Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Fee Schedule, Pursuant to IEX Rule 15.110(a) and (c), To Adopt Pricing for Orders That Execute in an IEX Auction for IEX-Listed Securities, 56089-56093 [2017-25471]
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Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
[Release No. 34–82127; File No. SR–IEX–
2017–40]
12:00 p.m. on Friday,
December 1, 2017.
TIME AND DATE:
Closed Commission Hearing
Room 10800.
PLACE:
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (a)(5), (a)(7),
(a)(9)(ii) and (a)(10), permit
consideration of the scheduled matters
at the closed meeting.
Commissioner Stein, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Adjudicatory matter; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
Dated: November 22, 2017.
Brent J. Fields,
Secretary.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
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 (date),
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, II and III
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 IEX is filing with the
Commission a proposed rule change to
modify its Fee Schedule, pursuant to
IEX Rule 15.110(a) and (c), to adopt
pricing for orders that execute in an IEX
Auction 6 for IEX-listed securities
pursuant to Rule 11.350. Changes to the
Fee Schedule pursuant to this proposal
are effective upon filing, and will be
operative once the Exchange begins
conducting IEX Auctions in IEX-listed
securities.7 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.
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 CRF 240.19b–4.
6 IEX Auctions include the daily Opening and
Closing Auctions (Rule 11.350(c) and (d),
respectively), as well as IPO Auctions related to an
initial public offering of securities (Rule 11.350(e)),
Halt Auctions following a regulatory halt (Rule
11.350(e)), and Volatility Auctions following a
trading pause pursuant to the Limit Up-Limit Down
Plan (Rule 11.350(f)).
7 See IEX Trader Alert #2017–015, available on
the Exchange public Web site.
2 15
BILLING CODE 8011–01–P
16:59 Nov 24, 2017
November 20, 2017.
1 15
[FR Doc. 2017–25701 Filed 11–22–17; 4:15 pm]
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Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Fee Schedule, Pursuant to IEX Rule
15.110(a) and (c), To Adopt Pricing for
Orders That Execute in an IEX Auction
for IEX-Listed Securities
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Fmt 4703
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56089
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On August 10, 2017, the Commission
approved a proposed rule change by the
Exchange to adopt rules governing
auctions, including dissemination of
auction-related market data, for
securities listed on the Exchange
pursuant to Chapter 14 of the IEX Rule
Book.8 The Exchange proposes to
update its Fee Schedule, pursuant to
IEX Rule 15.110(a) and (c), to add new
Fee Codes to identify the fees applicable
to orders that execute in IEX Auctions.
The IEX Auction processes are designed
to maximize participation in the
auctions in order to provide an efficient
price discovery process and greater
opportunity for execution at the official
auction price. The Exchange believes
that fees are an important component of
the IEX Auction processes, in that
execution fees can influence the trading
behavior of Members by creating
economic incentives (and disincentives)
for Members that participate in IEX
Auctions. Thus, the Exchange is
proposing fees that are similarly
designed to incentivize participation in
IEX Auctions in order to further support
an efficient price discovery process and
greater opportunity for execution at the
official auction price.
The Exchange proposes to apply the
following new Fee Codes:
• Executions in the Opening Auction 9
will receive Fee Code ‘‘O’’
• Executions in the Closing Auction 10
will receive Fee Code ‘‘C’’
8 See Securities and Exchange Act Release No.
81316 (August 4, 2017), 82 FR 37474 (August 10,
2017) (SR–IEX–2017–10).
9 See Rule 11.350(c).
10 See Rule 11.350(d).
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Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
• Executions in a Halt Auction 11 or
Volatility Auction 12 will receive Fee
Code ‘‘H’’
• Executions in an IPO Auction 13 will
receive Fee Code ‘‘N’’
As proposed, non-displayed orders on
the Continuous Book 14 that are
executed in an IEX Auction will receive
the applicable auction Fee Code on their
execution reports and will be subject to
a fee of $0.0003 per share (or 0.30% of
total dollar value of the transaction
calculated as the execution price
multiplied by the number of shares
executed in the transaction for shares
executed below $1.00) (the ‘‘Auction
Match Fee’’). Furthermore, all orders on
the Auction Book 15 that are executed in
an IEX Auction will receive the
applicable auction Fee Code on their
execution reports and will also be
subject to the Auction Match Fee of
$0.0003 per share (or 0.30% of total
dollar value of the transaction
calculated as the execution price
multiplied by the number of shares
executed in the transaction for shares
executed below $1.00).
The Exchange believes that the
proposed Auction Match Fee for nondisplayed orders on the Continuous
Book and all orders on the Auction
Book that are executed in an IEX
Auction are designed to incentivize
participation in IEX Auctions by
providing a cost-effective execution
mechanism that offers Members an
opportunity to receive executions at the
official opening, re-opening, or closing
price of an IEX-listed security. The
Exchange believes the proposed fees
enhance the price discovery process by
incentivizing Members to enter interest
in IEX-listed securities into IEX
Auctions, rather than investing
resources into developing and
maintaining their own off-exchange
11 See
Rule 11.350(e).
Rule 11.350(f).
13 See Rule 11.350(e).
14 See Rule 11.350(a)(4).
15 See Rule 11.350(a)(1).
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12 See
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16:59 Nov 24, 2017
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internalization mechanisms, or utilizing
the internalization mechanisms of
competing brokers and alternative
trading systems, and entering only the
balance to participate in an IEX
Auction.16 The Exchange believes
incentivizing broader participation will
increase overall liquidity in the IEX
Auctions, and enhance the price
discovery process, particularly in the
Opening and Closing Auctions, which
provide a critical price discovery
mechanism to establish the official
opening and closing prices for IEXlisted securities at the start and end of
each trading day.
