.6
• Only permit Participants that are
registered with the Exchange as
Institutional Brokers (‘‘IBs’’) 7 to submit
an NMS stock component order of a
1 15
August 4, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
90 15
U.S.C. 78s(b)(2).
91 Id.
92 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00062
Fmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See infra Section A.1(1).
4 A Participant is a ‘‘member’’ of the Exchange for
purposes of the Act. See CHX Article 1, Rule 1(s).
5 See CHX Article 1, Rule 2(a)(2).
6 See CHX Article 1, Rule 2(g)(1).
7 See CHX Article 1, Rule 1(n); see also generally
CHX Article 17.
2 17
Sfmt 4703
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]]>Agencies
[Federal Register Volume 82, Number 153 (Thursday, August 10, 2017)]
[Notices]
[Pages 37474-37479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16830]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81316; File No. SR-IEX-2017-10]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 2, Relating to
Auctions in IEX-Listed Securities, Dissemination of Auction-Related
Market Data, and Trading Halts and Pauses
August 4, 2017.
I. Introduction
On April 20, 2017, Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt rules governing auctions in IEX-listed
securities, provide for the dissemination of auction-related market
data, and establish rules relating to trading halts and pauses. The
proposed rule change was published for comment in the Federal Register
on May 9, 2017.\3\ The Commission received one comment regarding the
proposal.\4\ IEX responded to the comment on June 5, 2017.\5\ On June
22, 2017, pursuant to Section 19(b)(2) of the Act,\6\ the Commission
extended the time for Commission action on the proposal until August 7,
2017.\7\ IEX filed Amendment No. 1 to the proposal on July 10, 2017. On
July 19, 2017, IEX filed Amendment No 2 to the proposal, which
superseded and replaced Amendment No. 1 in its entirety.\8\ The
Commission is publishing this notice to solicit comment on Amendment
No. 2 to the proposed rule change from interested persons and is
approving the proposed rule change, as modified by Amendment No. 2, on
an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 80583 (May 3, 2017),
82 FR 21634 (May 9, 2017) (``Notice'').
\4\ See letter from Joan C. Conley, Senior Vice President and
Corporate Secretary, Nasdaq, to Brent J. Fields, Secretary,
Commission, dated May 30, 2017 (``Nasdaq Letter'').
\5\ See letter from Sophia Lee, General Counsel, IEX, to Brent
J. Fields, Secretary, Commission, dated June 5, 2017 (``IEX
Response'').
\6\ 15 U.S.C. 78s(b)(2).
\7\ See Securities Exchange Act Release No. 80998 (June 22,
2017), 82 FR 29355 (June 28, 2017).
\8\ As discussed more fully below, Amendment No. 2 revises the
proposal to: (1) Clarify the process for determining the auction
match price; (2) modify certain definitions used to determine the
auction match price to account for the requirement under the
National Market System Plan to Implement a Tick Size Pilot Program
(``Tick Size Pilot'') that certain securities be traded in nickel
increments; (3) modify the process for affecting incremental
extensions of the period for accepting orders after a Limit Up-Limit
Down (``LULD'') trading pause; and (4) make other conforming and
clarifying changes. To promote transparency of its proposed
amendment, when IEX filed Amendment No. 2 with the Commission, it
also submitted Amendment No. 2 as a comment letter to the file,
which the Commission posted on its Web site and placed in the public
comment file for SR-IEX-2017-10 (available at https://www.sec.gov/comments/sr-iex-2017-10/iex201710-1865053-156219.pdf). The Exchange
also posted a copy of its Amendment No. 2 on its Web site (available
at https://iextrading.com/docs/rule-filings/SR-IEX-2017-10-Amendment-2.pdf) when it filed Amendment No. 2 with the Commission.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 2
A. Overview
The Commission recently granted IEX's Form 1 application for
registration
[[Page 37475]]
as a national securities exchange.\9\ IEX's Form 1 application
contained provisions, including standards for initial and continued
listing on IEX, that would allow IEX to act as a primary listing
exchange. In connection with its plans to become a primary listing
exchange, IEX proposes to adopt new rules to govern auctions in IEX-
listed securities and to amend certain related rule provisions
concerning the same. In addition, IEX proposes to amend certain of its
rules governing trading halts and the operation of certain aspects of
LULD trading pauses.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 78101 (June 17,
2016), 81 FR 41142 (June 23, 2016) (File No. 10-222) (``Form 1
Order'').
