Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 11.152 To Add Provisions Related to Market Maker Withdrawals of Quotations in Securities Listed on the Investors Exchange, 49914-49918 [2017-23375]
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49914
Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
designated this rule filing as noncontroversial.
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 19 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative
immediately upon filing. The Exchange
notes that the proposed rule change will
promote consistency between the
Exchange and CBOE Affiliated
Exchanges, and is part of a larger
technology integration that will
ultimately reduce complexity for Users
of the Exchange that are also
participants on other CBOE Affiliated
Exchanges.
The Commission believes that waiver
of the 30-day operative delay is
consistent with the protection of
investor and the public interest. The
Commission notes that the proposed
rule change is based on rules of its
affiliated exchanges, CBOE and C2, and
thus does not raise any new or novel
issues. Accordingly, the Commission
hereby waives the 30-day operative
delay and designates the proposed rule
change as operative upon filing.20
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: (1) Necessary or appropriate in
the public interest; (2) for the protection
of investors; or (3) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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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:
18 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
20 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
19 17
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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–
BatsEDGX–2017–39 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–BatsEDGX–2017–39. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BatsEDGX–2017–39 and
should be submitted on or before
November 17, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–23373 Filed 10–26–17; 8:45 am]
BILLING CODE 8011–01–P
21 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81922; File No. SR–IEX–
2017–37]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
11.152 To Add Provisions Related to
Market Maker Withdrawals of
Quotations in Securities Listed on the
Investors Exchange
October 23, 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 October
19, 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
thereunder,5 Investors Exchange LLC
(‘‘IEX’’ or ‘‘Exchange’’) is filing with the
Commission a proposed rule change to
amend Rule 11.152 to add provisions
related to Market Maker withdrawals of
quotations in securities listed on IEX,
remove an incorrect cross reference in
paragraph (c), and to correct a
typographical error in a cross-reference
in paragraph (d). The Exchange has
designated this proposal as ‘‘noncontroversial’’ and provided the
Commission with the notice required by
Rule 19b–4(f)(6)(iii) under the Act.6 The
text of the proposed rule change is
available at the Exchange’s Web site at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
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).
5 17 CFR 240.19b–4.
6 17 CFR 240.19b–4(f)(6)(iii).
2 15
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statement [sic] may be
examined at the places specified in Item
IV below. The self-regulatory
organization has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
Background
On June 17, 2016, the Commission
granted IEX’s application for registration
as a national securities exchange under
Section 6 of the Act including approval
of rules applicable to the qualification,
listing and delisting of companies on
the Exchange. The Exchange plans to
begin a listing program in the fourth
quarter of 2017 and is proposing to
amend Rule 11.152 to add provisions
related to Market Maker withdrawals of
quotations in securities listed on IEX.
IEX Rules 11.150 through 11.154
contain provisions applicable to IEX
Market Makers, including registration,
quotation obligations, withdrawal of
quotations, voluntary termination of
registration, and suspension and
termination of quotations. Pursuant to
Rule 11.151 a Member registered as a
Market Maker is required to maintain a
two-sided quotation within the
designated percentage of the National
Best Bid (‘‘NBB’’) and National Best
Offer (‘‘NBO’’),7 as appropriate.
IEX Rule 11.152 governs the
requirements for a Market Maker to
obtain excused withdrawal status
thereby temporarily suspending its
obligation to comply with the two-sided
quotation obligation of Rule 11.151.
Specifically, Rule 11.152 provides the
ability for a Market Maker to obtain
excused withdrawal status under the
following circumstances:
• Systemic equipment problems—An
IEX Market Maker that wishes to obtain
excused withdrawal status based on a
market maker’s systemic equipment
problems, such as defects in an IEX
Market Maker’s software or hardware
systems or connectivity problems
associated with the circuits connecting
Exchange systems with the IEX Market
Maker’s systems, shall contact IEX
Market Operations. IEX Market
Operations may grant excused
7 As defined by Regulation NMS Rule 600(b)(42).
17 CFR 242.600.
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withdrawal status based on systemic
equipment problems for up to five (5)
business days, unless extended by IEX
Market Operations.
• For securities listed on exchanges
other than IEX—An IEX Market Maker
that wishes to withdraw quotations
shall contact IEX Regulation to obtain
excused withdrawal status prior to
withdrawing its quotations. Excused
withdrawal status based on illness,
vacations or physical circumstances
beyond the Market Maker’s control may
be granted for up to five (5) business
days, unless extended by IEX
Regulation. Excused withdrawal status
based on investment activity or advice
of legal counsel, accompanied by a
representation that the condition
necessitating the withdrawal of
quotations is not permanent in nature,
may, upon written request, be granted
for not more than sixty (60) days. The
withdrawal of quotations because of
pending news, a sudden influx of orders
or price changes, or to effect
transactions with competitors shall not
normally constitute acceptable reasons
for granting excused withdrawal status,
unless IEX has initiated a trading halt
for Market Makers in the security,
pursuant to IEX Rule 11.280.8
• Failure to maintain a clearing
arrangement—Excused withdrawal
status may be granted to an IEX Market
Maker that fails to maintain a clearing
arrangement with a registered clearing
agency or with a Member of such an
agency and is withdrawn from
participation in the trade reporting
service of the Exchange, thereby
terminating its registration as an IEX
Market Maker.9
Other than for systemic equipment
problems, a Market Maker that wishes to
withdraw quotations in a security shall
contact IEX Regulation to obtain
excused withdrawal status prior to
withdrawing its quotations.
Withdrawals of quotations shall be
granted by IEX Regulation only upon
satisfying one of the conditions
specified in Rule 11.152, as described
above.