Moreover, orders that were displayed
on the Continuous Book during the PreMarket Session 17 or Regular Market
Session 18 that are executed in the
Opening Auction or Closing Auction,
respectively, will receive the applicable
auction Fee Code, as well as existing
Fee Code L (Displayed Match Fee).19
Thus, such orders will not be charged a
fee because, pursuant to the IEX Fee
Schedule, to the extent a Member
receives multiple Fee Codes on an
16 See, e.g., Exhibit F of Instinet LLC’s Form ATS,
which describes its MOC Crosses that match buy
and sell orders for certain U.S. equity securities
marked ‘‘market on close’’. See also, Table 6 in
Appendix A of Bats BZX Exchange’s (‘‘Bats’’)
response letter from Joanne Moffic-Silver, Executive
Vice President, General Counsel, and Corporate
Secretary, to Secretary Brent J. Fields, dated August
2, 2017, in support of the proposed Bats Market
Close. Table 6 illustrates significant volume in
shares of FedEx, Proctor & Gamble, and Cardinal
Health that was executed at the official closing
price at off exchange venues. See Securities and
Exchange Act Release No. 80683 (May 16, 2017), 82
FR 23320 (May 22, 2017) (SR–BatsBZX–2017–34).
17 See Rule 1.160(z).
18 See Rule 1.160(gg).
19 The Exchange currently does not charge any fee
to Members for executions on IEX that provide or
take resting interest with displayed priority (i.e., an
order or portion of a reserve order that is booked
and ranked with display priority on the Order Book
either as the IEX best bid or best offer (‘‘BBO’’), or
at a less aggressive price). This pricing is referred
to by the Exchange as ‘‘Displayed Match Fee’’ with
a Fee Code of ‘L’ provided by the Exchange on
execution reports. See the Investors Exchange Fee
Schedule, available on the Exchange public Web
site.
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execution, the lower fee shall apply.20
As with the existing fee structure for
execution of transactions including
displayed liquidity, this fee structure is
designed to incentivize Members to
send IEX aggressively priced
displayable orders, thereby contributing
to price discovery leading into IEX
Auctions.
The Exchange notes that the
Internalization Fee, Displayed Match
Fee for non-displayed orders that
remove displayed liquidity,21 and the
exception to the Non-Displayed Match
Fee for displayable orders that remove
non-displayed resting interest upon
entry,22 are not applicable to IEX
Auctions. IEX Auctions are an
aggregated match process where only
the cumulative volume to buy and sell
at various prices is considered, and thus
there is no basis to distinguish between
liquidity providers and liquidity
removers, rendering the Internalization
Fee, Displayed Match Fee for nondisplayed orders that remove displayed
liquidity, and the exception to the NonDisplayed Match Fee for displayable
orders that remove non-displayed
resting interest upon entry,
inapplicable.
The following table is designed to
illustrate the various Fee Codes and
execution fees that will be applied to
orders that may be executed in an IEX
Auction:
20 See IEX Fee Schedule, Transaction Fees, bullet
three. The Exchange also notes that there is no
Continuous Book prior to a Halt, Volatility, or IPO
auction, and thus no opportunity for a Member to
have a displayed order on the Continuous Book that
is executed in such auctions.
21 See supra note 19.
22 The Exchange does not charge any fee to
Members (on a per MPID basis) for executions on
IEX that remove resting interest with non-displayed
priority where (i) the liquidity removing order was
displayable (i.e., the order would have booked and
displayed if posted to the Order Book), and (ii) on
a monthly basis, at least 90% of the liquidity
removing MPID’s aggregate executions of
displayable orders provided liquidity during such
calendar month. In such transactions, the liquidity
providing non-displayed interest is subject to the
Non-Displayed Match Fee.
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Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
Order details
Opening
auction
Closing
auction
Halt/volatility
auction
IPO auction
Fee for
executions
>=$1.00
Non-displayed orders resting
on the Continuous Book
that execute in the Opening
or Closing Auction 23.
Displayed orders resting on
the Continuous Book that
execute in the Opening or
Closing Auction.
All orders on the Auction
Book that execute in an IEX
Auction.
O ....................
C ....................
Not applicable ........
Not applicable ........
$0.0003 ..........
0.30% of
TDVT.24
O, L ................
C, L ................
Not applicable ........
Not applicable ........
FREE .............
FREE.
O ....................
C ....................
H ............................
N ............................
$0.0003 ..........
0.30% of
TDVT
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2. Statutory Basis
IEX believes that the proposed rule
change is consistent with the provisions
of Section 6(b) 25 of the Act in general,
and furthers the objectives of Sections
6(b)(4) 26 of the Act, in particular, in that
it is designed to provide for the
equitable allocation of reasonable dues,
fees and other charges among its
Members and other persons using its
facilities.
IEX believes that its proposed pricing
for orders executed in an IEX Auction
is reasonable and equitable because, as
discussed above, the proposed fees are
designed to incentivize participation in
IEX Auctions by providing a costeffective execution mechanism that
offers Members an opportunity to
receive executions at the official
opening, re-opening, or closing price of
an IEX-listed security. The Exchange
believes the proposed fees may also
incentivize Members to enter more
interest into IEX Auctions, rather than
investing resources into developing and
maintaining their own off-exchange
internalization mechanisms, or utilizing
the internalization mechanisms of
competing brokers and alternative
trading systems. The Exchange notes
that it operates in a highly competitive
market in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive.