---------------------------------------------------------------------------
Specifically, the proposal will allow IEX to conduct the following
auctions for IEX-listed securities: (1) An opening auction (``Opening
Auction''); (2) a closing auction (``Closing Auction''); (3) an auction
for an initial public offering (``IPO'') or the launch of a new issue
(``IPO Auction''); (4) an auction following a trading halt in a
security (``Halt Auction''); and (5) an auction to re-open a security
after such security is subject to a LULD trading pause (``Volatility
Auction'') (collectively, the ``IEX Auctions''). The IEX Auctions will
utilize a double auction process that is designed to maximize the
number of shares executed at a single price (the ``Auction Clearing
Price'').\10\ The proposal also provides for the dissemination of
auction-related market data, establishes rules (in addition to
Volatility Auctions) relating to LULD trading pauses, and authorizes
IEX to halt trading in securities listed or traded on IEX under certain
circumstances when IEX deems it necessary to protect investors and the
public interest.
---------------------------------------------------------------------------
\10\ See Notice, supra note 3, 82 FR at 21634. The proposed
rules establish a series of steps that IEX will follow to arrive to
arrive at a single Auction Clearing Price. See proposed IEX Rules
11.350(c)(2)(B), 11.350(d)(2)(B), 11.350(e)(2)(C), 11.350(f)(2)(E),
and 11.350(f)(3)(B)(ii). IEX states that its clearing price
determination process is similar to the clearing price determination
process used by The NASDAQ Stock Market LLC (``Nasdaq''). See
Notice, supra note 3, 82 FR at 21644.
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1. Auction Process
IEX will offer the following new order types specific to the IEX
Auctions: Market-on-Open (``MOO''); Limit-on-Open (``LOO''); Market-on-
Close (``MOC''); and Limit-on-Close (``LOC'').\11\ To determine the
Auction Clearing Price, IEX Auctions will consider orders that queue
prior to the auction match (the ``Auction Book'') and orders resting on
the Exchange's order book that are not on the Auction Book and are
available for continuous trading (the ``Continuous Book'')
(collectively, the ``Order Book'').\12\ Orders resting on the Order
Book will be ranked and maintained based on price-display-time
priority.\13\
---------------------------------------------------------------------------
\11\ See proposed IEX Rules 11.350(a)(20), 11.350(a)(21),
11.350(a)(24), and 11.350(a)(25). MOO and LOO orders will be
available for Opening Auctions, IPO Auctions, and, in certain
circumstances, Halt Auctions, while MOC and LOC orders will be
available for Closing Auctions and, in certain circumstances,
Volatility Auctions. See proposed IEX Rules 11.350(a)(20),
11.350(a)(21), 11.350(a)(24), and 11.350(a)(25).
\12\ See proposed IEX Rules 11.350(a)(1) and 11.350(a)(4). The
proposal amends IEX Rule 11.190(a)(2)(E) to allow market orders with
a time-in-force of DAY to be entered in the Pre-Market, thereby
permitting such orders to queue in IEX's System for participation in
the Opening Auction or in a Halt Auction. See Notice, supra note 3,
82 FR at 21636.
\13\ See proposed IEX Rule 11.350(b)(1). IEX represents that its
proposed auction priority is substantially similar to the auction
priority utilized by Nasdaq and Bats BZX Exchange, Inc. (``Bats'').
See Notice, supra note 3, 82 FR at 21641.
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2. IEX Auction Information
For each IEX Auction beginning at a specified time, IEX will
disseminate, and update every one second thereafter, the current status
of price, size, order imbalance, auction collar, and other relevant
auction-related information (``IEX Auction Information'').\14\ IEX will
add IEX Auction Information to its Top of Book Quote and Last Sale feed
(``TOPS'') and IEX Depth of Book and Last Sale feed (``DEEP''), and to
the IEX Data Platform, which is available on IEX's public Web site.\15\
IEX Auction Information will be available to IEX data recipients, and
on IEX's public Web site, free of charge.\16\
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\14\ See proposed IEX Rule 11.350(a)(9). See also Notice, supra
note 3, 82 FR at 21657.
\15\ See proposed IEX Rule 11.330(a)(1)-(3). See also Notice,
supra note 3, 82 FR at 21657.
\16\ See Notice, supra note 3, 82 FR at 21657 and 21667. IEX
data recipients include IEX Members and non-Members that have
entered into an agreement with IEX that permits them to receive IEX
data. See Notice, supra note 3, 82 FR at 21657 n.92.
