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]

Download as PDF 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. asabaliauskas on DSKBBXCHB2PROD with NOTICES 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 VerDate Sep<11>2014 17:54 Oct 26, 2017 Jkt 244001 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– 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 (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 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 PO 00000 CFR 200.30–3(a)(12). Frm 00134 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27OCN1.SGM 27OCN1 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 asabaliauskas on DSKBBXCHB2PROD with NOTICES 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. VerDate Sep<11>2014 17:54 Oct 26, 2017 Jkt 244001 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). PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 E:\FR\FM\27OCN1.SGM 27OCN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES 49916 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 VerDate Sep<11>2014 17:54 Oct 26, 2017 Jkt 244001 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. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27OCN1.SGM 27OCN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / Notices 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 VerDate Sep<11>2014 17:54 Oct 26, 2017 Jkt 244001 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 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 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 27OCN1 49918 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 (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 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 (http://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]


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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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
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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.
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    \7\ As defined by Regulation NMS Rule 600(b)(42). 17 CFR 
242.600.
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    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\
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    \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\
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    \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.
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    \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).
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    \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.
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     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\
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    \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.
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    \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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    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\
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    \14\ 17 CFR 242.103.
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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).
---------------------------------------------------------------------------

    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 (http://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 (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 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