However, in the case of auctions, the
primary listing market receives the
majority of order flow seeking execution
23 The Exchange notes that non-displayed orders
resting on the Continuous Book that execute in the
auction will no longer receive Fee Code ‘‘I’’, and
will instead receive the applicable auction Fee
Code. Orders taking or adding non-displayed
liquidity prior to or after an IEX Auction, will
continue to receive Fee Code I, either alone or in
conjunction with other applicable Fee Codes.
24 ‘‘TDVT’’ means the total dollar value of the
transaction calculated as the execution price
multiplied by the number of shares executed in the
transaction. See IEX Fee Schedule, Definitions,
bullet five.
25 15 U.S.C. 78f.
26 15 U.S.C. 78f(b)(4).
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16:59 Nov 24, 2017
Jkt 244001
at the official opening, re-opening, and
closing prices of its listed securities,
because such price is generally
established by its auction processes. As
a result, the Exchange believes that, to
date, the Nasdaq Stock Market
(‘‘Nasdaq’’) and the New York Stock
Exchange (‘‘NYSE’’) charge auction fees
that are considerably higher than those
charged during continuous trading,
when accounting for the fact that fees
for executions in the auction processes
are assessed on both sides of each
transaction, and a large portion of the
fees collected for removing liquidity
during continuous trading are largely
earmarked to pay rebates to liquidity
providers.27 Consequently, the
Exchange believes there is considerable
demand from market participants
seeking an alternative to the primary
market’s auction processes, as
evidenced by the recent proposal from
Bats BZX Exchange, Inc. (‘‘Bats’’) to
offer a closing process to match orders
in non-listed securities at the official
closing price published by the primary
listing market (the ‘‘Bats Market
Close’’).28 Therefore, the Exchange has
designed its proposed fees to meet the
demands of market participants by
27 For example, the Nasdaq Stock Market charges
fees ranging between $0.0008–$0.0016 for orders
executed in the Nasdaq Closing Cross, resulting in
net fee capture ranging between $0.0016–$0.0032
per share executed. In contrast, during continuous
trading, Nasdaq pays rebates ranging between
$0.0015–$0.00305 to liquidity providing orders, and
charges a fee of $0.0030 to liquidity taking orders,
resulting in net fee capture ranging between
¥$0.00005–$0.0015 per share executed. Similarly,
NYSE charges fees ranging between $0.0008–
$0.0011 for MOC and LOC orders executed in the
NYSE Closing Auction, resulting in net fee capture
ranging between $0.0016 and $0.0022 per share
executed. In contrast, during continuous trading,
NYSE pays a rebate ranging between $0.0010–
$0.0022 to liquidity providing orders for nonmarket makers and non-Supplemental Liquidity
providers, and assuming a member qualifies for the
highest removal tier, NYSE charges $0.00275 to
liquidity taking orders, resulting in net fee capture
ranging between $0.00055–$0.00175 per share
executed.
28 See Securities and Exchange Act Release No.
80683 (May 16, 2017), 82 FR 23320 (May 22, 2017)
(SR–BatsBZX–2017–34).
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Fee for
executions
<$1.00
offering competitive pricing to compete
for auction order flow with trading
centers such as Bats (if the Bats Market
Close is approved), as well as other offexchange facilities.29
As discussed above, IEX also believes
that it is appropriate, reasonable, and
consistent with the Act not to charge a
fee for an order executed in an IEX
Auction that was displayed on the
Continuous Book prior to the Opening
or Closing Auction. As with the existing
fee structure for the execution of
transactions including displayed
liquidity, this fee structure is designed
to incentivize Members to send IEX
aggressively priced displayable orders,
thereby contributing to price discovery,
consistent with the overall goal of
enhancing market quality. IEX believes
that, as with the existing Displayed
Match Fee, not charging a fee for the
execution of a previously displayed
order is equitable and not unfairly
discriminatory because it is designed to
facilitate the entry of, and enhance
execution opportunities for, displayable
orders, thereby further incentivizing
entry of displayed orders.
Furthermore, the Exchange notes that
the proposed fees are nondiscriminatory
because they will apply uniformly to all
Members, and all Members have an
equal opportunity to submit any type of
Auction Eligible Order,30—including
both displayed and non-displayed
orders on the Continuous Book, or
orders that queue on the Auction
Book—for execution in an IEX Auction,
using the order types made available to
all Members on a fair and equal basis.
In addition, the Exchange believes that
the proposed fees for IEX Auctions are
appropriate, reasonable, and consistent
with the Act, because such fees are
within the range of transaction fees
charged by other exchanges for their
29 See
30 See
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supra note 16.
Rule 11.350(a)(2).
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respective Auction processes.31
Furthermore, although orders that
execute in IEX Auctions may be subject
to different fees than similar orders
executed during continuous trading, the
Exchange notes that other exchanges
also charge differential pricing for
orders that execute in their opening
process.32 Moreover, as described
above, the Exchange believes the
proposed fees for orders executed in an
IEX Auction are appropriate, reasonable,
and consistent with the Act, because
such fees are designed to incentivize
participation in IEX Auctions, in order
to provide an efficient price discovery
process and greater opportunity for
execution at the official auction price.
