Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify the Manner in Which the Order Collar and Router Constraint Apply to Auctions and the Opening Process, 44861-44865 [2017-20500]

Download as PDF Federal Register / Vol. 82, No. 185 / Tuesday, September 26, 2017 / Notices Supporting Data; Filing Acceptance Date: September 20, 2017; Filing Authority: 39 U.S.C. 3642 and 39 CFR 3020.30 et seq., Public Representative: Christopher C. Mohr; Comments Due: September 28, 2017. 3. Docket No(s).: MC2017–206 and CP2017–314; Filing Title: Request of the United States Postal Service to Add Priority Mail Contract 360 to Competitive Product List and Notice of Filing (Under Seal) of Unredacted Governors’ Decision, Contract, and Supporting Data; Filing Acceptance Date: September 20, 2017; Filing Authority: 39 U.S.C. 3642 and 39 CFR 3020.30 et seq., Public Representative: Christopher C. Mohr; Comments Due: September 28, 2017. This notice will be published in the Federal Register. thereunder,5 Investors Exchange LLC (‘‘IEX’’ or ‘‘Exchange’’) is filing with the Commission a proposed rule change to clarify the inapplicability of the Exchange’s Order Collar 6 and Router Constraint 7 to certain orders that are eligible for participation in the opening process for non-IEX-listed securities pursuant to Rule 11.231, or for auctions in IEX-listed securities pursuant to Rule 11.350. The Exchange has designated this rule change as ‘‘non-controversial’’ under Section 19(b)(3)(A) of the Act 8 and provided the Commission with the notice required by Rule 19b–4(f)(6) thereunder.9 The text of the proposed rule change is available at the Exchange’s Web site at www.iextrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. Stacy L. Ruble, Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statement may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. [FR Doc. 2017–20528 Filed 9–25–17; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81662; File No. SR–IEX– 2017–31] Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify the Manner in Which the Order Collar and Router Constraint Apply to Auctions and the Opening Process September 20, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 6, 2017, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Pursuant to the provisions of Section 19(b)(1) under the Securities Exchange Act of 1934 (‘‘Act’’),4 and Rule 19b–4 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 15 U.S.C. 78s(b)(1). 2 15 VerDate Sep<11>2014 18:28 Sep 25, 2017 Jkt 241001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Background The purpose of this proposed rule change is to clarify the inapplicability of the Exchange’s Order Collar and Router Constraint to certain orders that are eligible for participation in the opening process for non-IEX-listed securities pursuant to Rule 11.231, or for auctions in IEX-listed securities pursuant to Rule 11.350. On July 24th 2017, the Commission approved a proposed rule change filed by the Exchange to amend IEX Rule 11.231 to modify the manner in which the Exchange opens trading for non-IEX-listed securities beginning at the start of Regular Market Hours (the ‘‘Opening Process’’).10 On August 4, 5 17 CRF 240.19b–4. Rule 11.190(f)(1). 7 See Rule 11.190(f)(2). 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b–4. 10 See Securities Exchange Act Release No. 81195 (July 24, 2017), 82 FR 35250 (July 28, 2017). 6 See PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 44861 2017, the Commission approved a proposed rule change filed by the Exchange 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 (‘‘IEX Auctions’’).11 Opening Process for Non-IEX-Listed Securities Pursuant to Rule 11.231, the Exchange attempts to perform the Opening Process in each non-IEX-listed security, in which all eligible interest resting on the Order Book in the Pre-Market Session available for continuous trading (i.e., orders on the ‘‘Continuous Book’’) as well as all eligible interest queued for execution in the Regular Market Session (i.e., orders on the ‘‘Cross Book’’) are executed at a single price. Prior to the beginning of Regular Market Hours, Users who wish to participate in the Opening Process may enter limit, market, and pegged orders designated with a time-in-force of DAY and limit orders designated with a time-in-force of GTX, which shall queue in the System and are eligible for execution in the Opening Process (orders on the Cross Book); interest resting on the Order Book in the Pre-Market Session available for continuous trading (i.e., orders on the Continuous Book) are also eligible for execution in the Opening Process (collectively, ‘‘Cross Eligible Orders’’). Cross Eligible Orders resting on the Continuous Book are ranked by the price at which they are resting on the Continuous Book and Cross Eligible Orders resting on the Cross Book are ranked by the limit price defined by the User, if any, except in the case of pegged orders, which are ranked by their current book price (in each case, the order’s ‘‘resting price’’). Specifically, pursuant to Rule 11.220(a)(2), Cross Eligible Orders are ranked and eligible for execution in the Opening Process in price-display-time priority as follows: • Midpoint peg orders, as defined in IEX Rule 11.190(b)(9), on the Cross Book are ranked and eligible for execution in the Opening Process at the less aggressive of the Midpoint Price or the order’s limit price, if any. • Primary peg orders, as defined in IEX Rule 11.190(b)(8), on the Cross Book are ranked and eligible for execution in the Opening Process at the less aggressive of one (1) MPV below (above) the NBB (NBO) for buy (sell) orders or the order’s limit price, if any, but may exercise price discretion up (down) to 11 See Securities Exchange Act Release No. 81316 (August 4, 2017), 82 FR 37474 (August 10, 2017). E:\FR\FM\26SEN1.SGM 26SEN1 44862 Federal Register / Vol. 82, No. 185 / Tuesday, September 26, 2017 / Notices the Opening Match Price, subject to the less aggressive of the NBB (NBO) or the order’s limit price, if any, except during periods of quote instability, as defined in IEX Rule 11.190(g). When exercising price discretion, primary peg orders are ranked behind any non-displayed interest at the Opening Match Price 12 for the duration of the Opening Process. If multiple primary peg orders are exercising price discretion during the Opening Process, they maintain their relative time priority at the Opening Match Price. • Discretionary Peg orders, as defined in IEX Rule 11.190(b)(10), on the Cross Book are ranked and eligible for execution in the Opening Process at the less aggressive of the NBB (NBO) for buy (sell) orders or the order’s limit price, if any, but may exercise price discretion up (down) to the Opening Match Price, subject to the less aggressive of the Midpoint Price or the order’s limit price, if any, except during periods of quote instability, as defined in IEX Rule 11.190(g). When exercising price discretion, Discretionary Peg orders are ranked behind any non-displayed interest at the Opening Match Price for the duration of the Opening Process. If multiple Discretionary Peg orders are exercising price discretion during the Opening Process, they maintain their relative time priority at the Opening Match Price. • Limit orders on the Cross Book are ranked and eligible for execution in the Opening Process at their limit price. • Non-displayed limit orders and non-displayed portions of reserve orders on the Continuous Book are ranked and eligible for execution in the Opening Process at the less aggressive of the Midpoint Price or the order’s limit price. • Displayed limit orders on the Continuous Book are ranked and eligible for execution in the Opening Process at their resting price. IEX Auctions for IEX-Listed Securities Pursuant to Rule 11.350, once IEX begins a