Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 11.350 To Clarify When a New IEX-Listed Security Will Be Eligible To Begin Trading With an IPO Auction, 18366-18370 [2018-08726]
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Federal Register / Vol. 83, No. 81 / Thursday, April 26, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08733 Filed 4–25–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83075; File No. SR–IEX–
2018–08]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
11.350 To Clarify When a New IEXListed Security Will Be Eligible To
Begin Trading With an IPO Auction
April 20, 2018.
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 April 17,
2018, 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 IEX is filing with the
Commission a proposed rule change to
amend Rules 11.350(e) and (a) to clarify
that a new IEX-listed security that is not
the subject of an initial public offering
(‘‘IPO’’) 6 or otherwise being priced
pursuant to Rule 11.280(h)(9) will be
eligible to begin trading in the PreMarket Session 7 and have an Opening
Auction 8 on IEX at the start of Regular
Market Hours,9 rather than an IPO
Auction,10 and to make corresponding
13 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 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 The term IPO refers to the initial public offering
of securities registered under Section 6 of the
Securities Act of 1933.
7 See Rule 1.160(z).
8 See Rule 11.350(c).
9 See Rule 1.160(gg).
10 See Rule 11.350(e).
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changes to certain definitions governing
IPO and Opening Auctions. The
Exchange has designated this rule
change as ‘‘non-controversial’’ under
Section 19(b)(3)(A) of the Act 11 and
provided the Commission with the
notice required by Rule 19b–4(f)(6)
thereunder.12
The text of the proposed rule change
is available at the Exchange’s website 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
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
Overview
On August 4, 2017, the Commission
approved a proposed rule change filed
by the Exchange to adopt rules
governing auctions in IEX-listed
securities (‘‘IEX Auctions’’), including
provisions governing the initial public
offering (‘‘IPO’’) of IEX-listed
securities.13 The Exchange intends to
launch a listings program for corporate
issuers in 2018. The purpose of this
proposed rule change is to amend
paragraphs (e) and (a) of Rule 11.350,
and adopt new Supplemental Material
.01 and .02 to Rule 11.350(e) to clarify
that a new IEX-listed security that is not
the subject of an initial public offering
or otherwise being priced pursuant to
Rule 11.280(h)(9) will be eligible to
begin trading in the Pre-Market Session
and have an Opening Auction on IEX at
the start of Regular Market Hours, rather
than an IPO Auction, and to make
corresponding changes to certain
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
13 See Securities Exchange Act Release No. 81316
(August 4, 2017), 82 FR 37474 (August 10, 2017).
See also Rule 11.350(e).
12 17
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definitions governing IPO and Opening
Auctions.
Pursuant to Rule 11.350(e), the
Exchange will conduct an IPO Auction
for securities that are the subject of an
initial public offering on the first day of
listing.14 In addition, as proposed, the
Exchange will also conduct an IPO
Auction on the first day of listing for a
new issue that is not an initial public
offering, provided that a broker-dealer
serving in the role of financial advisor
to the issuer of the securities being
listed is willing to perform the functions
that are performed by an underwriter
with respect to an initial public offering
as specified in Rule 11.280(h)(9)
(‘‘specified underwriter functions’’).15
For securities that are not the subject of
an initial public offering or other new
issues where a broker-dealer is
unwilling to perform the specified
underwriter functions, the security will
be eligible to begin trading in the PreMarket Session and have an Opening
Auction on IEX at the start of Regular
Market Hours, instead of conducting an
IPO Auction on the first day of listing.16
As an example, if an issuer with a class
of common stock listed on IEX offers
and lists a class of preferred stock on
IEX, the offering of the preferred stock
would not constitute an initial public
offering and if there is no broker-dealer
serving in the role of financial advisor
to the issuer of the preferred stock that
is willing to perform the specified
underwriter functions, the security will
be eligible to begin trading in the PreMarket Session and have an Opening
Auction on IEX at the start of Regular
14 Pursuant to section 12(f)(1)(G)(i)–(ii) of the
Securities and Exchange Act, a security is the
subject of an initial public offering if the offering
of the subject security is registered under the
Securities Act of 1933, the issuer of the security,
immediately prior to filing the registration
statement with respect to the offering, was not
subject to the reporting requirements of the Act, and
the initial public offering of such security
commences at the opening of trading on the day on
which such security commences trading on the
national securities exchange with which such
security is registered. See 15 U.S.C. 78l(f)(1)(G). See
also proposed Supplemental Material .01 to Rule
11.350(e).