Additionally, the Exchange believes
that its proposed Fee Codes for orders
executed in an IEX Auction, which will
be provided on execution reports, will
provide transparency and predictability
to Members as to the applicable
transaction fees, because Members can
determine which Fee Code is applicable
to the execution of a particular order in
an IEX Auction.
As discussed above, the Exchange
does not believe that it is appropriate to
provide the Internalization Fee, or the
Displayed Match Fee to non-displayed
orders that execute in an IEX Auction,
because IEX Auctions are an aggregated
match process where only the
cumulative volume to buy and sell at
various prices is considered, and thus
there is no basis to distinguish between
liquidity providers and liquidity
removers. Similarly, the Exchange does
not believe that the exception to the
Non-Displayed Match Fee for
displayable orders that take resting
interest upon entry is applicable in the
context of an IEX Auction, since such
orders are not able to remove resting
interest on entry in an IEX Auction,
because they are either queued on the
Auction Book and not displayed, or
resting displayed on the Continuous
Book.33 Moreover, as noted above, the
IEX Auctions are an aggregated match
process where only the cumulative
31 For example, the Nasdaq Stock Market charges
fees ranging from $0.00085–$0.0015 for orders
executed in the Nasdaq Opening Cross, including
capping such fees at $35,000 per month for certain
members, which includes crosses for listed and
non-listed securities. Similarly, NYSE charges fees
ranging from $0 for closing off-set orders and orders
on the continuous book that are executed in the
auction, to $0.0011 for MOC and LOC orders (for
members that don’t qualify for MOC/LC Tier 1 or
2).
32 See id.
33 The Exchange notes that it is of course possible
for a displayed order to remove non-displayed
liquidity during continuous trading on the
Continuous Book; however, such execution would
not be part of an IEX Auction, and would be subject
to the Exchange’s existing Fee Schedule.
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16:59 Nov 24, 2017
Jkt 244001
volume to buy and sell at various prices
is considered, and thus there is no basis
to distinguish between liquidity
providers and liquidity removers, or
their respective display status on the
Auction Book.
In conclusion, the Exchange also
submits that its proposed fee structure
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act for the
reasons discussed above in that it does
not permit unfair discrimination
between customers, issuers, brokers, or
dealers, and is designed 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. Further, IEX believes
that its proposal does not raise any new
or novel issues that have not previously
been considered by the Commission
when approving the existing IEX fees, or
the auction fees of other national
securities exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
To the contrary, the Exchange believes
that the proposed pricing structure will
increase competition and draw
additional volume to the Exchange for
IEX Auctions. The Exchange operates in
a highly competitive market in which
market participants can readily favor
competing venues if fee schedules at
other venues are viewed as more
favorable. Consequently, the Exchange
believes that the degree to which IEX
fees could impose any burden on
competition is extremely limited, and
does not believe that such fees would
burden competition between Members
or competing venues in a manner that
is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because, while different fees are
assessed in some circumstances, these
different fees are not based on the type
of Member entering the orders that
execute in an IEX Auction, but based on
the type of order entered, and all
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Frm 00108
Fmt 4703
Sfmt 4703
Members can submit any of IEX’s
permissible order types.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) 34 of the Act.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 35 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2017–40 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–IEX–2017–40. This file
number should be included in the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
34 15
35 15
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U.S.C. 78s(b)(3)(A)(ii).
U.S.C. 78s(b)(2)(B).
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with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the IEX’s
principal office and on its Internet Web
site at www.iextrading.com. All
comments received will be posted
without change. 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–2017–40 and
should be submitted on or before
December 18, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–25471 Filed 11–24–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32900; 812–14799]
New Mountain Finance Corporation, et
al.
November 20, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
AGENCY:
Notice of application for an order
(‘‘Order’’) to amend a prior order under
sections 17(d) and 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act
permitting certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and under rule
17d–1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
business development companies (each,
a ‘‘BDC’’) and certain closed-end
investment companies to co-invest in
portfolio companies with each other and
36 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
16:59 Nov 24, 2017
Jkt 244001
with affiliated investment funds. The
Order would supersede the prior order.1
APPLICANTS: New Mountain Finance
Corporation (‘‘NMFC’’); NMF Ancora
Holdings, Inc., NMF QID NGL Holdings,
Inc., and NMF YP Holdings, Inc.
(collectively, the ‘‘NMFC Subsidiaries’’);
New Mountain Finance SBIC, L.P.
(‘‘SBIC LP’’); New Mountain Net Lease
Corporation (‘‘NMNLC’’); New
Mountain Guardian Partners II, L.P.
(‘‘Guardian II’’); New Mountain
Guardian II Master Fund-A, L.P.
(‘‘Guardian II Master A’’); New
Mountain Guardian II Master Fund–B,
L.P. (‘‘Guardian II Master B,’’ and
together with Guardian II and Guardian
II Master A, the ‘‘Guardian II Funds’’);
and New Mountain Finance Advisers
BDC, L.L.C. (the BDC Adviser’’) on
behalf of itself and its successors.2
FILING DATES: The application was filed
on July 10, 2017 and amended on
October 31, 2017.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 15, 2017, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.,
NE., Washington, DC 20549–1090.
Applicants: Robert A. Hamwee, New
Mountain Finance Corporation, 787
Seventh Avenue, 48th Floor, New York,
NY 10019.