49915
Proposed Rule Change
IEX proposes to amend paragraph (c)
of Rule 11.152 to add provisions for a
Market Maker to obtain excused
withdrawal status for securities listed
on IEX. As proposed, a Market Maker in
a security listed on IEX may obtain
excused withdrawal status, thereby
temporarily suspending its obligation to
comply with the two-sided quotation
obligation of Rule 11.151, under the
following circumstances:
• Circumstances beyond the Market
Maker’s control—Excused withdrawal
status based on circumstances beyond
the IEX Market Maker’s control,10 other
than systemic equipment problems, may
be granted for up to five (5) business
days, unless extended by IEX
Regulation.
• Legal or regulatory requirements—
Excused withdrawal status based on
demonstrated legal or regulatory
requirements,11 supported by
appropriate documentation and
accompanied by a representation that
the condition necessitating the
withdrawal of quotations is not
permanent in nature, may, upon
notification, be granted for not more
than sixty (60) days (unless such request
is required to be made pursuant to
proposed amendments to paragraph (e)
related to the Member that operates the
Market Maker acting as a manager,
distribution participant or affiliated
purchaser of a distribution in the
security for which it seeks excused
withdrawal status).
• Religious holidays—Excused
withdrawal status based on religious
holidays may be granted only if written
notice is received by IEX one business
day in advance and is approved by IEX.
• Vacation—Excused withdrawal
status based on vacation may be granted
only if: (A) The written request for
withdrawal is received by IEX one
business day in advance, and is
approved by IEX; (B) The request
includes a list of securities for which
withdrawal is requested; and (C) The
request is made by an IEX Market Maker
that meets the definition of a ‘‘Small
Firm Member’’ pursuant to Definition Y
of the FINRA Restated Certification of
Incorporation, even if the IEX Market
Maker is not a FINRA member.12
As proposed, the withdrawal of
quotations because of pending news, a
sudden influx of orders or price
8 Note, as described further below, the Exchange
proposes to delete the final clause of this provision,
which provides an exception for a trading halt
initiated for Market Makers pursuant to IEX Rule
11.280. IEX Rule 11.280 (Limit Up-Limit Down Plan
and Trading Halts), does not include a provision
regarding a halt for Market Makers, and thus the
cross-reference has no practical effect.
9 However, if IEX finds that the IEX Market
Maker’s failure to maintain a clearing arrangement
is voluntary, the withdrawal of quotations will be
considered voluntary and unexcused.
10 Such circumstances would include, without
limitation, unpredictable events such as jury duty,
bomb threats or other physical security issues, the
birth of a child, or sudden illness.
11 Such requirements would include, for example,
possession of material nonpublic information
regarding the security in question for which the
Market Maker is seeking excused withdrawal status.
12 In the event that FINRA’s definition of a ‘‘Small
Firm Member’’ is changed, IEX will file a rule
change to address any such change in proposed
Rule 11.152(c)(1)(C).
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
changes, or to effect transactions with
competitors shall not constitute
acceptable reasons for granting excused
withdrawal status.
The Exchange also proposes to amend
paragraph (e) of Rule 11.152, which is
currently reserved, to add provisions to
provide that excused withdrawal status
may be granted to an IEX Market Maker
that is a distribution participant or an
affiliated purchaser in order to comply
with SEC Rule 101 or 104 under the Act.
As proposed, such excused withdrawal
status may be granted under the
following conditions:
• Subparagraph (e)(1) of Rule 11.152
provides that a member acting as a
manager (or in a similar capacity) of a
distribution of a security that is a
subject security or reference security
under SEC Rule 101 and any member
that is a distribution participant or an
affiliated purchaser in such a
distribution that does not have a
manager shall provide written notice to
IEX Regulation and the Market
Regulation Department of FINRA no
later than the business day prior to the
first entire trading session of the oneday or five-day restricted period under
SEC Rule 101, unless later notification
is necessary under the specific
circumstances.
Æ The notice required by
subparagraph (e)(1) shall be provided by
submitting a completed Underwriting
Activity Report that includes a request
on behalf of each IEX Market Maker that
is a distribution participant or an
affiliated purchaser to withdraw the IEX
Market Maker’s quotations and includes
the contemplated date and time of the
commencement of the restricted period.
Æ The managing underwriter shall
advise each IEX Market Maker that it
has been identified as a distribution
participant or an affiliated purchaser to
IEX Regulation and that its quotations
will be automatically withdrawn, unless
a market maker that is a distribution
participant (or an affiliated purchaser of
a distribution participant) notifies IEX
Regulation as required by subparagraph
(e)(2) of Rule 11.152 of its intention not
to participate in the prospective
distribution in order to avoid having its
quotations withdrawn. Further,
subparagraph (e)(3) provides that if an
IEX Market Maker that is a distribution
participant withdraws its quotations in
an IEX-listed security in order to
comply with any provision of SEC Rules
101 or 104 and promptly notifies IEX
Regulation of its action, the withdrawal
shall be deemed an excused withdrawal.
In addition, subparagraph (e)(3)
provides that nothing in the
subparagraph shall prohibit IEX from
taking such action as is necessary under
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the circumstances against a Member and
its associated persons for failure to
contact IEX Regulation to obtain an
excused withdrawal as required by
subparagraphs (a) and (e) of Rule
11.152.
Æ Subparagraph (e)(5) of Rule 11.152
provides that a member acting as a
manager (or in a similar capacity of a
distribution subject to subparagraph
(e)(1)) of Rule 11.152 shall submit a
request on the Underwriting Activity
Report to IEX Regulation and the Market
Regulation Department of FINRA to
rescind the excused withdrawal status
of distribution participants and
affiliated purchasers, which request
shall include the date and time of the
pricing of the offering, the offering
price, and the time the offering
terminated, and, if not in writing, shall
be confirmed in writing no later than
the close of business the day the offering
terminates.