15 Pursuant to Rule 11.280(h)(9), the process for
halting and initial pricing of a security that is the
subject of an IPO shall also be available for the
initial pricing of any other security that has not
been listed on a national securities exchange or
traded in the over-the-counter market pursuant to
FINRA Form 211 immediately prior to the initial
pricing, provided that a broker-dealer serving in the
role of financial advisor to the issuer of the
securities being listed is willing to perform the
functions under IEX Rule 11.280(h)(8) that are
performed by an underwriter with respect to an
initial public offering. See also proposed
Supplemental Material .01 to Rule 11.350(e).
16 See proposed Supplemental Material .02 to
Rule 11.350(e) and Rule 11.350(c).
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security that is the subject of an IPO on
IEX, and therefore there will be no
Continuous Book for such security. The
Order Acceptance Period for an IPO
Auction may be extended at the time of
the auction match pursuant to Rules
11.350(e)(2)(B)(i)–(iv):
• Automatically for five (5) minutes
when there are unmatched shares from
market orders on the IPO Auction Book;
• Automatically for five (5) minutes
when the Indicative Clearing Price 24 at
the time of the IPO Auction match
differs by the greater of five percent
(5%) or fifty cents ($0.50) from any of
the previous fifteen (15) Indicative
Clearing Price disseminations;
IEX IPO Auction
• Automatically during the PreFor trading in an IEX-listed security
Launch Period 25 when the IPO Auction
that is the subject of an IPO, or for the
match price is above (below) the upper
launch of a new issue,17 the Exchange
(lower) price band selected by the
will conduct an IPO Auction pursuant
underwriter pursuant to proposed Rule
to Rule 11.350(e). Specifically, Users
11.280(h)(8), until the clearing price is
may submit Auction Eligible Orders18
within such bands; or
for execution in the IPO Auction at the
• Manually upon request from the
start of the Order Acceptance Period,19
underwriter at any time prior to the
20 All Auction
which begins at 8:00 a.m.
auction match.
Eligible Orders designated for
Furthermore, Rule 11.280(h)(8)
participation in the IPO Auction will be governs the process for resuming from a
queued on the IPO Auction Book 21 until trading halt initiated under Rule
the scheduled auction match, at which
11.280(g)(7) for a security that is the
time they will be eligible for execution
subject of an IPO. Thus, in addition to
in the IPO Auction. Pursuant to Rule
the systemic processes described above
11.350(e)(2)(A), the Exchange will begin that govern the IPO Auction match,
to disseminate IEX Auction Information there is a series of procedural steps to
via electronic means at the start of the
complete an IPO Auction, which
Display Only Period,22 which begins
include input from and coordination
thirty (30) minutes prior to the
with the IPO underwriter. Specifically,
scheduled IPO Auction match, and will pursuant to Rule 11.280(h), thirty (30)
be updated every one second
minutes after the start of the Display
thereafter.23 The Exchange will attempt
Only Period, unless extended by the
to conduct an IPO Auction for all IEXunderwriter, the security will enter a
listed securities at the scheduled
Pre-Launch Period of indeterminate
auction match time in accordance with
duration. The Pre-Launch Period will
the clearing price determination process end immediately after the transition to
set forth in Rule 11.350(e)(2)(C).
the Regular Market Session following
Auction Eligible Orders will be ranked
the IPO Auction match,26 pending:
and maintained in accordance with IEX
• Notification from the underwriter
auction priority, pursuant to Rule
that the security is ready to trade;
11.350(b).