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B. Opening Auctions
On each trading day, IEX will attempt to conduct an Opening Auction
for all IEX-listed securities.\17\ IEX Users may submit orders to IEX
at the beginning of the Pre-Market Session for participation in the
Opening Auction, and orders designated for the Opening Auction Book
will be queued until the Opening Auction match.\18\ Between the Opening
Auction Lock-in Time (two minutes prior to the Opening Auction match,
i.e., 9:28 a.m.) \19\ and the Opening Auction match, Auction Eligible
Orders on the Opening Auction Book may not be canceled or modified
(i.e., they are ``locked in'').\20\ Between the Opening Auction Lock-in
Time and the Opening Auction match, IEX will reject Hyper-aggressive
Auction Orders upon entry.\21\ IEX represents that the rejection of
Hyper-aggressive Auction Orders after the Lock-in Time is designed to
minimize the increase of imbalances or large price swings resulting
from aggressively priced orders in the Auction Book during the last
minutes leading into the auction.\22\ IEX will accept LOO orders and
limit orders with a time-in-force of DAY or GTX that are not Hyper-
aggressive Orders until the Opening Auction Lock-out Time (i.e., 10
seconds prior to the Opening Auction match),\23\ which will allow Users
to continue to submit auction orders and offset auction imbalances via
orders specifically designated for the Auction Book in the minutes
leading up to the auction match.\24\ Incoming orders to the Opening
Auction Book that are received between the Opening Auction Lock-out
Time (i.e., 10 seconds prior to the Opening Auction match) and the
Opening Auction match will be rejected upon receipt.\25\ IEX will begin
to disseminate IEX Auction Information associated with the Opening
Auction starting at the Opening Auction Lock-in Time, and will update
it every one second thereafter.\26\ Before IEX will
[[Page 37476]]
perform the opening match in an IEX-listed security, the Opening
Auction price must be at or within the Opening/Closing Auction
Collar.\27\ IEX will apply Opening Auction Contingency Procedures if a
disruption occurs that prevents the execution of the Opening
Auction.\28\ These procedures are designed to ensure the orderly and
timely opening of IEX-listed securities.\29\
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\17\ See proposed IEX Rule 11.350(c)(2).
\18\ See proposed IEX Rule 11.350(c)(1)(A). IEX Rule 1.160(z)
defines ``Pre-Market Session'' as the time between 8:00 a.m. and
9:30 a.m. Eastern Time.
\19\ See proposed IEX Rule 11.350(a)(22).
\20\ See proposed IEX Rules 11.350(a)(22) and 11.350(c)(1)(B).
\21\ See proposed IEX Rules 11.350(a)(22) and 11.350(c)(1)(B).
For the Opening Auction, Hyper-aggressive Auction Orders are MOO
orders and market orders with a TIF of DAY, as well as LOO orders
and limit orders with a TIF of DAY or GTX to buy (sell) priced above
(below) the latest upper (lower) threshold of the Opening/Closing
Auction Collar calculated by the System. See proposed IEX Rules
11.350(a)(8)(A) and 11.350(a)(27) (defining ``Opening/Closing
Auction Collar'').
\22\ See Notice, supra note 3, 82 FR at 21666.
\23\ See proposed IEX Rule 11.350(a)(23).
\24\ See Notice, supra note 3, 82 FR at 21648. See also proposed
IEX Rules 11.350(a)(1)(A) and 11.350(c)(1)(B). IEX states that
allowing Users to offset imbalances on the Auction Book after the
Lock-in Time is designed to promote stability and equilibrium
leading into the auction match; consequently, these orders may not
be cancelled or modified after entry. See Notice, supra note 3, 82
FR at 21648.
\25\ See proposed IEX Rules 11.350(a)(23) and 11.350(c)(1)(C).
Orders submitted to the Continuous Book after the Lock-out Time
remain eligible for execution on the Continuous Book and in the
upcoming Opening Auction match. See proposed IEX Rule 11.350(a)(23).
IEX states that the Lock-out Time is designed to freeze the Auction
Book and to provide Users with an opportunity to offset any
remaining imbalance by submitting limit orders on the Continuous
Book. See Notice, supra note 3, 82 FR at 21648.
\26\ See proposed IEX Rule 11.350(c)(2)(A). See also IEX Rule
11.350(a)(9).
\27\ See proposed IEX Rules 11.350(c)(2)(B)(iv), 11.350(a)(27)
(defining ``Opening/Closing Auction Collar''), and 11.350(a),
Supplementary Material .01. IEX states that the default 10%
threshold used to determine the Opening/Closing Auction Collar will
provide an appropriate range within which price discovery may occur
to maximize the number of shares executed in the auction. See
Notice, supra note 3, 82 FR at 21646. IEX notes that a modification
of the default threshold percentage values for the Opening/Closing
Auction Collar would be subject to the requirements of Section
19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder,
17 CFR 240.19b-4. See id. at 21646 n.51.
\28\ See proposed IEX Rule 11.350(c)(4)(A).
\29\ See Notice, supra note 3, 82 FR at 21649 and 21666.