As noted above, the Exchange
proposes to delete the final clause of the
final sentence in Rule 11.152(c)
(described above), which states that the
withdrawal of quotations because of
pending news, a sudden influx of orders
or price changes, or to effect
transactions with competitors shall not
normally constitute acceptable reasons
for granting excused withdrawal status,
but provides an exception for a trading
halt initiated for Market Makers
pursuant to IEX Rule 11.280. IEX Rule
11.280 (Limit Up-Limit Down Plan and
Trading Halts), does not include a
provision granting the Exchange
authority to halt trading for Market
Makers, and thus the cross-reference has
no practical effect.13 The Exchange
further proposes to make a conforming
change to the preceding clause of the
final sentence in Rule 11.152(c), to
remove the qualifying term ‘‘normally’’
with regard to the circumstances that
will not constitute acceptable reasons
for granting excused withdrawal status,
because such qualification is no longer
necessary or applicable after the
Exchange removed the exception for a
trading halt initiated for Market Makers,
as described above. The proposed
deletion is designed to avoid any
potential confusion amongst market
makers regarding the reasons the
Exchange would find acceptable for
granting excused withdrawal status, and
make the Exchanges rules more clear,
concise, and accurate. Moreover,
pursuant to Rule 11.151(a)(2), in the
13 The Exchange notes that this provision was
inadvertently included in the Exchange’s original
rule set, and is substantially similar to Nasdaq Rule
4619(c)(2), which provides an identical exception
for a trading halt initiated for Nasdaq market
makers pursuant to Nasdaq Rule 4120.
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event a security is subject to a trading
halt, the Market Maker’s pricing
obligations are suspended, and do not
re-commence until after the first regular
way transaction on the primary listing
market in the security following such
halt, as reported by the responsible
single plan processor.
Finally, IEX proposes to correct a
typographical [sic] in a cross-reference
in paragraph (d) of Rule 11.152. As
described above, paragraph (d) provides
that excused withdrawal status may be
granted to an IEX Market Maker that
fails to maintain a clearing arrangement
with a registered clearing agency or with
a Member of such an agency and is
withdrawn from participation in the
trade reporting service of the Exchange,
thereby terminating its registration as an
IEX Market Maker. Paragraph (d) also
provides that if IEX finds that the
Market Maker’s failure to maintain a
clearance arrangement is voluntary, the
withdrawal of quotations will be
considered voluntary and unexcused
pursuant to Rule 2.190. However, the
reference to Rule 2.190 is incorrect and
should instead reference Rule 11.153
which provides that a Market Maker
may voluntarily terminate its
registration in a security by
withdrawing its two-sided quotation
from the Exchange, and also describes
the timeframes for registration after such
a termination, including in the case of
failure to maintain a clearance
arrangement. Rule 2.190 governs
voluntary termination of rights as a
Member, which is not relevant to the
provisions of paragraph (d), which
relate to treating a voluntary failure to
maintain a clearance arrangement as a
voluntary termination of Market Maker
registration. Accordingly, the Exchange
proposes to correct this typographical
error.
As proposed, the amendments to IEX
Rule 11.152 would substantially
conform the Rule to Nasdaq Stock
Market LLC (‘‘Nasdaq’’) Rule 4619, with
minor nonsubstantive differences in
terminology. Further, the proposed
changes to IEX Rule 11.152(e) do not
include provisions for passive market
making pursuant to Rule 103 of
Regulation M, which only applies to
Nasdaq registered market makers.14
2. Statutory Basis
IEX believes that the proposed rule
change is consistent with the provisions
of Section 6 of the Act 15 in general, and
furthers the objectives of Section
6(b)(5) 16 of the Act in particular, in that
14 17
CFR 242.103.
U.S.C. 78f.
16 15 U.S.C. 78f(b)(5).
15 15
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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 change supports these objectives
because it is designed to provide
appropriate, objective and transparent
criteria for an IEX Market Maker in
securities listed on IEX to withdraw its
quotations and obtain excused
withdrawal status. The Exchange further
believes that the proposed rule change
is consistent with the protection of
investors and the public interest
because the criteria to obtain excused
withdrawal status accommodate
legitimate issues that may be
periodically encountered by IEX Market
Makers that warrant an excused
withdrawal, and are not designed to
enable IEX Market Makers to avoid or
circumvent their market making
obligations through inappropriate
excused withdrawals. The proposed
changes to IEX Rule 11.152 are
substantially similar to existing
provisions of Nasdaq Rule 4619, subject
to several minor differences described
below. Thus, the Exchange does not
believe that this rule change raises any
new or novel issues not already
considered by the Commission. Further,
the Exchange believes that the proposed
rule change is reasonable, equitable, and
not unfairly discriminatory because all
IEX Market Makers will be subject to the
same requirements for excused
withdrawals in securities listed on IEX.
Specifically, the Exchange believes
that it is consistent with the protection
of investors and the public interest to
allow a Market Maker to obtain excused
withdrawal status based on
circumstances outside the Market
Maker’s control for up to five business
days, unless extended by IEX
Regulation, to provide appropriate
accommodation for unpredictable
events such as jury duty, bomb threats
or other physical security issues, the
birth of a child, or sudden illness. While
the Exchange anticipates that Market
Makers will utilize automated
algorithms and other systemic tools to
comply with the applicable quoting
requirements, such systemic tools
nonetheless must be overseen by one or
more individuals who may experience
unpredictable events that require time
off. The Exchange believes that the
permitted time period of up to five
business days, unless extended, is
reasonable and comports with the
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length of time that unpredictable events
generally last. The proposed
amendments to Rule 11.152(c) in this
regard are substantially identical to
Nasdaq Rule 4619 (c) except for
nonsubstantive terminology differences
to refer to IEX rather than Nasdaq.