• Subsequent approval of the
The Exchange will generally attempt
Indicative Clearing Price at the time of
to conduct an IPO Auction beginning at such notification; and
10:15 a.m. Pursuant to Rule 11.280(g)(7),
• Validation that each of the
IEX will declare a regulatory halt before conditions for the extension of the
the start of the Pre-Market Session for a
Order Acceptance Period set forth in
Rules 11.350(e)(2)(B)(i)–(iv) are not
17 The Exchange notes that new issues are
satisfied.
registered securities that are being listed on the
Lastly, pursuant to Rule 11.280(h)(9),
Exchange and sold publicly for the first time but are
the process for halting and initial
not necessarily the subject of an IPO.
pricing of a security that is the subject
18 See Rule 11.350(a)(2).
19 See Rule 11.350(a)(29).
of an IPO shall also be available for the
20 All times are in Eastern Time.
initial pricing of any other security that
21 See Rule 11.350(a)(1)(C). For an IPO Auction,
has not been listed on a national
the IPO Auction Book would include Market-Onsecurities exchange or traded in the
Open, Limit-On-Open, and market orders with a
over-the-counter market pursuant to
time-in-force of DAY, as well as limit orders with
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Market Hours, instead of conducting an
IPO Auction on the first day of listing.
The Exchange notes that the proposed
rule changes do not alter the substantive
functionality governing the IPO or
Opening Auction processes. Instead, the
proposed changes are designed to
simply clarify which of the existing IEX
Auction processes will be utilized to
begin trading in a new IEX-listed
security that is not the subject of an IPO
or otherwise being priced pursuant to
Rule 11.280(h)(9), and to make
corresponding changes to certain
definitions governing IPO and Opening
Auctions.
a time in-force of DAY, GTX, GTT, SYS, FOK, or
IOC.
22 See Rule 11.350(a)(5).
23 See Rule 11.350(a)(9).
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24 See
Rule 11.350(a)(9)(E).
Rule 11.280(h)(8).
26 See Rule 11.350(e)(3).
25 See
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18367
FINRA Form 211 immediately prior to
the initial pricing, provided that a
broker-dealer serving in the role of
financial advisor to the issuer of the
securities being listed is willing to
perform the functions under IEX Rule
11.280(h)(8) that are performed by an
underwriter with respect to an IPO.
IEX Opening Auction
Pursuant to Rule 11.350(c)(1), Users
may submit orders eligible for execution
in the Opening Auction 27 at the
beginning of the Pre-Market Session,
which begins at 8:00 a.m. Any orders
designated for the Opening Auction
Book 28 will be queued until 9:30 a.m.
at which time they will be eligible to be
executed in the Opening Auction. In
addition to orders on the Opening
Auction Book, limit orders on the
Continuous Book with a time-in-force of
SYS or GTT are eligible to execute in
the Opening Auction (‘‘Pre-market
Continuous Book’’).29 The Exchange
does not place any restrictions on the
entry of orders to the Pre-market
Continuous Book to avoid unnecessary
disruptions to continuous trading.
Pursuant to proposed Rule
11.350(c)(2), beginning at the Opening
Auction Lock-in Time 30 and updated
every one second thereafter, the
Exchange will disseminate IEX Auction
Information via electronic means. The
Exchange will attempt to conduct an
Opening Auction for all IEX-listed
securities at the start of Regular Market
Hours (i.e., 9:30 a.m.) in accordance
with the clearing price determination
process set forth in Rule 11.350(c)(2)(B).
All orders eligible for execution in the
Opening Auction (i.e., orders on the
Opening Auction Book and orders on
the Pre-Market Continuous Book that
are not Auction Ineligible Orders) 31 are
Auction Eligible Orders. Auction
Eligible Orders will be ranked and
maintained in accordance with IEX
auction priority, pursuant to Rule
11.350(b). Moreover, pursuant to Rule
11.350(a)(2), non-displayed buy (sell)
orders on the Pre-Market Continuous
Book with a resting price (as defined in
Rule 11.350(b)(1)(A)(i)) within the
Reference Price Range 32 will be priced
at the lower (upper) threshold of the
Reference Price Range for the purpose of
27 See
Rule 11.350(c).
to Rule 11.350(a)(1)(A), orders on the
Opening Auction Book would include MOO orders,
LOO orders, market orders with a time-in-force of
DAY, and limit orders with a time-in-force of DAY
or GTX.