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C. Closing Auctions
On each trading day, IEX will attempt to conduct a Closing Auction
for all IEX-listed securities.\30\ Users will be able to submit orders
for participation in the Closing Auction at the beginning of the Pre-
Market Session,\31\ or at the beginning of the Order Acceptance Period
for an IPO Auction.\32\ The Closing Auction Book consists of MOC and
LOC orders, which will be queued until the Closing Auction match.\33\
Between the Closing Auction Lock-in Time (i.e., 3:50 p.m. or 10 minutes
prior to the end of the Regular Market Session on days that IEX is
subject to an early closing),\34\ and the Closing Auction match, orders
on the Closing Auction Book may not be cancelled or modified.\35\
Hyper-aggressive Auction Orders submitted between the Closing Auction
Lock-in Time and the Closing Auction match will be rejected upon
entry.\36\ LOC orders that are not Hyper-aggressive Auction orders will
be accepted until the Closing Auction Lock-out Time (i.e., 10 seconds
prior to the Closing Auction match).\37\ IEX believes that rejecting
Hyper-aggressive Auction Orders for the Closing Auction after the Lock-
in Time, while allowing LOC orders that are priced within the auction
collar to be entered and eligible for execution in the Closing Auction
until the Lock-out Time, will allow Users to continue to submit orders
and offset imbalances on the Closing Auction Book in the minutes
leading up to the auction match while attempting to avoid increasing
auction imbalances resulting from aggressively priced orders in the
Auction Book during the last ten minutes of the auction process.\38\
Orders eligible for the Closing Auction Book received between the
Closing Auction Lock-out Time and the Closing Auction match will be
rejected.\39\ At the beginning of the Closing Auction Lock-in Time, and
updated every one second thereafter, IEX will disseminate IEX Auction
Information associated with the Closing Auction.\40\ Before IEX will
perform the closing match in an IEX-listed security, the Closing
Auction price must be within the Opening/Closing Auction Collar.\41\
When a disruption occurs that prevents the execution of the Closing
Auction, IEX will apply either its Primary Closing Auction Contingency
Procedures or its Secondary Closing Auction Contingency Procedures.\42\
These procedures are designed to ensure the orderly and timely closing
of IEX-listed securities.\43\
---------------------------------------------------------------------------
\30\ See proposed IEX Rule 11.350(d)(2).
\31\ See note 18, supra.
\32\ See proposed IEX Rule 11.350(d)(1)(A). The Order Acceptance
Period for an IPO Auction begins at 8:00 a.m., unless otherwise
specified. See proposed IEX Rule 11.350(a)(29)(A).
\33\ See proposed IEX Rule 11.350(d)(1)(A).
\34\ See proposed IEX Rule 11.350(a)(22).
\35\ See proposed IEX Rule 11.350(d)(1)(B). However, between the
Closing Auction Lock-in Time and five minutes before the Closing
Auction match, On-Close orders may be cancelled if the User requests
that IEX correct a legitimate error in the order (e.g., side, size,
symbol, price, or duplication of an order). On-Close orders may not
be cancelled or modified at or after five minutes before the Closing
Auction match for any reason. See proposed IEX Rule 11.350(d)(1)(C).
\36\ See proposed IEX Rule 11.350(d)(1)(B). For the Closing
Auction, Hyper-aggressive Auction Orders are MOC and LOC orders to
buy (sell) priced above (below) the latest upper (lower) threshold
of the Opening/Closing Auction Collar calculated by the System. See
proposed IEX Rule 11.350(a)(8)(B).
\37\ See Notice, supra note 3, 82 FR at 21650 and proposed IEX
Rule 11.350(a)(23) (defining ``Lock-out Time''). IEX notes that the
Lock-out Time for the Closing Auction is designed to provide Users
with an opportunity to offset any remaining imbalance during a
period of relative stability (while the Auction Book is locked) by
submitting limit orders to the Continuous Book. See Notice, supra
note 3, 82 FR at 21650.
\38\ See Notice, supra note 3, 82 FR at 21650.
\39\ See proposed IEX Rule 11.350(d)(1)(D).
\40\ See proposed IEX Rule 11.350(d)(2)(A).
\41\ See proposed IEX Rules 11.350(d)(2)(B)(iv), 11.350(a)(27)
(defining ``Opening/Closing Auction Collar''), and 11.350(a),
Supplementary Material .01.
\42\ See proposed IEX Rule 11.350(d)(4).
\43\ See Notice, supra note 3, 82 FR at 21666.
---------------------------------------------------------------------------
D. IPO Auctions
IEX will conduct an IPO Auction for an initial public offering or
for the launch of a new issue.\44\ Users will be able to submit Auction
Eligible Orders for an IPO Auction beginning at the start of IEX's
system hours (i.e., 8:00 a.m.), unless otherwise specified.\45\ Such
orders will be queued, and may be cancelled or modified, until the time
of the auction match.\46\ Thirty minutes prior to the scheduled auction
match, IEX will begin to disseminate and update every one second IEX
Auction Information associated with the IPO Auction.\47\ IEX will
generally attempt to conduct an auction for corporate IPOs at 10:15
a.m. and an auction for new issues at 9:30 a.m.\48\ If IEX is unable to
complete an IPO Auction before the end of Post-Market Hours (i.e., 5:00
p.m.), all open orders in the subject security on the Order Book will
be canceled.\49\ Likewise, if a disruption occurs that prevents the
execution of an IPO Auction, IEX will publicly announce that the Order
Acceptance Period for the IPO Auction will be reset, cancel all orders
in that subject security, and disseminate a new schedule for the Order
Acceptance Period and auction match.\50\
---------------------------------------------------------------------------
\44\ See proposed IEX Rule 11.350(e).