listing program, IEX Auctions will enable Members to participate in electronic price discovery mechanisms that match all eligible orders resting on the Order Book that are eligible for continuous trading (i.e., orders on the ‘‘Continuous Book’’), as well as all eligible orders queued for execution in the applicable auction (i.e., orders on the ‘‘Auction Book’’) in each IEX-listed security at a single price using a double auction process. Members who wish to participate in an IEX Auction can send Auction Eligible Orders (i.e., orders on Continuous Book or Auction Book that are not Auction Ineligible Orders 13) prior to the auction. The IEX Auction process is designed to efficiently maximize the number of shares executed at a single price during the auctions. IEX Auctions will apply to all IEX-listed securities at the open (‘‘Opening Auction’’) and close (‘‘Closing Auction’’) of the Regular Market Session, for the start of trading for an IPO or launch of a new issue (‘‘IPO Auction’’), and upon the resumption of trading in a security following a trading halt (‘‘Halt Auction’’) or a trading pause pursuant to the LULD Plan (‘‘Volatility Auction’’).14 Auction Eligible Orders resting on the Continuous Book are ranked by the price at which they are resting on the Continuous Book; Auction Eligible Orders resting on the Auction Book are ranked by the limit price defined by the User, if any, (in each case, the order’s ‘‘resting price’’). Specifically, pursuant to Rule 11.350(b)(1)(A)(i), Auction Eligible Orders are ranked and eligible for execution in IEX Auctions in pricedisplay-time priority as follows: • Midpoint peg orders are ranked and eligible for execution in the Closing Auction at the less aggressive of the Midpoint Price or the order’s limit price, if any. • Primary peg orders are ranked and eligible for execution in the Closing Auction at the less aggressive of one (1) MPV below (above) the NBB (NBO) for buy (sell) orders or the order’s limit price, if any, but may exercise price discretion up (down) to the auction match price, subject to the less aggressive of the NBB (NBO) or the order’s limit price, if any, except during periods of quote instability, as defined in IEX Rule 11.190(g). When exercising price discretion, primary peg orders are ranked behind any non-displayed interest at the auction match price for the duration of the Closing Auction. If multiple primary peg orders are exercising price discretion during the Closing Auction, they maintain their relative time priority at the auction match price. • Discretionary Peg orders are ranked and eligible for execution in the Closing Auction at the less aggressive of the NBB (NBO) for buy (sell) orders or the order’s limit price, if any, but may exercise price discretion up (down) to the auction match price, subject to the less aggressive of the Midpoint Price or the order’s limit price, if any, except during periods of quote instability, as 13 See Rule 11.350(a)(3). Rule 11.280(e)(1)(A) and Supplementary Material .01(c) to Rule 14.207. 14 See 12 See IEX Rule 11.231(b)(1). VerDate Sep<11>2014 18:28 Sep 25, 2017 Jkt 241001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 defined in IEX Rule 11.190(g). When exercising price discretion, Discretionary Peg orders are ranked behind any non-displayed interest at the auction match price for the duration of the Closing Auction. If multiple Discretionary Peg orders are exercising price discretion during the Closing Auction, they maintain their relative time priority at the auction match price. • Non-displayed limit orders and non-displayed portions of reserve orders on the Continuous Book are ranked and eligible for execution in the Opening or Closing Auction at the less aggressive of the Midpoint Price or the order’s limit price. • Displayed limit orders on the Continuous Book are ranked and eligible for execution in the Opening or Closing Auction at the order’s resting price. • Limit orders, including LOO and LOC orders, on the Auction Book are ranked and eligible for execution in an auction at the order’s limit price. IEX Order Collar and Router Constraint Rule 11.190(f)(1) sets forth the operation of the IEX Order Collar, which prevents any incoming order, or order resting on the Order Book including those marked ISO, from executing at prices outside of the Order Collar price range. Similarly, Rule 11.190(f)(2) sets forth the operation of the IEX Router Constraint, which prevents an order from routing at prices more aggressive than the Router Constraint price range. The Order Collar and Router Constraint price ranges are calculated by applying the numerical guidelines for clearly erroneous executions to the Order Collar Reference Price and Router Constraint Reference Price, respectively.15 The Order Collar Reference Price and Router Constraint Reference Price are each defined as the most current of the following: • The last sale price disseminated during the Regular Market Session on the current trade date; • Last trade price disseminated outside of the Regular Market Session (Form T, as communicated by the relevant SIP) on trade date which other than for the Form T designation would have been considered a valid last sale price; or • If neither of the prices above are available, the prior days Official Closing Price from the listing exchange, adjusted 15 The upper (lower) Order Collar price range and the upper (lower) Router Constraint Price range are calculated by adding (subtracting) the appropriate percentage (consistent with the numerical guidelines for clearly erroneous executions) to the Order Collar Reference Price and the Router Constraint Reference Price, respectively. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 82, No. 185 / Tuesday, September 26, 2017 / Notices to account for corporate actions, news events, etc. In the event there is no valid Order Collar Reference Price or Router Constraint Reference Price, the Exchange generally rejects orders for the security.16 Proposed Clarifications During development and testing of the functionality for the Opening Process and IEX Auctions, the Exchange identified a minor ambiguity between the Order Collar and Router Constraint rule provisions, and the rule provisions governing the priority of ranking and execution for orders eligible for execution in the Opening Process or IEX Auctions. Specifically, as described above, the priority of ranking and execution rule provisions for the Opening Process and for IEX Auctions contemplate that the IEX Order Collar would not apply to orders eligible for the Cross Book or the Auction Book, and that the Router Constraint functionality would not apply to orders eligible for the Cross Book or the Opening Auction Book.17 As set forth above, the rules governing priority of ranking and execution for the Opening Process and IEX Auctions specify in relevant part that orders queued on the Cross Book or the Auction Book rest at the order’s limit price defined by the User (if any), and that market orders have precedence over limit orders. Accordingly, and as discussed more fully below, application of the Order Collar or Router Constraint to such orders would be inconsistent with the provisions governing their priority of ranking and execution. The Exchange believes that the application of the Order Collar to orders eligible for the Cross Book or the Auction Book, or the Router Constraint to orders eligible for the Cross Book or the Opening Auction Book, would be inconsistent with the existing provisions governing their priority of ranking and execution, because a collared or constrained limit order 16 See Rules 11.190(f)(1)–(2). Exchange notes that the Router Constraint does not apply to orders on the Closing Auction Book, because such orders are comprised of OnClose orders (i.e., Limit-On-Close and Market-OnClose