29 See Rule 11.190(a)(1)(E)(iv) and (vi).
30 See Rule 11.350(a)(22).
31 See Rule 11.350(a)(3).
32 See Rule 11.350(a)(30).
28 Pursuant
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determining the clearing price,33 but
will be ranked and eligible for execution
in the Opening Auction match at the
order’s resting price.34
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Proposed Changes
The Exchange proposes to clarify that
a new IEX-listed security that is not the
subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9)
(i.e., a financial advisor to the issuer is
willing to perform the specified
underwriter functions for a security that
was not listed on a national securities
exchange or traded pursuant to FINRA
form 211 immediately prior to the initial
pricing) will be eligible to begin trading
in the Pre-Market Session and have an
Opening Auction on IEX at the start of
Regular Market Hours, rather than an
IPO Auction. As described above,
current Exchange Rule 11.350(e) states
in relevant part that an IPO Auction will
be utilized for the launch of a new issue.
However, pursuant to Rule 11.280(g)(7),
IEX may only issue a regulatory halt
before the start of the Pre-Market
Session for a security that is the subject
of an IPO on IEX, or pursuant to Rule
11.280(h)(9).
Therefore, the IPO Auction process,
which pre-supposes there is no trading
in the security prior to the IPO Auction
match, would be suboptimal for the
launch of a new issue that is not an IPO
or otherwise being priced pursuant to
Rule 11.280(h)(9), because the Exchange
does not have authority to initiate a
regulatory trading halt, and thus such
securities would be eligible for trading
during the Pre-Market Session. The IPO
Auction process is designed to aggregate
all existing liquidity in a security and
execute the maximum number of shares
at a price that accurately reflects supply
and demand. The IPO Auction is not
designed to account for continuous
trading, and thus running an IPO
Auction alongside continuous trading
could result in auction pricing that does
not account for all available interest in,
or reflect the current market for, the
security. Accordingly, the Exchange is
proposing to clarify that an IEX-listed
security that is not the subject of an IPO
or otherwise being priced pursuant to
33 Note, non-displayed buy (sell) orders on the
Continuous Book with a resting price (as defined in
Rule 11.350(b)(1)(A)(i)) within the Reference Price
Range will be priced at the at the lower (upper)
threshold of the Reference Price Range for the
purpose of determining the clearing price and the
Indicative Clearing Price disseminated in IEX
Auction Information as set forth in Rule
11.350(a)(9)(E).
34 The Exchange notes that in the case of an IPO,
Halt, or Volatility Auction, there is no continuous
trading and therefore no Continuous Book.
Accordingly, there would be no non-displayed
interest on the Continuous Book to which this
functionality would apply.
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Rule 11.280(h)(9) will be eligible to
begin trading in the Pre-Market Session
and have an Opening Auction on IEX at
the start of Regular Market Hours, rather
than an IPO Auction.
Lastly, the Exchange proposes to
make corresponding changes to Rules
11.350(a)(6) and (7), which define the
terms ‘‘Final Consolidated Last Sale
Eligible Trade’’,35 and ‘‘Final Last Sale
Eligible Trade’’,36 respectively.
Specifically, the Exchange proposes to
add a new subparagraph (i) to paragraph
(A) of Rules 11.350(a)(6) and (7) to
specify that if there is no qualifying
previous official closing price for a
security that is not the subject of an IPO
or otherwise being priced pursuant to
Rule 11.280(h)(9), the Final
Consolidated Last Sale Eligible Trade
and the Final Last Sale Eligible Trade
will be equal to issue price.