\45\ See proposed IEX Rule 11.350(a)(29)(A) and Notice, supra
note 3, 82 FR at 21652. The Order Acceptance Period may be
automatically or manually extended under certain circumstances. See
proposed IEX Rule 11.350(e)(2)(B). In addition, the Pre-Launch
Period for an IPO may be extended under certain circumstances. See
proposed IEX Rule 11.280(h)(8)(B). The underwriter, with the
concurrence of IEX, may determine to postpone and reschedule the IPO
at any point during the IPO Auction process. See proposed IEX Rule
11.280(h)(8)(B).
\46\ See proposed IEX Rule 11.350(e)(1)(A)-(B) and Notice, supra
note 3, 82 FR at 21652.
\47\ See proposed IEX Rules 11.350(e)(2)(A) and 11.350(a)(5).
The term ``Post-Market Hours'' or ``Post-Market Session'' refers to
the time between 4:00 p.m. and 5:00 p.m. Eastern Time. See IEX Rule
1.160(aa).
\48\ See Notice, supra note 3, 82 FR at 21653.
\49\ See proposed IEX Rule 11.350(e)(1)(D).
\50\ See proposed IEX Rule 11.350(e)(4)(A).
---------------------------------------------------------------------------
E. Halt Auctions
IEX may initiate trading halts under certain circumstances in which
the Exchange deems it necessary to protect investors and the public
interest.\51\ Following a trading halt in an IEX-listed security
pursuant to proposed IEX Rules 11.280(g)(1), (4), or (5), IEX will
conduct a Halt Auction.\52\ IEX Users will be able
[[Page 37477]]
to submit Auction Eligible Orders for a Halt Auction five minutes prior
to the scheduled auction match.\53\ Such orders will be queued, and may
be cancelled or modified, until the time of the Halt Auction.\54\ At
the start of the Order Acceptance Period for a Halt Auction, IEX will
begin to disseminate IEX Auction Information associated with the Halt
Auction and will update that information every one second
thereafter.\55\ If there is insufficient crossing interest to conduct a
Halt Auction, no Halt Auction will occur and the security will be
transitioned to continuous trading.\56\ If IEX is unable to complete a
Halt Auction before the end of Post-Market Hours (i.e., 5:00 p.m.), all
open orders in the subject security on the Order Book will be
canceled.\57\ When a disruption occurs that prevents the execution of a
Halt Auction, IEX will publicly announce that no Halt Auction will
occur, cancel all orders in that subject security, and open the
security for trading without an auction.\58\
---------------------------------------------------------------------------
\51\ See proposed IEX Rule 11.280(g). Proposed IEX Rule
11.280(h) establishes the procedures that IEX must follow to
initiate or terminate a trading halt.
\52\ See proposed IEX Rule 11.350(e). Proposed IEX Rule
11.280(g)(1) allows IEX to halt trading to permit the dissemination
of material news; IEX Rule 280(g)(4) allows IEX to halt trading in
an American Depository Receipt (``ADR'') or other security listed on
IEX when the IEX-listed security or security underlying the ADR is
listed on or registered with another national or foreign securities
exchange or market, and that exchange or market, or a regulatory
overseeing that exchange or market, halts trading in the security
for regulatory reasons; and IEX Rule 11.280(g)(5) allows IEX to halt
trading in a security listed on IEX when IEX requests information
from the issuer relating to material news, the issuer's ability to
meet IEX listing qualification requirements, or any other
information necessary to protect investors and the public interest.
\53\ See IEX Rule 11.350(a)(29)(B) and Notice, supra note 3, 82
FR at 21652.
\54\ See proposed IEX Rule 11.350(e)(1)(A)-(B) and Notice, supra
note 3, 82 FR at 21652.
\55\ See proposed IEX Rules 11.350(e)(2)(A) and 11.350(a)(5).
IEX will extend the Order Acceptance Period automatically for one
minute when there are unmatched shares from market orders on the
Auction Book or the Indicative Clearing Price differs by the greater
of five percent or fifty cents from any of the previous fifteen
Indicative Clearing Prices disseminations. See proposed IEX Rules
11.350(e)(2)(B)(i) and (ii) and 11.350(a)(9)(E) (defining
``Indicative Clearing Price'').
\56\ See proposed IEX Rule 11.350(e)(2)(C).
\57\ See proposed IEX Rule 11.350(e)(1)(D). See also IEX Rule
1.160(aa) (defining ``Post-Market Hours'').