orders), which are only accepted if they are appropriately designated as ‘‘IEX-only’’. See the IEX Auction Specification at 15, which describes valid FIX tag combinations for On-Close orders. See also Rules 11.350(a)(20) and (24). Similarly, the Router Constraint does not apply to market orders with a time-in-force of DAY that are entered during the Pre-Market Session and are eligible for the Opening Auction Book, because such orders are rejected if they are designated to route pursuant to Rule 11.230(c). See Rule 11.190(a)(2)(E)(iii). Accordingly, the proposed rule change is narrowly tailored to cover limit orders eligible for the Opening Auction Book. 17 The VerDate Sep<11>2014 18:28 Sep 25, 2017 Jkt 241001 could rest at a less aggressive price than its user-defined limit price, and a collared or constrained market order would, by definition, have a limit applied by the System (which is inconsistent with the user-instructed terms if the order), and could cede priority. For example, if the Order Collar were to apply, a market order to buy (sell) entered for the Opening Process or for an IEX Auction would effectively be converted into a limit order with a limit price equal to the upper (lower) Order Collar price range. Moreover, a limit order to buy (sell) with a limit price more aggressive than the upper (lower) Order Collar price range would be entered onto the Cross Book or the Auction Book with a limit price equal to the upper (lower) Order Collar price range, which is a less aggressive price than the orders’ userdefined limit price. Similarly, if the Router Constraint were to apply to routable orders that are eligible for the Cross Book or the Opening Auction Book, a routable limit order to buy (sell) with a limit price more aggressive than the upper (lower) Router Constraint price range would be entered onto the Cross Book or the Opening Auction Book, respectively, with a limit price equal to the upper (lower) Router Constraint price range, which is a less aggressive price than the user-defined limit price on such orders. Lastly, in addition to the inconsistencies that arise from applying the Router Constraint as described above, its application to a buy (sell) order entered onto the Opening Auction Book early in the Pre-Market Session based on the price of the current last trade could unnecessarily constrain the order from participating in the auction and impact the price discovery process if the market for the security has moved up (down) by the time of the Opening Auction. In addition to the foregoing, the Exchange believes that applying the Order Collar or Router Constraint to orders entered for a Halt or Volatility Auction could disrupt the price discovery process, and would be inconsistent with the protection of investors and the public interest.18 Applying the Order Collar or Router Constraint to orders entered for a Halt Auction or Volatility Auction would require using the price of the last trade immediately before the halt or pause as the Order Collar Reference Price and Router Constraint Reference Price, 18 The Exchange notes that securities that are the subject of an IPO Auction pursuant to Rule 11.350(e) will be subject to a trading halt pursuant to Rule 11.280(g)(7), and would therefore not have a valid Router Constraint Reference Price pursuant Rule 11.190(f)(2)(A). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 44863 respectively. In the event of a trading halt, the market is in the process of reestablishing the value of a security, and therefore calculating the Order Collar price range and Router Constraint price range using a last sale reference price that may not reflect adjustments in valuation resulting from additional information regarding the security during the halt could result in auction pricing that is not reflective of the current value of the security. Similarly, in the event of a trading pause, the security has just experienced sharp price volatility and the market is in the process of reestablishing the value of a security, and therefore calculating the Order Collar price range and the Router Constraint price range using a reference price that may not reflect adjustments in valuation during the pause could potentially result in auction pricing that is not reflective of the current value of the security. Accordingly, the Exchange is proposing to also clarify that in the event a security is subject to a trading halt or trading pause, the Router Constraint Reference Price is invalid. Pursuant to Rule 11.190(f)(2)(B), in the absence of a valid Router Constraint Reference Price, the Exchange will reject any routable orders for the security. In sum, consistent with the foregoing, the Exchange is proposing to: • Clarify in Rule 11.190(f)(1) that the Order Collar does not apply to orders that are eligible for the Cross Book pursuant to Rule 11.231 during the Opening Process for non-IEX-listed securities or the Auction Book pursuant to Rule 11.350(a)(1) during the auction process for IEX-listed securities; • Clarify in Rule 11.190(f)(2) that the Router Constraint does not apply to orders that are eligible for the Cross Book pursuant to Rule 11.231 during the Opening Process for non-IEX-listed securities or the Auction Book pursuant to Rule 11.350(a)(1)(A)(ii) during the auction process for IEX-listed securities; and • Clarify in Rule 11.190(f)(2)(A) that the Router Constraint Reference Price during a trading halt or pause is invalid. Lastly, as recently announced by IEX Trading Alert #2017–027, on August 23, 2017 the Exchange began a multi-phase deployment of the Opening Process for non-IEX-listed securities.19 The production deployment is scheduled to be completed on August 30, 2017. Moreover, as announced by IEX Trading Alert #2017–015, the Exchange intends to become a primary listing exchange and support its first IEX-listed security 19 See IEX Trading Alert #2017–027 (Deployment Schedule for New Opening Process for Non-IEXListed Securities), August 3, 2017. E:\FR\FM\26SEN1.SGM 26SEN1 44864 Federal Register / Vol. 82, No. 185 / Tuesday, September 26, 2017 / Notices in October of 2017.20 In addition, as part of the listings initiative, the Exchange is providing a series of industry wide weekend tests for the Exchange and its Members to exercise the various technology changes required to support IEX Auctions and listings functionality.21 Accordingly, in order to provide clarity to Members and other market participants regarding the Opening Process and IEX Auctions, and specifically to avoid potential confusion regarding the inapplicability of the IEX Order Collar and Router Constraint to their operation, the Exchange is proposing to make the clarifying changes to Rule 11.190(f)(1) and (2) described above. 2. Statutory Basis IEX believes that the proposed rule change is consistent with the provisions of Section 6(b) 22 of the Act in general, and furthers the objectives of Section 6(b)(5) of the Act 23 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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. The Exchange believes that the proposed rule clarifications do not alter the substantive functionality of the Opening Process or IEX Auctions, but instead clarify the applicability of the IEX Order Collar and Router Constraint so as to be consistent with the existing rules approved by the Commission. The Exchange further believes that the proposed clarifying rule change is consistent with the protection of investors and the public interest because the proposed clarifications are designed to avoid any potential confusion regarding the Opening Process and IEX Auction functionality as IEX completes the production deployment of the Opening Process for non-IEX-listed securities, and begins industry wide testing to exercise the technology changes being made by the Exchange and its Members, and make the Exchanges rules more clear and complete. Additionally, the Exchange believes it is consistent with the Act to clarify the rule provisions regarding the Opening Process and IEX Auctions so that IEX’s rules are accurate and 20 See IEX Trading Alert #2017–015 (Listings Specifications, Testing Opportunities, and Timelines), May 31, 2017. 