Furthermore, the Exchange proposes to
amend subparagraph (B) of Rules
11.350(a)(6) and (7) to replace the broad
language referencing ‘‘the launch of a
new issue’’ with a more specific cross
reference to the initial pricing of any
other security pursuant to Rule
11.280(h)(9). Thus, as proposed:
• For a security that is not the subject
of an IPO or otherwise being priced
pursuant to Rule 11.280(h)(9):
Æ The security will be eligible to
begin trading in the Pre-Market Session
and have an Opening Auction on IEX at
the start of Regular Market Hours, rather
than an IPO Auction; and
Æ The Final Consolidated Last Sale
Eligible Trade will be equal to the last
trade prior to the end of Regular Market
35 Pursuant to Rule 11.350(a)(6), the Final
Consolidated Last Sale Eligible Trade is the last
trade prior to the end of Regular Market Hours, or
where applicable, prior to trading in the security
being halted or paused, that is last sale eligible and
reported to the Consolidated Tape System
(‘‘Consolidated Tape’’), rounded to the nearest MPV
or Midpoint Price calculated by the System,
whichever is closer. If there is no qualifying Final
Consolidated Last Sale Eligible Trade for the
current day, the previous official closing price; and
in the case of an IPO or the initial pricing of any
other security pursuant to Rule 11.280(h)(9), the
issue price. See also Rules 11.350(a)(30) and (33),
as well as Rules 11.350(d)(4)(B)(i) and (ii), which
utilize the defined term in a variety of contexts,
none of which are significantly impacted by the
proposed changes.
36 Pursuant to Rule 11.350(a)(7), the Final Last
Sale Eligible Trade is the last trade on IEX prior to
the end of Regular Market Hours, or where
applicable, prior to trading in the security being
halted or paused, that is last sale eligible and
reported to the Consolidated Tape. If there is no
qualifying Final Last Sale Eligible Trade for the
current day, the previous official closing price; and
in the case of an IPO or launch of a new issue, the
issue price. See also Rules 11.350(d)(2)(B) and (D);
as well as Rule 11.350(f)(3)(B)(ii), which each
utilize the defined term in a variety of contexts,
none of which are significantly impacted by the
proposed changes.
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Hours, rounded to the nearest Minimum
Price Variant (‘‘MPV’’) or Midpoint
Price calculated by the System,
whichever is closer: 37
D If there is no qualifying Final
Consolidated Last Sale Eligible Trade
for the current day, the previous official
closing price; or
D If there is no qualifying previous
official closing price for a security that
is not the subject of an IPO or otherwise
being priced pursuant to Rule
11.280(h)(9), the issue price.
o The Final Last Sale Eligible Trade
will be equal to the last trade on IEX
prior to the end of Regular Market
Hours,38 or if there is no qualifying
Final Last Sale Eligible Trade for the
current day, the issue price.
• For a security that is the subject of
an IPO or otherwise being priced
pursuant to Rule 11.280(h)(9):
Æ The Exchange will conduct an IPO
Auction;
Æ The Final Consolidated Last Sale
Eligible Trade will be equal to the last
trade prior to the end of Regular Market
Hours, rounded to the nearest MPV or
Midpoint Price calculated by the
System, whichever is closer: 39
D If there is no qualifying Final
Consolidated Last Sale Eligible Trade
for the current day, the issue price.
Æ The Final Last Sale Eligible Trade
will be equal to the last trade on IEX
prior to the end of Regular Market
Hours: 40
D If there is no qualifying Final Last
Sale Eligible Trade for the current day,
the issue price.
The Exchange believes the proposed
modifications to paragraphs (e) and (a)
of Rule 11.350 and the addition of
Supplemental Material .01 and .02 to
Rule 11.350(e) are designed to avoid any
potential confusion regarding which of
the IEX Auctions will be utilized to
process an IEX-listed security that is not
the subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9),
and therefore further clarifies the
Exchange’s auction processing. In
addition, as announced in IEX Trading
Alerts #2017–015 and #2017–046, the
Exchange intends to become a primary
listing exchange and support its first
37 However, where applicable, it will be the last
trade prior to trading in the security being halted
or paused, that is last sale eligible and reported to
the Consolidated Tape, rounded to the nearest MPV
or Midpoint Price calculated by the System,
whichever is closer. See Rule 11.210 specifying the
MPV and Rule 1.160(t) defining Midpoint Price.
38 However, where applicable, it will be the last
trade prior to trading in the security being halted
or paused, that is last sale eligible and reported to
the Consolidated Tape.