FOR FURTHER INFORMATION CONTACT:
Barbara T. Heussler, Senior Counsel, at
(202) 551–6990 or David J. Marcinkus,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
1 New Mountain Finance Corporation, et al.,
Investment Company Act Rel. Nos. 32630 (May 8,
2017) (notice) and 32668 (Jun. 5, 2017).
2 The term ‘‘successor,’’ means an entity that
results from a reorganization into another
jurisdiction or change in the type of business
organization.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
56093
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. NMFC, a Delaware corporation, is
an externally managed, non-diversified,
closed-end management investment
company that has elected to be
regulated as a BDC under section 54(a)
of the Act.3 Applicants state that
NMFC’s Objectives and Strategies 4 are
to generate both current income and
capital appreciation through the
sourcing and origination of debt
securities at all levels of the capital
structure, including first and second
lien debt, notes, bonds and mezzanine
securities. The board of directors
(‘‘Board’’) of NMFC is comprised of
seven directors, four of whom are not
‘‘interested directors’’ as defined in
section 2(a)(19) of the Act (‘‘NonInterested Directors’’), of NMFC.
2. The NMFC Subsidiaries are
Wholly-Owned Investment Subs (as
defined below) of NMFC, each
structured as a Delaware corporation to
hold equity or equity-like investments
in portfolio companies organized as
limited liability companies or other
forms of pass-through entities. The
NMFC Subsidiaries are not registered
under the Act in reliance on the
exclusion from the definition of
‘‘investment company’’ in section
3(a)(7) of the Act.
3. SBIC LP, a Wholly-Owned
Investment Sub of NMFC, is structured
as a Delaware limited partnership. SBIC
LP received a license from the Small
Business Administration (‘‘SBA’’) to
operate under the Small Business
Investment Act of 1958 (‘‘SBA Act’’) as
a small business investment company
(each such licensed entity, a ‘‘SBIC
Subsidiary’’).
4. NMNLC, a Maryland corporation, is
a Wholly-Owned Investment Sub of
NMFC. NMNLC was formed to acquire
real properties that are subject to ‘‘triple
net’’ leases and will qualify as a real
3 Section 2(a)(48) of the Act defines a BDC to be
any closed-end investment company that operates
for the purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
4 ‘‘Objectives and Strategies’’ means a Regulated
Fund’s investment objectives and strategies as
described in the Regulated Fund’s registration
statement on Form N–2, other filings the Regulated
Fund has made with the Commission under the
Securities Act of 1933 (the ‘‘Securities Act’’), or the
Securities Exchange Act of 1934, and the Regulated
Fund’s reports to shareholders.
E:\FR\FM\27NON1.SGM
27NON1
]]>Agencies
[Federal Register Volume 82, Number 226 (Monday, November 27, 2017)]
[Notices]
[Pages 56089-56093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25471]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82127; File No. SR-IEX-2017-40]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Its Fee Schedule, Pursuant to IEX Rule 15.110(a) and (c), To Adopt
Pricing for Orders That Execute in an IEX Auction for IEX-Listed
Securities
November 20, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on (date), 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, II
and III 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\ IEX is
filing with the Commission a proposed rule change to modify its Fee
Schedule, pursuant to IEX Rule 15.110(a) and (c), to adopt pricing for
orders that execute in an IEX Auction \6\ for IEX-listed securities
pursuant to Rule 11.350. Changes to the Fee Schedule pursuant to this
proposal are effective upon filing, and will be operative once the
Exchange begins conducting IEX Auctions in IEX-listed securities.\7\
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 CRF 240.19b-4.
\6\ IEX Auctions include the daily Opening and Closing Auctions
(Rule 11.350(c) and (d), respectively), as well as IPO Auctions
related to an initial public offering of securities (Rule
11.350(e)), Halt Auctions following a regulatory halt (Rule
11.350(e)), and Volatility Auctions following a trading pause
pursuant to the Limit Up-Limit Down Plan (Rule 11.350(f)).
\7\ See IEX Trader Alert #2017-015, available on the Exchange
public Web site.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On August 10, 2017, the Commission approved a proposed rule change
by the Exchange to adopt rules governing auctions, including
dissemination of auction-related market data, for securities listed on
the Exchange pursuant to Chapter 14 of the IEX Rule Book.\8\ The
Exchange proposes to update its Fee Schedule, pursuant to IEX Rule
15.110(a) and (c), to add new Fee Codes to identify the fees applicable
to orders that execute in IEX Auctions. The IEX Auction processes are
designed to maximize participation in the auctions in order to provide
an efficient price discovery process and greater opportunity for
execution at the official auction price. The Exchange believes that
fees are an important component of the IEX Auction processes, in that
execution fees can influence the trading behavior of Members by
creating economic incentives (and disincentives) for Members that
participate in IEX Auctions. Thus, the Exchange is proposing fees that
are similarly designed to incentivize participation in IEX Auctions in
order to further support an efficient price discovery process and
greater opportunity for execution at the official auction price.
---------------------------------------------------------------------------
\8\ See Securities and Exchange Act Release No. 81316 (August 4,
2017), 82 FR 37474 (August 10, 2017) (SR-IEX-2017-10).
---------------------------------------------------------------------------
The Exchange proposes to apply the following new Fee Codes:
Executions in the Opening Auction \9\ will receive Fee Code
``O''
---------------------------------------------------------------------------
\9\ See Rule 11.350(c).
---------------------------------------------------------------------------
Executions in the Closing Auction \10\ will receive Fee Code
``C''
---------------------------------------------------------------------------
\10\ See Rule 11.350(d).