The Exchange additionally believes
that it is consistent with the protection
of investors and the public interest to
allow a Market Maker to obtain excused
withdrawal status based on
demonstrated legal or regulatory
requirements, for not more than 60 days,
as described in the Purpose section to
provide appropriate relief when a
Market Maker is prohibited from trading
in a particular security, such as if a
Market Maker is in possession of
material nonpublic information
regarding a security in which it is
registered. The Exchange believes that
60 days is a reasonable amount of time
for the legal or regulatory requirement to
be resolved, and that if it persists
beyond that time period it would be
appropriate for the Market Maker to
terminate its registration in the security
in question. The proposed amendments
to Rule 11.152(c) in this regard are
substantially identical to Nasdaq Rule
4619(c) except for nonsubstantive
terminology differences to refer to IEX
rather than Nasdaq.
The Exchange also believes that it is
consistent with the protection of
investors and the public interest to
allow a Market Maker to obtain excused
withdrawal status based on religious
holidays to provide for such
observances by the individual(s)
overseeing Market Maker systemic tools
in the case of religious holidays when
IEX is open. The proposed amendments
to Rule 11.152(c) in this regard are
substantially identical to Nasdaq Rule
4619(c) except for nonsubstantive
terminology differences to refer to IEX
rather than Nasdaq.
The Exchange further believes that it
is consistent with the protection of
investors and the public interest to
allow a Market Maker to obtain excused
withdrawal status based on vacation,
but to limit such excused withdrawals
to the circumstances described in the
Purpose section, including that the
Market Maker meets the definition of a
FINRA Small Firm Member, even if the
IEX Market Maker is not a FINRA
member. The Exchange believes that
Market Makers should generally be able
to manage staff vacations so that it can
oversee its market making activity, but
recognizes that smaller firms may not
have adequate staff in this regard. The
Exchange notes that Nasdaq Rule 4619
provides similar relief for vacations, but
limits such relief to a market maker with
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49917
three or fewer Nasdaq level 3 terminals,
which it believes is designed to
similarly identify smaller firms. Since
IEX Market Makers will not use Nasdaq
terminals to connect to IEX, the
Exchange believes that reference to the
FINRA definition of a Small Member
Firm is an appropriate alternative
measure to account for smaller firms
that serve as IEX Market Makers. Other
than this difference, the proposed
amendments to Rule 11.152(c) in this
regard are substantially identical to
Nasdaq Rule 4619(c) except for
nonsubstantive terminology differences
to refer to IEX rather than Nasdaq.
Further, the Exchange believes that it
is consistent with the protection of
investors and the public interest to
allow a Market Maker to obtain excused
withdrawal status in order to comply
with SEC Rule 101 or 104 under the Act
on the conditions described in the
Purpose section. The Exchange notes
that Rules 101 and 104 are part of
Regulation M, which governs the
activities of underwriters, issuers,
selling security holders, and others in
connection with offerings of securities,
and is intended to preclude
manipulative conduct by persons with
an interest in the outcome of an
offering.17 The proposed amendments to
IEX Rule 11.152(e) are designed to
facilitate IEX Market Makers’
compliance with SEC Rules 101 and 104
and support the objectives of Regulation
M generally. The proposed changes to
IEX Rule 11.152(e) in this regard are
substantially identical to Nasdaq Rule
4619(e) except that they do not include
provisions for passive market making
pursuant to Rule 103 of Regulation M,
which only applies to Nasdaq registered
market makers, as discussed in the
Purpose section.
In addition, the Exchange believes
that it is consistent with the Act to
delete the final clause of Rule 11.152(c),
as well as the related qualifying
language in the preceding clause,
because the proposed deletion is
designed to avoid any potential
confusion amongst market makers
regarding the reasons the Exchange
would find acceptable for granting
excused withdrawal status, and make
the Exchanges rules more clear, concise,
and accurate.
Finally, the Exchange believes that it
is consistent with the Act to correct the
cross-reference typographical error in
paragraph (d) of Rule 11.152 to promote
clarity and consistency among market
participants thereby facilitating investor
protection and the public interest. The
17 Securities Exchange Act Release No. 34–38067
(January 3, 1997), 62 FR 520 (File No. S7–11–96).
E:\FR\FM\27OCN1.SGM
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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices
corrected cross-reference is substantially
identical to the cross reference in
Nasdaq Rule 4619(d) to Nasdaq Rule
4620, which in turn is substantially
identical to IEX Rule 11.153.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is designed to
provide appropriate, objective and
transparent criteria for Market Maker
excused withdrawals in securities listed
on IEX. The Exchange does not believe
that the proposed rule change will result
in any burden on intramarket
competition because all Market Makers
will be subject to the same criteria. The
Exchange also does not believe that the
proposed rule change will result in any
burden on intermarket competition,
since Nasdaq has substantially similar
criteria for excused withdrawals and
other exchanges are free to adopt
comparable criteria. The Exchange also
believes that the proposed rule change
will serve to promote clarity and
consistency, as noted in the Statutory
Basis section, thereby reducing burdens
on competition and facilitating investor
protection.