\58\ See proposed IEX Rule 11.350(e)(4)(B).
---------------------------------------------------------------------------
F. Volatility Auctions
IEX will conduct a Volatility Auction to re-open an IEX-listed
security after that security is subject to a trading pause pursuant to
the National Market System Plan to Address Extraordinary Market
Volatility (``Limit Up-Limit Down Plan'' or ``LULD Plan'').\59\ Orders
may be submitted for a Volatility Auction during a five-minute Order
Acceptance Period beginning immediately after the dissemination of the
trading pause and are queued until the auction match.\60\ Orders may be
canceled or modified at any time prior to the auction match.\61\ IEX
will begin to disseminate IEX Auction Information associated with the
Volatility Auction commencing at the start of the Order Acceptance
Period for such auction, and will update that information every one
second thereafter.\62\ Before IEX will perform the Volatility Auction
match, the Volatility Auction price must be at or within the Volatility
Auction Collar.\63\ When a disruption occurs that prevents the
execution of the Volatility Auction, IEX will apply its Volatility
Auction Contingency Procedures.\64\
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\59\ See proposed IEX Rule 11.350(f). See also, e.g., Securities
Exchange Act Release Nos. 67091 (May 31, 2012), 77 FR 33498 (June 6,
2012) (approving LULD Plan); 80455 (April 13, 2017), 82 FR 18519
(April 19, 2017) (approving thirteenth amendment to LULD Plan).
\60\ See proposed IEX Rules 11.350(f)(1)(A), 11.350(a)(29)(C),
and 11.350(f)(1)(B). The Order Acceptance Period for a Volatility
Auction may be extended under certain circumstances. See proposed
IEX Rules 11.350(f)(2)(C) and (D).
\61\ See proposed IEX Rule 11.350(f)(1)(C).
\62\ See proposed IEX Rules 11.350(f)(2)(A) and 11.350(a)(5).
\63\ See proposed IEX Rules 11.350(f)(2)(B); 11.350(a)(31)
(defining ``Volatility Auction Collar''); 11.350(a), Supplementary
Material .02. IEX states that its proposed Volatility Auction Collar
functionality is consistent with the commitment made by each primary
listing exchange set forth in the twelfth amendment to the LULD Plan
to file rule changes with the Commission under Section 19(b) of the
Act to amend its respective trading practice for automated re-
openings following a trading pause consistent with a standardized
approach agreed to by LULD Plan participants that would allow for
extensions of an LULD trading pause if equilibrium cannot be met for
a re-opening price within specified parameters. See Securities
Exchange Act Release No. 79845 (January 19, 2017), 82 FR 8551
(January 26, 2017) (``LULD Plan Twelfth Amendment Approval Order'')
and Notice, supra note 3, 82 FR at 21646.
\64\ See proposed IEX Rule 11.350(f)(2)(H).
---------------------------------------------------------------------------
In place of its normal Closing Auction procedures, IEX will close
an IEX-listed security using a Volatility Auction when the IEX-listed
security is paused pursuant to IEX Rule 11.280(e) at or after the
Closing Auction Lock-in Time, or when the Order Acceptance Period for a
Volatility Auction for a security paused before the Closing Auction
Lock-Time pursuant to IEX Rule 11.280(e) would otherwise be extended to
a time after the Closing Auction Lock-in Time.\65\
---------------------------------------------------------------------------
\65\ See proposed IEX Rule 11.350(f)(3).
---------------------------------------------------------------------------
In addition, IEX proposes several amendments to IEX Rule 11.280
relating to LULD trading pauses.\66\ In Amendment No. 2, IEX states
that it intends to continue coordinating with other LULD Plan
participants and the Securities Information Processors (``SIPs'')
regarding the implementation timeline of changes to the SIPs pursuant
to the twelfth amendment to the LULD Plan to support dissemination of
certain data related to re-opening auctions after LULD trading
pauses.\67\
---------------------------------------------------------------------------
\66\ In particular, IEX proposes to amend IEX Rule 11.280 to
provide that Auction Eligible Orders on the Auction Book are not
price slid or canceled due to LULD price bands; that the Exchange
may declare an LULD trading pause for a NMS Stock listed on the
Exchange during a straddle state; and that following a trading
pause, the Exchange will re-open trading in IEX-listed securities
pursuant to the procedures set forth in proposed IEX Rule 11.350(f).
See proposed IEX Rules 11.280(e)(5)(F) and (e)(7) and (8). In
addition, the revised rule indicates that trading in non-IEX-listed
securities will re-open upon receipt of the Price Bands from the
single plan processor responsible for consolidation of information
for the security. See proposed IEX Rule 11.280(e)(8).