---------------------------------------------------------------------------
[[Page 56090]]
Executions in a Halt Auction \11\ or Volatility Auction \12\
will receive Fee Code ``H''
---------------------------------------------------------------------------
\11\ See Rule 11.350(e).
\12\ See Rule 11.350(f).
---------------------------------------------------------------------------
Executions in an IPO Auction \13\ will receive Fee Code ``N''
---------------------------------------------------------------------------
\13\ See Rule 11.350(e).
As proposed, non-displayed orders on the Continuous Book \14\ that
are executed in an IEX Auction will receive the applicable auction Fee
Code on their execution reports and will be subject to a fee of $0.0003
per share (or 0.30% of total dollar value of the transaction calculated
as the execution price multiplied by the number of shares executed in
the transaction for shares executed below $1.00) (the ``Auction Match
Fee''). Furthermore, all orders on the Auction Book \15\ that are
executed in an IEX Auction will receive the applicable auction Fee Code
on their execution reports and will also be subject to the Auction
Match Fee of $0.0003 per share (or 0.30% of total dollar value of the
transaction calculated as the execution price multiplied by the number
of shares executed in the transaction for shares executed below $1.00).
---------------------------------------------------------------------------
\14\ See Rule 11.350(a)(4).
\15\ See Rule 11.350(a)(1).
---------------------------------------------------------------------------
The Exchange believes that the proposed Auction Match Fee for non-
displayed orders on the Continuous Book and all orders on the Auction
Book that are executed in an IEX Auction are designed to incentivize
participation in IEX Auctions by providing a cost-effective execution
mechanism that offers Members an opportunity to receive executions at
the official opening, re-opening, or closing price of an IEX-listed
security. The Exchange believes the proposed fees enhance the price
discovery process by incentivizing Members to enter interest in IEX-
listed securities into IEX Auctions, rather than investing resources
into developing and maintaining their own off-exchange internalization
mechanisms, or utilizing the internalization mechanisms of competing
brokers and alternative trading systems, and entering only the balance
to participate in an IEX Auction.\16\ The Exchange believes
incentivizing broader participation will increase overall liquidity in
the IEX Auctions, and enhance the price discovery process, particularly
in the Opening and Closing Auctions, which provide a critical price
discovery mechanism to establish the official opening and closing
prices for IEX-listed securities at the start and end of each trading
day.
---------------------------------------------------------------------------
\16\ See, e.g., Exhibit F of Instinet LLC's Form ATS, which
describes its MOC Crosses that match buy and sell orders for certain
U.S. equity securities marked ``market on close''. See also, Table 6
in Appendix A of Bats BZX Exchange's (``Bats'') response letter from
Joanne Moffic-Silver, Executive Vice President, General Counsel, and
Corporate Secretary, to Secretary Brent J. Fields, dated August 2,
2017, in support of the proposed Bats Market Close. Table 6
illustrates significant volume in shares of FedEx, Proctor & Gamble,
and Cardinal Health that was executed at the official closing price
at off exchange venues. See Securities and Exchange Act Release No.
80683 (May 16, 2017), 82 FR 23320 (May 22, 2017) (SR-BatsBZX-2017-
34).
---------------------------------------------------------------------------
Moreover, orders that were displayed on the Continuous Book during
the Pre-Market Session \17\ or Regular Market Session \18\ that are
executed in the Opening Auction or Closing Auction, respectively, will
receive the applicable auction Fee Code, as well as existing Fee Code L
(Displayed Match Fee).\19\ Thus, such orders will not be charged a fee
because, pursuant to the IEX Fee Schedule, to the extent a Member
receives multiple Fee Codes on an execution, the lower fee shall
apply.\20\ As with the existing fee structure for execution of
transactions including displayed liquidity, this fee structure is
designed to incentivize Members to send IEX aggressively priced
displayable orders, thereby contributing to price discovery leading
into IEX Auctions.
---------------------------------------------------------------------------
\17\ See Rule 1.160(z).
\18\ See Rule 1.160(gg).
\19\ The Exchange currently does not charge any fee to Members
for executions on IEX that provide or take resting interest with
displayed priority (i.e., an order or portion of a reserve order
that is booked and ranked with display priority on the Order Book
either as the IEX best bid or best offer (``BBO''), or at a less
aggressive price). This pricing is referred to by the Exchange as
``Displayed Match Fee'' with a Fee Code of `L' provided by the
Exchange on execution reports. See the Investors Exchange Fee
Schedule, available on the Exchange public Web site.
\20\ See IEX Fee Schedule, Transaction Fees, bullet three. The
Exchange also notes that there is no Continuous Book prior to a
Halt, Volatility, or IPO auction, and thus no opportunity for a
Member to have a displayed order on the Continuous Book that is
executed in such auctions.
---------------------------------------------------------------------------
The Exchange notes that the Internalization Fee, Displayed Match
Fee for non-displayed orders that remove displayed liquidity,\21\ and
the exception to the Non-Displayed Match Fee for displayable orders
that remove non-displayed resting interest upon entry,\22\ are not
applicable to IEX Auctions. IEX Auctions are an aggregated match
process where only the cumulative volume to buy and sell at various
prices is considered, and thus there is no basis to distinguish between
liquidity providers and liquidity removers, rendering the
Internalization Fee, Displayed Match Fee for non-displayed orders that
remove displayed liquidity, and the exception to the Non-Displayed
Match Fee for displayable orders that remove non-displayed resting
interest upon entry, inapplicable.