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.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and Rule 19b–4(f)(6)
thereunder.19
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
19 17
VerDate Sep<11>2014
17:54 Oct 26, 2017
Jkt 244001
A proposed rule change filed under
Rule 19b–4(f)(6) 20 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),21 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The
Commission believes that waiver of the
operative delay is consistent with the
protection of investors and the public
interest because the Exchange’s
proposed rule change will conform
IEX’s rules to a substantially similar
provision in the rules of Nasdaq, and
the Exchange’s proposal does not raise
any new or novel issues. Accordingly,
the Commission hereby waives the 30day operative delay requirement and
designates the proposed rule change as
operative upon filing.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
All submissions should refer to File
Number SR–IEX–2017–37. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–IEX–2017–37, and should
be submitted on or before November 17,
2017.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
Electronic Comments
BILLING CODE 8011–01–P
• 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–2017–37 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.
20 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
22 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
21 17
PO 00000
Frm 00138
Fmt 4703
Sfmt 4703
[FR Doc. 2017–23375 Filed 10–26–17; 8:45 am]
SOCIAL SECURITY ADMINISTRATION
[Docket No. SSA 2017–0010]
Privacy Act of 1974, as Amended;
Computer Matching Program (SSA/the
Department of Labor (DOL)—Match
Number 1003)
AGENCY:
Social Security Administration
(SSA).
Notice of a renewal of an
existing computer matching program
that will expire on May 24, 2017.
ACTION:
In accordance with the
provisions of the Privacy Act, as
SUMMARY:
23 17
E:\FR\FM\27OCN1.SGM
CFR 200.30–3(a)(12).
27OCN1
]]>Agencies
[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Notices]
[Pages 49914-49918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23375]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81922; File No. SR-IEX-2017-37]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 11.152 To Add Provisions Related to Market Maker Withdrawals of
Quotations in Securities Listed on the Investors Exchange
October 23, 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 October 19, 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 amend Rule 11.152 to add
provisions related to Market Maker withdrawals of quotations in
securities listed on IEX, remove an incorrect cross reference in
paragraph (c), and to correct a typographical error in a cross-
reference in paragraph (d). The Exchange has designated this proposal
as ``non-controversial'' and provided the Commission with the notice
required by Rule 19b-4(f)(6)(iii) under the Act.\6\ The text of the
proposed rule change is available at the Exchange's Web site at
www.iextrading.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
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
[[Page 49915]]
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statement [sic] may be examined at the places
specified in Item IV below. The self-regulatory organization has
prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
On June 17, 2016, the Commission granted IEX's application for
registration as a national securities exchange under Section 6 of the
Act including approval of rules applicable to the qualification,
listing and delisting of companies on the Exchange. The Exchange plans
to begin a listing program in the fourth quarter of 2017 and is
proposing to amend Rule 11.152 to add provisions related to Market
Maker withdrawals of quotations in securities listed on IEX.
IEX Rules 11.150 through 11.154 contain provisions applicable to
IEX Market Makers, including registration, quotation obligations,
withdrawal of quotations, voluntary termination of registration, and
suspension and termination of quotations. Pursuant to Rule 11.151 a
Member registered as a Market Maker is required to maintain a two-sided
quotation within the designated percentage of the National Best Bid
(``NBB'') and National Best Offer (``NBO''),\7\ as appropriate.
---------------------------------------------------------------------------
\7\ As defined by Regulation NMS Rule 600(b)(42). 17 CFR
242.600.
---------------------------------------------------------------------------
IEX Rule 11.152 governs the requirements for a Market Maker to
obtain excused withdrawal status thereby temporarily suspending its
obligation to comply with the two-sided quotation obligation of Rule
11.151. Specifically, Rule 11.152 provides the ability for a Market
Maker to obtain excused withdrawal status under the following
circumstances:
Systemic equipment problems--An IEX Market Maker that
wishes to obtain excused withdrawal status based on a market maker's
systemic equipment problems, such as defects in an IEX Market Maker's
software or hardware systems or connectivity problems associated with
the circuits connecting Exchange systems with the IEX Market Maker's
systems, shall contact IEX Market Operations. IEX Market Operations may
grant excused withdrawal status based on systemic equipment problems
for up to five (5) business days, unless extended by IEX Market
Operations.
For securities listed on exchanges other than IEX--An IEX
Market Maker that wishes to withdraw quotations shall contact IEX
Regulation to obtain excused withdrawal status prior to withdrawing its
quotations. Excused withdrawal status based on illness, vacations or
physical circumstances beyond the Market Maker's control may be granted
for up to five (5) business days, unless extended by IEX Regulation.
Excused withdrawal status based on investment activity or advice of
legal counsel, accompanied by a representation that the condition
necessitating the withdrawal of quotations is not permanent in nature,
may, upon written request, be granted for not more than sixty (60)
days. The withdrawal of quotations because of pending news, a sudden
influx of orders or price changes, or to effect transactions with
competitors shall not normally constitute acceptable reasons for
granting excused withdrawal status, unless IEX has initiated a trading
halt for Market Makers in the security, pursuant to IEX Rule 11.280.\8\
---------------------------------------------------------------------------
\8\ Note, as described further below, the Exchange proposes to
delete the final clause of this provision, which provides an
exception for a trading halt initiated for Market Makers pursuant to
IEX Rule 11.280. IEX Rule 11.280 (Limit Up-Limit Down Plan and
Trading Halts), does not include a provision regarding a halt for
Market Makers, and thus the cross-reference has no practical effect.
---------------------------------------------------------------------------
Failure to maintain a clearing arrangement--Excused
withdrawal status may be granted to an IEX Market Maker that fails to
maintain a clearing arrangement with a registered clearing agency or
with a Member of such an agency and is withdrawn from participation in
the trade reporting service of the Exchange, thereby terminating its
registration as an IEX Market Maker.\9\
---------------------------------------------------------------------------
\9\ However, if IEX finds that the IEX Market Maker's failure to
maintain a clearing arrangement is voluntary, the withdrawal of
quotations will be considered voluntary and unexcused.