21 See IEX Trading Alert #2017–028 (First Listings Functionality Industry Test on Saturday, August 26), August 17, 2017. 22 15 U.S.C. 78f. 23 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:28 Sep 25, 2017 Jkt 241001 descriptive of the System’s functionality as approved by the Commission, and to avoid any potential confusion among Members and market participants regarding such functionality. Lastly, the Exchange believes that it is consistent with the Act to provide that the Router Constraint Reference Price is invalid in the event a security is subject to a trading halt or trading pause, and thus routable orders in such security will be rejected, to further clarify the inapplicability of the Router Constraint to such orders. As discussed in the Purpose section, when a security is subject to a trading halt or trading pause, the Router Constraint Reference Price may not reflect adjustments in valuation and therefore could result in auction pricing that is not reflective of the current value of the security. B. Self-Regulatory Organization’s Statement on Burden on Competition IEX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed correction does not impact competition in any respect since it is designed to clarify the inapplicability of the IEX Order Collar and Router Constraint to orders eligible for execution in the Opening Process for non-IEX-listed securities and in IEX Auctions for IEXlisted securities, without substantively changing the Rules as separately approved. In addition, the Exchange does not believe that clarifying that the Router Constraint Reference Price is invalid in the event a security is subject to a trading halt or trading pause will impose any burden on competition, since this proposed change is designed to further clarify the inapplicability of the Router Constraint to such orders. The proposed changes will apply equally to all Members and therefore no new burdens are being proposed. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated this rule filing as non-controversial under Section 19(b)(3)(A) 24 of the Act and Rule 19b–4(f)(6) 25 thereunder. Because 24 15 25 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Frm 00106 Fmt 4703 Sfmt 4703 the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b– 4(f)(6) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 26 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),27 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so that it may become operative on the date the filing was received. The purpose of the proposed rule change is to state clearly in IEX Rule 11.190 the inapplicability of the IEX Order Collar and Router Constraint to orders eligible for execution in the Opening Process for non-IEX-listed securities and in IEX Auctions for IEXlisted securities. Additionally, the proposed rule change clearly states in IEX Rule 11.190 that the IEX Router Constraint is inapplicable when a security is subject to a trading halt or trading pause and such orders will be rejected. These clarifications resolve potential ambiguity and ensure consistency between IEX Rule 11.190 and the opening auction rules previously approved by the Commission. Further, the proposed rule change does not raise any novel issues. The waiver of the operative delay is, therefore, consistent with the protection of investors and the public interest because it will help to avoid potential confusion among market participants regarding the inapplicability of the IEX Order Collar and Router Constraint to orders eligible for the Cross Book for non-IEX-listed securities and the Auction Book for IEX-listed securities. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative upon filing.28 26 17 CFR 240.19b–4(f)(6). CFR 240.19b–4(f)(6)(iii). 28 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 27 17 E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 82, No. 185 / Tuesday, September 26, 2017 / Notices At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 29 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– IEX–2017–31 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–IEX–2017–31. This file number should be included in 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 (http://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 Section, 100 F Street NE., Washington, DC 20549–1090. Copies of the filing will also be available for inspection and copying at the IEX’s principal office and on its Internet Web 29 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:28 Sep 25, 2017 site at www.iextrading.com. 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–2017–31 and should be submitted on or before October 17, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–20500 Filed 9–25–17; 8:45 am] BILLING CODE 8011–01–P Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a closed meeting on Thursday, September 28, 2017 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(7), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. Commissioner Stein, as duty officer, voted to consider the items listed for the closed meeting in closed session. The subject matters of the closed meeting will be: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Adjudicatory matters; and Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Brent J. Fields from the Office of the Secretary at (202) 551–5400. 30 17 Jkt 241001 Dated: September 21, 2017. Brent J. Fields, Secretary. [FR Doc. 2017–20633 Filed 9–22–17; 11:15 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Information Collection Activities: Proposed Collection; Comment Request; Fast Track Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery Small Business Administration. 60-Day notice and request for comments. AGENCY: ACTION: As part of its continuing effort to reduce paperwork burden on the public the Small Business Administration (SBA), announces its intent to submit a new generic collection of information: ‘‘Fast Track Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery’’ to the Office of Management and Budget for approval. The Paperwork Reduction Act (PRA) requires federal agencies to publish a notice in the Federal Register concerning each proposed collection of information before submission to OMB and to allow 60 days for public comment in response to the notice. This notice complies with that requirement. DATES: Submit comments on or before November 27, 2017. ADDRESSES: Send all comments to Small Business Administration, 409 3rd Street, 7th Floor, Washington, DC 20416. (202) 205–6981. FOR FURTHER INFORMATION CONTACT: Amber Chaudhry, Presidential Management Fellow, Office of the Chief Operating Office, amber.chaudhry@ sba.gov, 202–657–9722, or Curtis B. Rich, Management Analyst, 202–205– 7030, curtis.rich@sba.gov. SUPPLEMENTARY INFORMATION: Title: Fast Track Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery. OMB Control Number: TBD (New Collection). Needs and Uses: The proposed information collection will provide a means to gather qualitative customer and stakeholder feedback in an efficient, timely manner, in accordance with SBA’s commitment to improving service delivery. Qualitative feedback means information that provides useful insights on perceptions and opinions, but is not statistical surveys that yield quantitative results that can be generalized to the population being SUMMARY: SECURITIES AND EXCHANGE COMMISSION PO 00000 CFR 200.30–3(a)(12). Frm 00107 Fmt 4703 Sfmt 4703 44865 E:\FR\FM\26SEN1.SGM 26SEN1