\67\ See Amendment No. 2, supra note 8, at 44-45. See also LULD
Plan Twelfth Amendment Approval Order, supra note 63, 82 FR at 8553-
54 n.22 (expecting LULD participants to implement the twelfth
amendment no later than six months after the date of the order);
80549 (April 28, 2017), 82 FR 20928 (May 4, 2017) (extending the
time frame to implement the LULD twelfth amendment to no later than
the end of the third quarter of 2017).
---------------------------------------------------------------------------
G. Additional Changes
IEX proposes to adopt several additional provisions relating to IEX
Auctions. New IEX Rule 11.350(g) will address the handling during
Opening, Closing, Halt, and Volatility Auctions of short sale orders
for covered securities not marked short exempt when the Short Sale
Price Test of Rule 201 of Regulation SHO (``Short Sale Price Test'') is
in effect.\68\
---------------------------------------------------------------------------
\68\ See proposed IEX Rule 11.350(g). IEX notes that a security
in an IPO Auction will never be subject to the Short Sale Price Test
because there will have been no prior trading in the security. See
Notice, supra note 3, 82 FR at 21656-57.
---------------------------------------------------------------------------
In addition, new IEX Rule 11.350(h) will allow IEX to adjust the
timing of or suspend an IEX Auction with prior notice to Users when, in
IEX's judgment, the interests of a fair and orderly market require such
action. IEX believes that this discretion is necessary to give IEX
latitude to adapt to quickly changing, volatile market conditions that
may negatively impact market participants.\69\
---------------------------------------------------------------------------
\69\ See Notice, supra note 3, 82 FR at 21657.
---------------------------------------------------------------------------
New IEX Rule 11.350(i) provides that, for purposes of Rule
611(b)(3) of Regulation NMS and section VI(D)(6) of Tick Size Pilot,
orders executed pursuant to IEX Auctions may trade-through or trade-at
the price of any other trading center's Manual or Protected Quotations
if the transaction that traded-at or constituted a trade-through was a
single-priced opening, re-opening, or closing transaction at the
trading center.
Finally, new IEX Rule 11.350(j) specifies that, for purposes of the
Rule, references to a.m. and p.m. mean Eastern Time.
III. Summary of Comments and IEX's Response
As noted above, the Commission received one comment regarding the
proposal, and a response to the
[[Page 37478]]
comment from IEX.\70\ In its proposal, IEX expresses its intention to
disseminate ``substantially the same information'' as the IEX Auction
Information through the Consolidated Quotation System operated by the
Consolidated Tape Association (``CTA'') securities information
processor, ``pending approval by the Operating Committee of the CTA.''
\71\ IEX states that ``[f]ollowing such approval, IEX will amend Rule
11.330 to reflect this additional means of dissemination.'' \72\ The
commenter expresses the view that any Commission approval of the
current proposal ``should not be construed as approval for
dissemination of [IEX Auction Information] data through the CQS,'' and
that the Commission, if it approves the proposal, should make clear
that its approval of the proposal does not constitute an approval of
the inclusion of IEX Auction Information in the CQS.\73\ The commenter
further states that ``there are serious legal and policy impediments to
the dissemination of IEX Auction Information . . . through the
facilities of the CQ Plan,'' and ``that an opportunity for public
comment and formal action by the Commission, either in the context of a
proposed CQ Plan amendment or a proposed rule change, is needed to
ensure that these issues are given adequate consideration.'' \74\ The
commenter acknowledges, however, that this issue is not directly before
the Commission at this time.\75\
---------------------------------------------------------------------------
\70\ See Nasdaq Letter, supra note 4; and IEX Response, supra
note 5.
\71\ See Notice, supra note 3, 82 FR at 21657.
\72\ See id. at 21657 n.134.
\73\ Nasdaq Letter, supra note 4, at 2.
\74\ Id. at 3.
\75\ Id. at 3 n.3.
---------------------------------------------------------------------------
IEX submitted a letter in response to the comment letter, which
acknowledges that the dissemination of IEX Auction Information through
the CQS would require action by the CTA Operating Committee.\76\ IEX
states that it would file a separate proposed rule change with the
Commission that would be subject to notice and comment if it decides to
pursue such dissemination.\77\
---------------------------------------------------------------------------
\76\ See IEX Response, supra note 5, at 1.
\77\ See id. at 1-2.
---------------------------------------------------------------------------
The Commission believes that IEX's response addresses the concern
raised by the commenter. The Commission notes that IEX's proposal and
proposed rule text do not provide for the dissemination of IEX Auction
Information through the facilities of the CQ Plan. Accordingly, despite
IEX's statement in the current proposal of its intention to pursue such
dissemination in the future, the issue is not presently before the
Commission as part of the current proposal.
IV. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 2, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\78\ In particular, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\79\ which requires, among other things,
that the rules of a national securities exchange be 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. This order approves the proposed
rule change in its entirety, although only certain more significant
aspects of the proposed rules are discussed below.
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\78\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\79\ 15 U.S.C. 78f(b)(5).