---------------------------------------------------------------------------
Other than for systemic equipment problems, a Market Maker that
wishes to withdraw quotations in a security shall contact IEX
Regulation to obtain excused withdrawal status prior to withdrawing its
quotations. Withdrawals of quotations shall be granted by IEX
Regulation only upon satisfying one of the conditions specified in Rule
11.152, as described above.
Proposed Rule Change
IEX proposes to amend paragraph (c) of Rule 11.152 to add
provisions for a Market Maker to obtain excused withdrawal status for
securities listed on IEX. As proposed, a Market Maker in a security
listed on IEX may obtain excused withdrawal status, thereby temporarily
suspending its obligation to comply with the two-sided quotation
obligation of Rule 11.151, under the following circumstances:
Circumstances beyond the Market Maker's control--Excused
withdrawal status based on circumstances beyond the IEX Market Maker's
control,\10\ other than systemic equipment problems, may be granted for
up to five (5) business days, unless extended by IEX Regulation.
---------------------------------------------------------------------------
\10\ Such circumstances would include, without limitation,
unpredictable events such as jury duty, bomb threats or other
physical security issues, the birth of a child, or sudden illness.
---------------------------------------------------------------------------
Legal or regulatory requirements--Excused withdrawal
status based on demonstrated legal or regulatory requirements,\11\
supported by appropriate documentation and accompanied by a
representation that the condition necessitating the withdrawal of
quotations is not permanent in nature, may, upon notification, be
granted for not more than sixty (60) days (unless such request is
required to be made pursuant to proposed amendments to paragraph (e)
related to the Member that operates the Market Maker acting as a
manager, distribution participant or affiliated purchaser of a
distribution in the security for which it seeks excused withdrawal
status).
---------------------------------------------------------------------------
\11\ Such requirements would include, for example, possession of
material nonpublic information regarding the security in question
for which the Market Maker is seeking excused withdrawal status.
---------------------------------------------------------------------------
Religious holidays--Excused withdrawal status based on
religious holidays may be granted only if written notice is received by
IEX one business day in advance and is approved by IEX.
Vacation--Excused withdrawal status based on vacation may
be granted only if: (A) The written request for withdrawal is received
by IEX one business day in advance, and is approved by IEX; (B) The
request includes a list of securities for which withdrawal is
requested; and (C) The request is made by an IEX Market Maker that
meets the definition of a ``Small Firm Member'' pursuant to Definition
Y of the FINRA Restated Certification of Incorporation, even if the IEX
Market Maker is not a FINRA member.\12\
---------------------------------------------------------------------------
\12\ In the event that FINRA's definition of a ``Small Firm
Member'' is changed, IEX will file a rule change to address any such
change in proposed Rule 11.152(c)(1)(C).
---------------------------------------------------------------------------
As proposed, the withdrawal of quotations because of pending news,
a sudden influx of orders or price
[[Page 49916]]
changes, or to effect transactions with competitors shall not
constitute acceptable reasons for granting excused withdrawal status.
The Exchange also proposes to amend paragraph (e) of Rule 11.152,
which is currently reserved, to add provisions to provide that excused
withdrawal status may be granted to an IEX Market Maker that is a
distribution participant or an affiliated purchaser in order to comply
with SEC Rule 101 or 104 under the Act. As proposed, such excused
withdrawal status may be granted under the following conditions:
Subparagraph (e)(1) of Rule 11.152 provides that a member
acting as a manager (or in a similar capacity) of a distribution of a
security that is a subject security or reference security under SEC
Rule 101 and any member that is a distribution participant or an
affiliated purchaser in such a distribution that does not have a
manager shall provide written notice to IEX Regulation and the Market
Regulation Department of FINRA no later than the business day prior to
the first entire trading session of the one-day or five-day restricted
period under SEC Rule 101, unless later notification is necessary under
the specific circumstances.
[cir] The notice required by subparagraph (e)(1) shall be provided
by submitting a completed Underwriting Activity Report that includes a
request on behalf of each IEX Market Maker that is a distribution
participant or an affiliated purchaser to withdraw the IEX Market
Maker's quotations and includes the contemplated date and time of the
commencement of the restricted period.
[cir] The managing underwriter shall advise each IEX Market Maker
that it has been identified as a distribution participant or an
affiliated purchaser to IEX Regulation and that its quotations will be
automatically withdrawn, unless a market maker that is a distribution
participant (or an affiliated purchaser of a distribution participant)
notifies IEX Regulation as required by subparagraph (e)(2) of Rule
11.152 of its intention not to participate in the prospective
distribution in order to avoid having its quotations withdrawn.
Further, subparagraph (e)(3) provides that if an IEX Market Maker that
is a distribution participant withdraws its quotations in an IEX-listed
security in order to comply with any provision of SEC Rules 101 or 104
and promptly notifies IEX Regulation of its action, the withdrawal
shall be deemed an excused withdrawal. In addition, subparagraph (e)(3)
provides that nothing in the subparagraph shall prohibit IEX from
taking such action as is necessary under the circumstances against a
Member and its associated persons for failure to contact IEX Regulation
to obtain an excused withdrawal as required by subparagraphs (a) and
(e) of Rule 11.152.
[cir] Subparagraph (e)(5) of Rule 11.152 provides that a member
acting as a manager (or in a similar capacity of a distribution subject
to subparagraph (e)(1)) of Rule 11.152 shall submit a request on the
Underwriting Activity Report to IEX Regulation and the Market
Regulation Department of FINRA to rescind the excused withdrawal status
of distribution participants and affiliated purchasers, which request
shall include the date and time of the pricing of the offering, the
offering price, and the time the offering terminated, and, if not in
writing, shall be confirmed in writing no later than the close of
business the day the offering terminates.