Agencies

[Federal Register Volume 82, Number 185 (Tuesday, September 26, 2017)]
[Notices]
[Pages 44861-44865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20500]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81662; File No. SR-IEX-2017-31]


Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Clarify 
the Manner in Which the Order Collar and Router Constraint Apply to 
Auctions and the Opening Process

September 20, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on September 6, 2017, the Investors Exchange LLC (``IEX'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ 
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the 
Commission a proposed rule change to clarify the inapplicability of the 
Exchange's Order Collar \6\ and Router Constraint \7\ to certain orders 
that are eligible for participation in the opening process for non-IEX-
listed securities pursuant to Rule 11.231, or for auctions in IEX-
listed securities pursuant to Rule 11.350. The Exchange has designated 
this rule change as ``non-controversial'' under Section 19(b)(3)(A) of 
the Act \8\ and provided the Commission with the notice required by 
Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CRF 240.19b-4.
    \6\ See Rule 11.190(f)(1).
    \7\ See Rule 11.190(f)(2).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
Web site at www.iextrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statement may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    The purpose of this proposed rule change is to clarify the 
inapplicability of the Exchange's Order Collar and Router Constraint to 
certain orders that are eligible for participation in the opening 
process for non-IEX-listed securities pursuant to Rule 11.231, or for 
auctions in IEX-listed securities pursuant to Rule 11.350. On July 24th 
2017, the Commission approved a proposed rule change filed by the 
Exchange to amend IEX Rule 11.231 to modify the manner in which the 
Exchange opens trading for non-IEX-listed securities beginning at the 
start of Regular Market Hours (the ``Opening Process'').\10\ On August 
4, 2017, the Commission approved a proposed rule change filed by the 
Exchange 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 (``IEX 
Auctions'').\11\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 81195 (July 24, 
2017), 82 FR 35250 (July 28, 2017).
    \11\ See Securities Exchange Act Release No. 81316 (August 4, 
2017), 82 FR 37474 (August 10, 2017).
---------------------------------------------------------------------------

Opening Process for Non-IEX-Listed Securities
    Pursuant to Rule 11.231, the Exchange attempts to perform the 
Opening Process in each non-IEX-listed security, in which all eligible 
interest resting on the Order Book in the Pre-Market Session available 
for continuous trading (i.e., orders on the ``Continuous Book'') as 
well as all eligible interest queued for execution in the Regular 
Market Session (i.e., orders on the ``Cross Book'') are executed at a 
single price. Prior to the beginning of Regular Market Hours, Users who 
wish to participate in the Opening Process may enter limit, market, and 
pegged orders designated with a time-in-force of DAY and limit orders 
designated with a time-in-force of GTX, which shall queue in the System 
and are eligible for execution in the Opening Process (orders on the 
Cross Book); interest resting on the Order Book in the Pre-Market 
Session available for continuous trading (i.e., orders on the 
Continuous Book) are also eligible for execution in the Opening Process 
(collectively, ``Cross Eligible Orders'').
    Cross Eligible Orders resting on the Continuous Book are ranked by 
the price at which they are resting on the Continuous Book and Cross 
Eligible Orders resting on the Cross Book are ranked by the limit price 
defined by the User, if any, except in the case of pegged orders, which 
are ranked by their current book price (in each case, the order's 
``resting price''). Specifically, pursuant to Rule 11.220(a)(2), Cross 
Eligible Orders are ranked and eligible for execution in the Opening 
Process in price-display-time priority as follows:
     Midpoint peg orders, as defined in IEX Rule 11.190(b)(9), 
on the Cross Book are ranked and eligible for execution in the Opening 
Process at the less aggressive of the Midpoint Price or the order's 
limit price, if any.
     Primary peg orders, as defined in IEX Rule 11.190(b)(8), 
on the Cross Book are ranked and eligible for execution in the Opening 
Process at the less aggressive of one (1) MPV below (above) the NBB 
(NBO) for buy (sell) orders or the order's limit price, if any, but may 
exercise price discretion up (down) to

[[Page 44862]]

the Opening Match Price, subject to the less aggressive of the NBB 
(NBO) or the order's limit price, if any, except during periods of 
quote instability, as defined in IEX Rule 11.190(g). When exercising 
price discretion, primary peg orders are ranked behind any non-
displayed interest at the Opening Match Price \12\ for the duration of 
the Opening Process. If multiple primary peg orders are exercising 
price discretion during the Opening Process, they maintain their 
relative time priority at the Opening Match Price.
---------------------------------------------------------------------------

    \12\ See IEX Rule 11.231(b)(1).
---------------------------------------------------------------------------