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In its filing, IEX notes that its auctions were designed based on
its understanding of how the auctions work on other primary listing
exchanges, including the New York Stock Exchange, NYSE Arca, Nasdaq,
and Bats.\80\ IEX further notes that its proposed auctions contain a
number of attributes that are ``substantially similar to existing
exchange auction models, and will therefore be familiar'' to Users.\81\
In addition, the Commission notes that the price determination process
in the IEX Auctions is substantially similar to the opening process
that the Commission recently approved IEX to use for non-IEX-listed
securities.\82\
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\80\ See Notice, supra note 3, 82 FR at 21634.
\81\ See id.
\82\ See IEX Rule 11.231 and Securities Exchange Act Release No.
81195 (July 24, 2017), 82 FR 35250 (July 28, 2017) (order approving
File No. SR-IEX-2017-11).
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IEX states that its proposal is integral to its future operation of
a listing market,\83\ and that the proposed rules will benefit issuers
and investors by allowing IEX to provide companies with an additional
listing option.\84\ IEX believes that the operation of IEX Auctions for
securities listed on IEX will assist in the price discovery process and
help to ensure a fair and orderly market for securities listed on
IEX.\85\ IEX further believes that its auction is designed to provide a
transparent, efficient, and robust process for aggregating trading
interest submitted by a broad range of market participants to be
matched at a single clearing price.\86\
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\83\ The Commission notes that it has separately approved rules
for the qualification, listing, and delisting of companies on IEX.
See Form 1 Order, supra note 9.
\84\ See Notice, supra note 3, 82 FR at 21662.
\85\ See id.
\86\ See id.
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IEX's auction process is designed to match orders at a single price
that maximizes the number of shares to be executed.\87\ IEX has
designed the IEX Auctions to be conducted within specified periods of
time and in accordance with specified order entry, calculation, price,
and execution priority parameters. IEX may adjust the timing of or
suspend IEX Auctions with prior notice to Users, whenever, in the
judgement of the Exchange, the interests of a fair and orderly market
so require.\88\ IEX's auction rules are designed to open, close, or re-
open trading in each IEX-listed security by matching as much interest
as possible at a price determined through an objective process set
forth in the proposed rules.
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\87\ See id. at 21642.
\88\ See proposed IEX Rule 11.350(h).
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Finally, the Commission believes that the proposed rules relating
to Volatility Auctions are designed to further the goal of establishing
a standardized approach for how primary listing exchanges will conduct
certain aspects of an automated re-opening following an LULD trading
pause, which should help to provide certainty for market participants
regarding how a security would re-open following an LULD trading pause,
regardless of the listing exchange.\89\
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\89\ See Securities Exchange Act Release Nos. 79846 (January 19,
2017), 82 FR 8548 (January 26, 2017) (order approving File No. SR-
NYSEArca-2016-130); 79884 (January 26, 2017), 82 FR 8968 (February
1, 2017) (order approving File No. SR-BatsBZX-2016-61); and 79876
(January 25, 2017), 82 FR 8888 (January 31, 2017) (order approving
File No. SR-Nasdaq-2016-131).
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V. Solicitation of Comments on Amendment No. 2
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 is consistent with the
Act. Comments may be submitted by any of the following methods:
[[Page 37479]]
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-2017-10 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-IEX-2017-10. 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 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-IEX-2017-10, and should be
submitted on or before August 31, 2017.
VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of the notice of Amendment No. 2 in the
Federal Register. The Commission believes that the proposed changes to
the description of the process for determining the Auction Clearing
Price that were included in Amendment No. 2 add clarity to the price
determination process without materially changing the proposal from
what the Exchange originally filed. Additionally, the Commission
believes that the proposed addition of a rounding process to prevent
certain Tick Size Pilot securities from trading in an impermissible
increment eliminates a potential conflict between the Tick Size Pilot
and IEX Auctions. Further, the Commission believes that the proposed
modification of the process for affecting incremental extensions of the
period for accepting orders after an LULD trading pause will clarify
the process and ensure consistency with the standardized approach
agreed to by the LULD Plan participants. The Commission does not
believe that any of the changes proposed in Amendment No. 2 introduce
novel concepts, but rather add detail to better reflect in the proposed
rule text how the proposed IEX Auctions would work for IEX-listed
securities, and also reconciles the proposed IEX Auctions with the
tick-size requirements of the Tick Size Pilot.
Accordingly, for the reasons noted above, the Commission finds good
cause for approving the proposed rule change, as modified by Amendment
No. 2, on an accelerated basis, pursuant to Section 19(b)(2) of the
Act.\90\
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\90\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\91\ that the proposed rule change (SR-IEX-2017-10), as modified by
Amendment No. 2, is approved on an accelerated basis.
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\91\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\92\
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\92\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16830 Filed 8-9-17; 8:45 am]
BILLING CODE 8011-01-P