As noted above, the Exchange proposes to delete the final clause of
the final sentence in Rule 11.152(c) (described above), which states
that the withdrawal of quotations because of pending news, a sudden
influx of orders or price changes, or to effect transactions with
competitors shall not normally constitute acceptable reasons for
granting excused withdrawal status, but provides an exception for a
trading halt initiated for Market Makers pursuant to IEX Rule 11.280.
IEX Rule 11.280 (Limit Up-Limit Down Plan and Trading Halts), does not
include a provision granting the Exchange authority to halt trading for
Market Makers, and thus the cross-reference has no practical
effect.\13\ The Exchange further proposes to make a conforming change
to the preceding clause of the final sentence in Rule 11.152(c), to
remove the qualifying term ``normally'' with regard to the
circumstances that will not constitute acceptable reasons for granting
excused withdrawal status, because such qualification is no longer
necessary or applicable after the Exchange removed the exception for a
trading halt initiated for Market Makers, as described above. The
proposed deletion is designed to avoid any potential confusion amongst
market makers regarding the reasons the Exchange would find acceptable
for granting excused withdrawal status, and make the Exchanges rules
more clear, concise, and accurate. Moreover, pursuant to Rule
11.151(a)(2), in the event a security is subject to a trading halt, the
Market Maker's pricing obligations are suspended, and do not re-
commence until after the first regular way transaction on the primary
listing market in the security following such halt, as reported by the
responsible single plan processor.
---------------------------------------------------------------------------
\13\ The Exchange notes that this provision was inadvertently
included in the Exchange's original rule set, and is substantially
similar to Nasdaq Rule 4619(c)(2), which provides an identical
exception for a trading halt initiated for Nasdaq market makers
pursuant to Nasdaq Rule 4120.
---------------------------------------------------------------------------
Finally, IEX proposes to correct a typographical [sic] in a cross-
reference in paragraph (d) of Rule 11.152. As described above,
paragraph (d) provides that excused withdrawal status may be granted to
an IEX Market Maker that fails to maintain a clearing arrangement with
a registered clearing agency or with a Member of such an agency and is
withdrawn from participation in the trade reporting service of the
Exchange, thereby terminating its registration as an IEX Market Maker.
Paragraph (d) also provides that if IEX finds that the Market Maker's
failure to maintain a clearance arrangement is voluntary, the
withdrawal of quotations will be considered voluntary and unexcused
pursuant to Rule 2.190. However, the reference to Rule 2.190 is
incorrect and should instead reference Rule 11.153 which provides that
a Market Maker may voluntarily terminate its registration in a security
by withdrawing its two-sided quotation from the Exchange, and also
describes the timeframes for registration after such a termination,
including in the case of failure to maintain a clearance arrangement.
Rule 2.190 governs voluntary termination of rights as a Member, which
is not relevant to the provisions of paragraph (d), which relate to
treating a voluntary failure to maintain a clearance arrangement as a
voluntary termination of Market Maker registration. Accordingly, the
Exchange proposes to correct this typographical error.
As proposed, the amendments to IEX Rule 11.152 would substantially
conform the Rule to Nasdaq Stock Market LLC (``Nasdaq'') Rule 4619,
with minor nonsubstantive differences in terminology. Further, the
proposed changes to IEX Rule 11.152(e) do not include provisions for
passive market making pursuant to Rule 103 of Regulation M, which only
applies to Nasdaq registered market makers.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 242.103.
---------------------------------------------------------------------------
2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act \15\ in general, and furthers the
objectives of Section 6(b)(5) \16\ of the Act in particular, in that
[[Page 49917]]
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 change
supports these objectives because it is designed to provide
appropriate, objective and transparent criteria for an IEX Market Maker
in securities listed on IEX to withdraw its quotations and obtain
excused withdrawal status. The Exchange further believes that the
proposed rule change is consistent with the protection of investors and
the public interest because the criteria to obtain excused withdrawal
status accommodate legitimate issues that may be periodically
encountered by IEX Market Makers that warrant an excused withdrawal,
and are not designed to enable IEX Market Makers to avoid or circumvent
their market making obligations through inappropriate excused
withdrawals. The proposed changes to IEX Rule 11.152 are substantially
similar to existing provisions of Nasdaq Rule 4619, subject to several
minor differences described below. Thus, the Exchange does not believe
that this rule change raises any new or novel issues not already
considered by the Commission. Further, the Exchange believes that the
proposed rule change is reasonable, equitable, and not unfairly
discriminatory because all IEX Market Makers will be subject to the
same requirements for excused withdrawals in securities listed on IEX.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Specifically, the Exchange believes that it is consistent with the
protection of investors and the public interest to allow a Market Maker
to obtain excused withdrawal status based on circumstances outside the
Market Maker's control for up to five business days, unless extended by
IEX Regulation, to provide appropriate accommodation for unpredictable
events such as jury duty, bomb threats or other physical security
issues, the birth of a child, or sudden illness. While the Exchange
anticipates that Market Makers will utilize automated algorithms and
other systemic tools to comply with the applicable quoting
requirements, such systemic tools nonetheless must be overseen by one
or more individuals who may experience unpredictable events that
require time off. The Exchange believes that the permitted time period
of up to five business days, unless extended, is reasonable and
comports with the length of time that unpredictable events generally
last. The proposed amendments to Rule 11.152(c) in this regard are
substantially identical to Nasdaq Rule 4619 (c) except for
nonsubstantive terminology differences to refer to IEX rather than
Nasdaq.