---------------------------------------------------------------------------
\21\ See supra note 19.
\22\ The Exchange does not charge any fee to Members (on a per
MPID basis) for executions on IEX that remove resting interest with
non-displayed priority where (i) the liquidity removing order was
displayable (i.e., the order would have booked and displayed if
posted to the Order Book), and (ii) on a monthly basis, at least 90%
of the liquidity removing MPID's aggregate executions of displayable
orders provided liquidity during such calendar month. In such
transactions, the liquidity providing non-displayed interest is
subject to the Non-Displayed Match Fee.
---------------------------------------------------------------------------
The following table is designed to illustrate the various Fee Codes
and execution fees that will be applied to orders that may be executed
in an IEX Auction:
[[Page 56091]]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fee for executions Fee for executions
Order details Opening auction Closing auction Halt/volatility auction IPO auction >=$1.00 <$1.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-displayed orders resting on O...................... C...................... Not applicable............... Not applicable.............. $0.0003............... 0.30% of TDVT.\24\
the Continuous Book that execute
in the Opening or Closing
Auction \23\.
Displayed orders resting on the O, L................... C, L................... Not applicable............... Not applicable.............. FREE.................. FREE.
Continuous Book that execute in
the Opening or Closing Auction.
All orders on the Auction Book O...................... C...................... H............................ N........................... $0.0003............... 0.30% of TDVT
that execute in an IEX Auction.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2. Statutory Basis
---------------------------------------------------------------------------
\23\ The Exchange notes that non-displayed orders resting on the
Continuous Book that execute in the auction will no longer receive
Fee Code ``I'', and will instead receive the applicable auction Fee
Code. Orders taking or adding non-displayed liquidity prior to or
after an IEX Auction, will continue to receive Fee Code I, either
alone or in conjunction with other applicable Fee Codes.
\24\ ``TDVT'' means the total dollar value of the transaction
calculated as the execution price multiplied by the number of shares
executed in the transaction. See IEX Fee Schedule, Definitions,
bullet five.
---------------------------------------------------------------------------
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \25\ of the Act in general, and furthers the
objectives of Sections 6(b)(4) \26\ of the Act, in particular, in that
it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f.
\26\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
IEX believes that its proposed pricing for orders executed in an
IEX Auction is reasonable and equitable because, as discussed above,
the proposed fees are designed to incentivize participation in IEX
Auctions by providing a cost-effective execution mechanism that offers
Members an opportunity to receive executions at the official opening,
re-opening, or closing price of an IEX-listed security. The Exchange
believes the proposed fees may also incentivize Members to enter more
interest into IEX Auctions, rather than investing resources into
developing and maintaining their own off-exchange internalization
mechanisms, or utilizing the internalization mechanisms of competing
brokers and alternative trading systems. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues if they deem fee
levels at a particular venue to be excessive. However, in the case of
auctions, the primary listing market receives the majority of order
flow seeking execution at the official opening, re-opening, and closing
prices of its listed securities, because such price is generally
established by its auction processes. As a result, the Exchange
believes that, to date, the Nasdaq Stock Market (``Nasdaq'') and the
New York Stock Exchange (``NYSE'') charge auction fees that are
considerably higher than those charged during continuous trading, when
accounting for the fact that fees for executions in the auction
processes are assessed on both sides of each transaction, and a large
portion of the fees collected for removing liquidity during continuous
trading are largely earmarked to pay rebates to liquidity
providers.\27\ Consequently, the Exchange believes there is
considerable demand from market participants seeking an alternative to
the primary market's auction processes, as evidenced by the recent
proposal from Bats BZX Exchange, Inc. (``Bats'') to offer a closing
process to match orders in non-listed securities at the official
closing price published by the primary listing market (the ``Bats
Market Close'').\28\ Therefore, the Exchange has designed its proposed
fees to meet the demands of market participants by offering competitive
pricing to compete for auction order flow with trading centers such as
Bats (if the Bats Market Close is approved), as well as other off-
exchange facilities.\29\
---------------------------------------------------------------------------
\27\ For example, the Nasdaq Stock Market charges fees ranging
between $0.0008-$0.0016 for orders executed in the Nasdaq Closing
Cross, resulting in net fee capture ranging between $0.0016-$0.0032
per share executed. In contrast, during continuous trading, Nasdaq
pays rebates ranging between $0.0015-$0.00305 to liquidity providing
orders, and charges a fee of $0.0030 to liquidity taking orders,
resulting in net fee capture ranging between -$0.00005-$0.0015 per
share executed. Similarly, NYSE charges fees ranging between
$0.0008-$0.0011 for MOC and LOC orders executed in the NYSE Closing
Auction, resulting in net fee capture ranging between $0.0016 and
$0.0022 per share executed. In contrast, during continuous trading,
NYSE pays a rebate ranging between $0.0010-$0.0022 to liquidity
providing orders for non-market makers and non-Supplemental
Liquidity providers, and assuming a member qualifies for the highest
removal tier, NYSE charges $0.00275 to liquidity taking orders,
resulting in net fee capture ranging between $0.00055-$0.00175 per
share executed.
\28\ See Securities and Exchange Act Release No. 80683 (May 16,
2017), 82 FR 23320 (May 22, 2017) (SR-BatsBZX-2017-34).
\29\ See supra note 16.