     Discretionary Peg orders, as defined in IEX Rule 
11.190(b)(10), on the Cross Book are ranked and eligible for execution 
in the Opening Process at the less aggressive of the NBB (NBO) for buy 
(sell) orders or the order's limit price, if any, but may exercise 
price discretion up (down) to the Opening Match Price, subject to the 
less aggressive of the Midpoint Price or the order's limit price, if 
any, except during periods of quote instability, as defined in IEX Rule 
11.190(g). When exercising price discretion, Discretionary Peg orders 
are ranked behind any non-displayed interest at the Opening Match Price 
for the duration of the Opening Process. If multiple Discretionary Peg 
orders are exercising price discretion during the Opening Process, they 
maintain their relative time priority at the Opening Match Price.
     Limit orders on the Cross Book are ranked and eligible for 
execution in the Opening Process at their limit price.
     Non-displayed limit orders and non-displayed portions of 
reserve orders on the Continuous Book are ranked and eligible for 
execution in the Opening Process at the less aggressive of the Midpoint 
Price or the order's limit price.
     Displayed limit orders on the Continuous Book are ranked 
and eligible for execution in the Opening Process at their resting 
price.
IEX Auctions for IEX-Listed Securities
    Pursuant to Rule 11.350, once IEX begins a listing program, IEX 
Auctions will enable Members to participate in electronic price 
discovery mechanisms that match all eligible orders resting on the 
Order Book that are eligible for continuous trading (i.e., orders on 
the ``Continuous Book''), as well as all eligible orders queued for 
execution in the applicable auction (i.e., orders on the ``Auction 
Book'') in each IEX-listed security at a single price using a double 
auction process. Members who wish to participate in an IEX Auction can 
send Auction Eligible Orders (i.e., orders on Continuous Book or 
Auction Book that are not Auction Ineligible Orders \13\) prior to the 
auction. The IEX Auction process is designed to efficiently maximize 
the number of shares executed at a single price during the auctions. 
IEX Auctions will apply to all IEX-listed securities at the open 
(``Opening Auction'') and close (``Closing Auction'') of the Regular 
Market Session, for the start of trading for an IPO or launch of a new 
issue (``IPO Auction''), and upon the resumption of trading in a 
security following a trading halt (``Halt Auction'') or a trading pause 
pursuant to the LULD Plan (``Volatility Auction'').\14\
---------------------------------------------------------------------------

    \13\ See Rule 11.350(a)(3).
    \14\ See Rule 11.280(e)(1)(A) and Supplementary Material .01(c) 
to Rule 14.207.
---------------------------------------------------------------------------

    Auction Eligible Orders resting on the Continuous Book are ranked 
by the price at which they are resting on the Continuous Book; Auction 
Eligible Orders resting on the Auction Book are ranked by the limit 
price defined by the User, if any, (in each case, the order's ``resting 
price''). Specifically, pursuant to Rule 11.350(b)(1)(A)(i), Auction 
Eligible Orders are ranked and eligible for execution in IEX Auctions 
in price-display-time priority as follows:
     Midpoint peg orders are ranked and eligible for execution 
in the Closing Auction at the less aggressive of the Midpoint Price or 
the order's limit price, if any.
     Primary peg orders are ranked and eligible for execution 
in the Closing Auction at the less aggressive of one (1) MPV below 
(above) the NBB (NBO) for buy (sell) orders or the order's limit price, 
if any, but may exercise price discretion up (down) to the auction 
match price, subject to the less aggressive of the NBB (NBO) or the 
order's limit price, if any, except during periods of quote 
instability, as defined in IEX Rule 11.190(g). When exercising price 
discretion, primary peg orders are ranked behind any non-displayed 
interest at the auction match price for the duration of the Closing 
Auction. If multiple primary peg orders are exercising price discretion 
during the Closing Auction, they maintain their relative time priority 
at the auction match price.
     Discretionary Peg orders are ranked and eligible for 
execution in the Closing Auction at the less aggressive of the NBB 
(NBO) for buy (sell) orders or the order's limit price, if any, but may 
exercise price discretion up (down) to the auction match price, subject 
to the less aggressive of the Midpoint Price or the order's limit 
price, if any, except during periods of quote instability, as defined 
in IEX Rule 11.190(g). When exercising price discretion, Discretionary 
Peg orders are ranked behind any non-displayed interest at the auction 
match price for the duration of the Closing Auction. If multiple 
Discretionary Peg orders are exercising price discretion during the 
Closing Auction, they maintain their relative time priority at the 
auction match price.
     Non-displayed limit orders and non-displayed portions of 
reserve orders on the Continuous Book are ranked and eligible for 
execution in the Opening or Closing Auction at the less aggressive of 
the Midpoint Price or the order's limit price.
     Displayed limit orders on the Continuous Book are ranked 
and eligible for execution in the Opening or Closing Auction at the 
order's resting price.
     Limit orders, including LOO and LOC orders, on the Auction 
Book are ranked and eligible for execution in an auction at the order's 
limit price.
IEX Order Collar and Router Constraint
    Rule 11.190(f)(1) sets forth the operation of the IEX Order Collar, 
which prevents any incoming order, or order resting on the Order Book 
including those marked ISO, from executing at prices outside of the 
Order Collar price range. Similarly, Rule 11.190(f)(2) sets forth the 
operation of the IEX Router Constraint, which prevents an order from 
routing at prices more aggressive than the Router Constraint price 
range. The Order Collar and Router Constraint price ranges are 
calculated by applying the numerical guidelines for clearly erroneous 
executions to the Order Collar Reference Price and Router Constraint 
Reference Price, respectively.\15\ The Order Collar Reference Price and 
Router Constraint Reference Price are each defined as the most current 
of the following:
---------------------------------------------------------------------------

    \15\ The upper (lower) Order Collar price range and the upper 
(lower) Router Constraint Price range are calculated by adding 
(subtracting) the appropriate percentage (consistent with the 
numerical guidelines for clearly erroneous executions) to the Order 
Collar Reference Price and the Router Constraint Reference Price, 
respectively.
---------------------------------------------------------------------------

     The last sale price disseminated during the Regular Market 
Session on the current trade date;
     Last trade price disseminated outside of the Regular 
Market Session (Form T, as communicated by the relevant SIP) on trade 
date which other than for the Form T designation would have been 
considered a valid last sale price; or
     If neither of the prices above are available, the prior 
days Official Closing Price from the listing exchange, adjusted