The Exchange additionally believes that it is consistent with the
protection of investors and the public interest to allow a Market Maker
to obtain excused withdrawal status based on demonstrated legal or
regulatory requirements, for not more than 60 days, as described in the
Purpose section to provide appropriate relief when a Market Maker is
prohibited from trading in a particular security, such as if a Market
Maker is in possession of material nonpublic information regarding a
security in which it is registered. The Exchange believes that 60 days
is a reasonable amount of time for the legal or regulatory requirement
to be resolved, and that if it persists beyond that time period it
would be appropriate for the Market Maker to terminate its registration
in the security in question. The proposed amendments to Rule 11.152(c)
in this regard are substantially identical to Nasdaq Rule 4619(c)
except for nonsubstantive terminology differences to refer to IEX
rather than Nasdaq.
The Exchange also believes that it is consistent with the
protection of investors and the public interest to allow a Market Maker
to obtain excused withdrawal status based on religious holidays to
provide for such observances by the individual(s) overseeing Market
Maker systemic tools in the case of religious holidays when IEX is
open. The proposed amendments to Rule 11.152(c) in this regard are
substantially identical to Nasdaq Rule 4619(c) except for
nonsubstantive terminology differences to refer to IEX rather than
Nasdaq.
The Exchange further believes that it is consistent with the
protection of investors and the public interest to allow a Market Maker
to obtain excused withdrawal status based on vacation, but to limit
such excused withdrawals to the circumstances described in the Purpose
section, including that the Market Maker meets the definition of a
FINRA Small Firm Member, even if the IEX Market Maker is not a FINRA
member. The Exchange believes that Market Makers should generally be
able to manage staff vacations so that it can oversee its market making
activity, but recognizes that smaller firms may not have adequate staff
in this regard. The Exchange notes that Nasdaq Rule 4619 provides
similar relief for vacations, but limits such relief to a market maker
with three or fewer Nasdaq level 3 terminals, which it believes is
designed to similarly identify smaller firms. Since IEX Market Makers
will not use Nasdaq terminals to connect to IEX, the Exchange believes
that reference to the FINRA definition of a Small Member Firm is an
appropriate alternative measure to account for smaller firms that serve
as IEX Market Makers. Other than this difference, the proposed
amendments to Rule 11.152(c) in this regard are substantially identical
to Nasdaq Rule 4619(c) except for nonsubstantive terminology
differences to refer to IEX rather than Nasdaq.
Further, the Exchange believes that it is consistent with the
protection of investors and the public interest to allow a Market Maker
to obtain excused withdrawal status in order to comply with SEC Rule
101 or 104 under the Act on the conditions described in the Purpose
section. The Exchange notes that Rules 101 and 104 are part of
Regulation M, which governs the activities of underwriters, issuers,
selling security holders, and others in connection with offerings of
securities, and is intended to preclude manipulative conduct by persons
with an interest in the outcome of an offering.\17\ The proposed
amendments to IEX Rule 11.152(e) are designed to facilitate IEX Market
Makers' compliance with SEC Rules 101 and 104 and support the
objectives of Regulation M generally. The proposed changes to IEX Rule
11.152(e) in this regard are substantially identical to Nasdaq Rule
4619(e) except that they do not include provisions for passive market
making pursuant to Rule 103 of Regulation M, which only applies to
Nasdaq registered market makers, as discussed in the Purpose section.
---------------------------------------------------------------------------
\17\ Securities Exchange Act Release No. 34-38067 (January 3,
1997), 62 FR 520 (File No. S7-11-96).
---------------------------------------------------------------------------
In addition, the Exchange believes that it is consistent with the
Act to delete the final clause of Rule 11.152(c), as well as the
related qualifying language in the preceding clause, because the
proposed deletion is designed to avoid any potential confusion amongst
market makers regarding the reasons the Exchange would find acceptable
for granting excused withdrawal status, and make the Exchanges rules
more clear, concise, and accurate.
Finally, the Exchange believes that it is consistent with the Act
to correct the cross-reference typographical error in paragraph (d) of
Rule 11.152 to promote clarity and consistency among market
participants thereby facilitating investor protection and the public
interest. The
[[Page 49918]]
corrected cross-reference is substantially identical to the cross
reference in Nasdaq Rule 4619(d) to Nasdaq Rule 4620, which in turn is
substantially identical to IEX Rule 11.153.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
designed to provide appropriate, objective and transparent criteria for
Market Maker excused withdrawals in securities listed on IEX. The
Exchange does not believe that the proposed rule change will result in
any burden on intramarket competition because all Market Makers will be
subject to the same criteria. The Exchange also does not believe that
the proposed rule change will result in any burden on intermarket
competition, since Nasdaq has substantially similar criteria for
excused withdrawals and other exchanges are free to adopt comparable
criteria. The Exchange also believes that the proposed rule change will
serve to promote clarity and consistency, as noted in the Statutory
Basis section, thereby reducing burdens on competition and facilitating
investor protection.
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
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6)
thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiver of the operative delay is consistent with the protection of
investors and the public interest because the Exchange's proposed rule
change will conform IEX's rules to a substantially similar provision in
the rules of Nasdaq, and the Exchange's proposal does not raise any new
or novel issues. Accordingly, the Commission hereby waives the 30-day
operative delay requirement and designates the proposed rule change as
operative upon filing.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-IEX-2017-37 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-2017-37. 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 the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-IEX-2017-37, and should be
submitted on or before November 17, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Eduardo A. Aleman,
Assistant Secretary.
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\23\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-23375 Filed 10-26-17; 8:45 am]
BILLING CODE 8011-01-P