---------------------------------------------------------------------------
As discussed above, IEX also believes that it is appropriate,
reasonable, and consistent with the Act not to charge a fee for an
order executed in an IEX Auction that was displayed on the Continuous
Book prior to the Opening or Closing Auction. As with the existing fee
structure for the execution of transactions including displayed
liquidity, this fee structure is designed to incentivize Members to
send IEX aggressively priced displayable orders, thereby contributing
to price discovery, consistent with the overall goal of enhancing
market quality. IEX believes that, as with the existing Displayed Match
Fee, not charging a fee for the execution of a previously displayed
order is equitable and not unfairly discriminatory because it is
designed to facilitate the entry of, and enhance execution
opportunities for, displayable orders, thereby further incentivizing
entry of displayed orders.
Furthermore, the Exchange notes that the proposed fees are
nondiscriminatory because they will apply uniformly to all Members, and
all Members have an equal opportunity to submit any type of Auction
Eligible Order,\30\--including both displayed and non-displayed orders
on the Continuous Book, or orders that queue on the Auction Book--for
execution in an IEX Auction, using the order types made available to
all Members on a fair and equal basis. In addition, the Exchange
believes that the proposed fees for IEX Auctions are appropriate,
reasonable, and consistent with the Act, because such fees are within
the range of transaction fees charged by other exchanges for their
[[Page 56092]]
respective Auction processes.\31\ Furthermore, although orders that
execute in IEX Auctions may be subject to different fees than similar
orders executed during continuous trading, the Exchange notes that
other exchanges also charge differential pricing for orders that
execute in their opening process.\32\ Moreover, as described above, the
Exchange believes the proposed fees for orders executed in an IEX
Auction are appropriate, reasonable, and consistent with the Act,
because such fees are designed to incentivize participation in IEX
Auctions, in order to provide an efficient price discovery process and
greater opportunity for execution at the official auction price.
---------------------------------------------------------------------------
\30\ See Rule 11.350(a)(2).
\31\ For example, the Nasdaq Stock Market charges fees ranging
from $0.00085-$0.0015 for orders executed in the Nasdaq Opening
Cross, including capping such fees at $35,000 per month for certain
members, which includes crosses for listed and non-listed
securities. Similarly, NYSE charges fees ranging from $0 for closing
off-set orders and orders on the continuous book that are executed
in the auction, to $0.0011 for MOC and LOC orders (for members that
don't qualify for MOC/LC Tier 1 or 2).
\32\ See id.
---------------------------------------------------------------------------
Additionally, the Exchange believes that its proposed Fee Codes for
orders executed in an IEX Auction, which will be provided on execution
reports, will provide transparency and predictability to Members as to
the applicable transaction fees, because Members can determine which
Fee Code is applicable to the execution of a particular order in an IEX
Auction.
As discussed above, the Exchange does not believe that it is
appropriate to provide the Internalization Fee, or the Displayed Match
Fee to non-displayed orders that execute in an IEX Auction, because IEX
Auctions are an aggregated match process where only the cumulative
volume to buy and sell at various prices is considered, and thus there
is no basis to distinguish between liquidity providers and liquidity
removers. Similarly, the Exchange does not believe that the exception
to the Non-Displayed Match Fee for displayable orders that take resting
interest upon entry is applicable in the context of an IEX Auction,
since such orders are not able to remove resting interest on entry in
an IEX Auction, because they are either queued on the Auction Book and
not displayed, or resting displayed on the Continuous Book.\33\
Moreover, as noted above, the IEX Auctions are an aggregated match
process where only the cumulative volume to buy and sell at various
prices is considered, and thus there is no basis to distinguish between
liquidity providers and liquidity removers, or their respective display
status on the Auction Book.
---------------------------------------------------------------------------
\33\ The Exchange notes that it is of course possible for a
displayed order to remove non-displayed liquidity during continuous
trading on the Continuous Book; however, such execution would not be
part of an IEX Auction, and would be subject to the Exchange's
existing Fee Schedule.
---------------------------------------------------------------------------
In conclusion, the Exchange also submits that its proposed fee
structure satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act for the reasons discussed above in that it does not permit
unfair discrimination between customers, issuers, brokers, or dealers,
and is designed 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. Further, IEX believes that its proposal does
not raise any new or novel issues that have not previously been
considered by the Commission when approving the existing IEX fees, or
the auction fees of other national securities exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. To the contrary, the Exchange believes that the
proposed pricing structure will increase competition and draw
additional volume to the Exchange for IEX Auctions. The Exchange
operates in a highly competitive market in which market participants
can readily favor competing venues if fee schedules at other venues are
viewed as more favorable. Consequently, the Exchange believes that the
degree to which IEX fees could impose any burden on competition is
extremely limited, and does not believe that such fees would burden
competition between Members or competing venues in a manner that is not
necessary or appropriate in furtherance of the purposes of the Act.
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because, while
different fees are assessed in some circumstances, these different fees
are not based on the type of Member entering the orders that execute in
an IEX Auction, but based on the type of order entered, and all Members
can submit any of IEX's permissible order types.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) \34\ of the Act.
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\34\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 under
Section 19(b)(2)(B) \35\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\35\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-IEX-2017-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-IEX-2017-40. This file
number should be included in the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements
[[Page 56093]]
with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Section, 100 F Street NE.,
Washington, DC 20549-1090. Copies of the filing will also be available
for inspection and copying at the IEX's principal office and on its
Internet Web site at www.iextrading.com. All comments received will be
posted without change. 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-
2017-40 and should be submitted on or before December 18, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25471 Filed 11-24-17; 8:45 am]
BILLING CODE 8011-01-P