[[Page 44863]]

to account for corporate actions, news events, etc.
    In the event there is no valid Order Collar Reference Price or 
Router Constraint Reference Price, the Exchange generally rejects 
orders for the security.\16\
---------------------------------------------------------------------------

    \16\ See Rules 11.190(f)(1)-(2).
---------------------------------------------------------------------------

Proposed Clarifications
    During development and testing of the functionality for the Opening 
Process and IEX Auctions, the Exchange identified a minor ambiguity 
between the Order Collar and Router Constraint rule provisions, and the 
rule provisions governing the priority of ranking and execution for 
orders eligible for execution in the Opening Process or IEX Auctions. 
Specifically, as described above, the priority of ranking and execution 
rule provisions for the Opening Process and for IEX Auctions 
contemplate that the IEX Order Collar would not apply to orders 
eligible for the Cross Book or the Auction Book, and that the Router 
Constraint functionality would not apply to orders eligible for the 
Cross Book or the Opening Auction Book.\17\ As set forth above, the 
rules governing priority of ranking and execution for the Opening 
Process and IEX Auctions specify in relevant part that orders queued on 
the Cross Book or the Auction Book rest at the order's limit price 
defined by the User (if any), and that market orders have precedence 
over limit orders. Accordingly, and as discussed more fully below, 
application of the Order Collar or Router Constraint to such orders 
would be inconsistent with the provisions governing their priority of 
ranking and execution.
---------------------------------------------------------------------------

    \17\ The Exchange notes that the Router Constraint does not 
apply to orders on the Closing Auction Book, because such orders are 
comprised of On-Close orders (i.e., Limit-On-Close and Market-On-
Close orders), which are only accepted if they are appropriately 
designated as ``IEX-only''. See the IEX Auction Specification at 15, 
which describes valid FIX tag combinations for On-Close orders. See 
also Rules 11.350(a)(20) and (24). Similarly, the Router Constraint 
does not apply to market orders with a time-in-force of DAY that are 
entered during the Pre-Market Session and are eligible for the 
Opening Auction Book, because such orders are rejected if they are 
designated to route pursuant to Rule 11.230(c). See Rule 
11.190(a)(2)(E)(iii). Accordingly, the proposed rule change is 
narrowly tailored to cover limit orders eligible for the Opening 
Auction Book.
---------------------------------------------------------------------------

    The Exchange believes that the application of the Order Collar to 
orders eligible for the Cross Book or the Auction Book, or the Router 
Constraint to orders eligible for the Cross Book or the Opening Auction 
Book, would be inconsistent with the existing provisions governing 
their priority of ranking and execution, because a collared or 
constrained limit order could rest at a less aggressive price than its 
user-defined limit price, and a collared or constrained market order 
would, by definition, have a limit applied by the System (which is 
inconsistent with the user-instructed terms if the order), and could 
cede priority. For example, if the Order Collar were to apply, a market 
order to buy (sell) entered for the Opening Process or for an IEX 
Auction would effectively be converted into a limit order with a limit 
price equal to the upper (lower) Order Collar price range. Moreover, a 
limit order to buy (sell) with a limit price more aggressive than the 
upper (lower) Order Collar price range would be entered onto the Cross 
Book or the Auction Book with a limit price equal to the upper (lower) 
Order Collar price range, which is a less aggressive price than the 
orders' user-defined limit price. Similarly, if the Router Constraint 
were to apply to routable orders that are eligible for the Cross Book 
or the Opening Auction Book, a routable limit order to buy (sell) with 
a limit price more aggressive than the upper (lower) Router Constraint 
price range would be entered onto the Cross Book or the Opening Auction 
Book, respectively, with a limit price equal to the upper (lower) 
Router Constraint price range, which is a less aggressive price than 
the user-defined limit price on such orders. Lastly, in addition to the 
inconsistencies that arise from applying the Router Constraint as 
described above, its application to a buy (sell) order entered onto the 
Opening Auction Book early in the Pre-Market Session based on the price 
of the current last trade could unnecessarily constrain the order from 
participating in the auction and impact the price discovery process if 
the market for the security has moved up (down) by the time of the 
Opening Auction.
    In addition to the foregoing, the Exchange believes that applying 
the Order Collar or Router Constraint to orders entered for a Halt or 
Volatility Auction could disrupt the price discovery process, and would 
be inconsistent with the protection of investors and the public 
interest.\18\ Applying the Order Collar or Router Constraint to orders 
entered for a Halt Auction or Volatility Auction would require using 
the price of the last trade immediately before the halt or pause as the 
Order Collar Reference Price and Router Constraint Reference Price, 
respectively. In the event of a trading halt, the market is in the 
process of reestablishing the value of a security, and therefore 
calculating the Order Collar price range and Router Constraint price 
range using a last sale reference price that may not reflect 
adjustments in valuation resulting from additional information 
regarding the security during the halt could result in auction pricing 
that is not reflective of the current value of the security. Similarly, 
in the event of a trading pause, the security has just experienced 
sharp price volatility and the market is in the process of 
reestablishing the value of a security, and therefore calculating the 
Order Collar price range and the Router Constraint price range using a 
reference price that may not reflect adjustments in valuation during 
the pause could potentially result in auction pricing that is not 
reflective of the current value of the security. Accordingly, the 
Exchange is proposing to also clarify that in the event a security is 
subject to a trading halt or trading pause, the Router Constraint 
Reference Price is invalid. Pursuant to Rule 11.190(f)(2)(B), in the 
absence of a valid Router Constraint Reference Price, the Exchange will 
reject any routable orders for the security.
---------------------------------------------------------------------------

    \18\ The Exchange notes that securities that are the subject of 
an IPO Auction pursuant to Rule 11.350(e) will be subject to a 
trading halt pursuant to Rule 11.280(g)(7), and would therefore not 
have a valid Router Constraint Reference Price pursuant Rule 
11.190(f)(2)(A).
---------------------------------------------------------------------------

    In sum, consistent with the foregoing, the Exchange is proposing 
to:
     Clarify in Rule 11.190(f)(1) that the Order Collar does 
not apply to orders that are eligible for the Cross Book pursuant to 
Rule 11.231 during the Opening Process for non-IEX-listed securities or 
the Auction Book pursuant to Rule 11.350(a)(1) during the auction 
process for IEX-listed securities;
     Clarify in Rule 11.190(f)(2) that the Router Constraint 
does not apply to orders that are eligible for the Cross Book pursuant 
to Rule 11.231 during the Opening Process for non-IEX-listed securities 
or the Auction Book pursuant to Rule 11.350(a)(1)(A)(ii) during the 
auction process for IEX-listed securities; and
     Clarify in Rule 11.190(f)(2)(A) that the Router Constraint 
Reference Price during a trading halt or pause is invalid.
    Lastly, as recently announced by IEX Trading Alert #2017-027, on 
August 23, 2017 the Exchange began a multi-phase deployment of the 
Opening Process for non-IEX-listed securities.\19\ The production 
deployment is scheduled to be completed on August 30, 2017. Moreover, 
as announced by IEX Trading Alert #2017-015, the Exchange intends to 
become a primary listing exchange and support its first IEX-listed 
security

[[Page 44864]]

in October of 2017.\20\ In addition, as part of the listings 
initiative, the Exchange is providing a series of industry wide weekend 
tests for the Exchange and its Members to exercise the various 
technology changes required to support IEX Auctions and listings 
functionality.\21\ Accordingly, in order to provide clarity to Members 
and other market participants regarding the Opening Process and IEX 
Auctions, and specifically to avoid potential confusion regarding the 
inapplicability of the IEX Order Collar and Router Constraint to their 
operation, the Exchange is proposing to make the clarifying changes to 
Rule 11.190(f)(1) and (2) described above.
---------------------------------------------------------------------------

    \19\ See IEX Trading Alert #2017-027 (Deployment Schedule for 
New Opening Process for Non-IEX-Listed Securities), August 3, 2017.
    \20\ See IEX Trading Alert #2017-015 (Listings Specifications, 
Testing Opportunities, and Timelines), May 31, 2017.
    \21\ See IEX Trading Alert #2017-028 (First Listings 
Functionality Industry Test on Saturday, August 26), August 17, 
2017.
---------------------------------------------------------------------------

2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \22\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \23\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f.
    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule clarifications do not 
alter the substantive functionality of the Opening Process or IEX 
Auctions, but instead clarify the applicability of the IEX Order Collar 
and Router Constraint so as to be consistent with the existing rules 
approved by the Commission. The Exchange further believes that the 
proposed clarifying rule change is consistent with the protection of 
investors and the public interest because the proposed clarifications 
are designed to avoid any potential confusion regarding the Opening 
Process and IEX Auction functionality as IEX completes the production 
deployment of the Opening Process for non-IEX-listed securities, and 
begins industry wide testing to exercise the technology changes being 
made by the Exchange and its Members, and make the Exchanges rules more 
clear and complete. Additionally, the Exchange believes it is 
consistent with the Act to clarify the rule provisions regarding the 
Opening Process and IEX Auctions so that IEX's rules are accurate and 
descriptive of the System's functionality as approved by the 
Commission, and to avoid any potential confusion among Members and 
market participants regarding such functionality. Lastly, the Exchange 
believes that it is consistent with the Act to provide that the Router 
Constraint Reference Price is invalid in the event a security is 
subject to a trading halt or trading pause, and thus routable orders in 
such security will be rejected, to further clarify the inapplicability 
of the Router Constraint to such orders. As discussed in the Purpose 
section, when a security is subject to a trading halt or trading pause, 
the Router Constraint Reference Price may not reflect adjustments in 
valuation and therefore could result in auction pricing that is not 
reflective of the current value of the security.

B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed correction does not impact competition in any respect since it 
is designed to clarify the inapplicability of the IEX Order Collar and 
Router Constraint to orders eligible for execution in the Opening 
Process for non-IEX-listed securities and in IEX Auctions for IEX-
listed securities, without substantively changing the Rules as 
separately approved. In addition, the Exchange does not believe that 
clarifying that the Router Constraint Reference Price is invalid in the 
event a security is subject to a trading halt or trading pause will 
impose any burden on competition, since this proposed change is 
designed to further clarify the inapplicability of the Router 
Constraint to such orders. The proposed changes will apply equally to 
all Members and therefore no new burdens are being proposed.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \24\ of the Act and Rule 19b-4(f)(6) \25\ 
thereunder. Because the proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has filed 
the proposed rule change for immediate effectiveness and has requested 
that the Commission waive the requirement that the proposed rule change 
not become operative for 30 days after the date of the filing, so that 
it may become operative on the date the filing was received.
---------------------------------------------------------------------------

    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The purpose of the proposed rule change is to state clearly in IEX 
Rule 11.190 the inapplicability of the IEX Order Collar and Router 
Constraint to orders eligible for execution in the Opening Process for 
non-IEX-listed securities and in IEX Auctions for IEX-listed 
securities. Additionally, the proposed rule change clearly states in 
IEX Rule 11.190 that the IEX Router Constraint is inapplicable when a 
security is subject to a trading halt or trading pause and such orders 
will be rejected. These clarifications resolve potential ambiguity and 
ensure consistency between IEX Rule 11.190 and the opening auction 
rules previously approved by the Commission. Further, the proposed rule 
change does not raise any novel issues. The waiver of the operative 
delay is, therefore, consistent with the protection of investors and 
the public interest because it will help to avoid potential confusion 
among market participants regarding the inapplicability of the IEX 
Order Collar and Router Constraint to orders eligible for the Cross 
Book for non-IEX-listed securities and the Auction Book for IEX-listed 
securities. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change to be operative 
upon filing.\28\
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    \28\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 44865]]

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form
    (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-IEX-2017-31 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-IEX-2017-31. This file 
number should be included in 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 (http://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 Section, 100 F Street 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for inspection and copying at the IEX's principal office and 
on its Internet Web site at www.iextrading.com. 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-2017-31 and should be submitted on 
or before October 17, 2017.
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    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20500 Filed 9-25-17; 8:45 am]
BILLING CODE 8011-01-P