39 See supra note 37.
40 See supra note 38.
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IEX-listed security in 2018.41 As part of
the listings initiative, the Exchange is
providing a series of industry wide
weekend tests for the Exchange and its
Members to exercise the various
technology changes required to support
IEX Auctions and listings
functionality.42 Accordingly, the
Exchange is proposing to clarify
paragraphs (e) and (a) of Rule 11.350
and add Supplemental Material .01 and
.02 to Rule 11.350(e) as described above
in advance of the industry wide testing
period in 2018 in order to avoid
potential confusion, and allow Members
and other market participants time to
develop, test, and deploy any necessary
changes to support IEX Auctions.
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2. Statutory Basis
IEX believes that the proposed rule
changes are consistent with the
provisions of Section 6(b) 43 of the Act
in general, and furthers the objectives of
Section 6(b)(5) of the Act 44 in
particular, in that they are 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 changes to paragraphs (e) and
(a) of Rule 11.350 and the addition of
Supplemental Material .01 and .02 to
Rule 11.350(e) are consistent with the
protection of investors and the public
interest in that they do not alter the
substantive functionality governing the
IPO or Opening Auction processes.
Instead, the proposed changes simply
clarify which of the existing IEX
Auction processes will be utilized to
begin trading in a new IEX-listed
security that is not the subject of an IPO
41 See IEX Trading Alert #2017–015 (Listings
Specifications, Testing Opportunities, and
Timelines), May 31, 2017. See also IEX Trading
Alert #2017–046 (IEX Listings Timeline Update),
originally published on Monday, October 30, 2017,
and re-published on Tuesday, October 31, 2017.
42 See, e.g., IEX Trading Alert #2017–028 (First
Listings Functionality Industry Test on Saturday,
August 26), August 17, 2017; IEX Trading Alert
#2017–037 (Second Listings Functionality Industry
Test on Saturday, September 9), September 7, 2017;
IEX Trading Alert #2017–039 (Third Listings
Functionality Industry Test on Saturday, September
23), September 18, 2017; IEX Trading Alert #2017–
040 (Rescheduled 4th Listing Functionality
Industry Test), September 29, 2017; IEX Trading
Alert #2017–046 (IEX Listings Timeline Update),
originally published on Monday, October 30, 2017,
and re-published on Tuesday, October 31, 2017;
and IEX Trading Alert #2017–047 (Fourth Listings
Functionality Industry Test on Saturday, November
4), October 31, 2017.
43 15 U.S.C. 78f.
44 15 U.S.C. 78f(b)(5).
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Jkt 244001
or otherwise being priced pursuant to
Rule 11.280(h)(9). In this regard, the
Exchange believes that the choice of
which auction applies is consistent with
the Act because the IPO Auction
presupposes that a financial advisor is
willing to perform the specified
underwriter functions and it would not
make sense to use an IPO Auction in the
absence of such a financial advisor.
Further, the proposed progression of
reference prices that will be utilized as
the Final Consolidated Last Sale Eligible
Trade and the Final Last Sale Eligible
Trade for a security that is not the
subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9) is
consistent with the protection of
investors and the public interest in that
such prices most accurately reflect the
market for the security and are also
consistent with the Exchange’s current
reference prices.
Furthermore, the Exchange believes
the proposed rule changes are consistent
with the protection of investors and the
public interest because as described
above, the IPO Auction is not designed
to account for continuous trading, and
thus running an IPO Auction alongside
continuous trading could result in
auction pricing that does not account for
all available interest in, or reflect the
current market for, the security.
Accordingly, the Exchange proposes to
clarify that an IEX-listed security that is
not the subject of an IPO or otherwise
being priced pursuant to Rule
11.280(h)(9) will be eligible to begin
trading in the Pre-Market Session and
have an Opening Auction on IEX at the
start of Regular Market Hours, rather
than an IPO Auction.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule changes will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, in that the
proposed rule changes are consistent
with the rules of other primary listing
markets.45 Thus, the Exchange believes
there are no new inter-market
competitive burdens imposed as a result
of the proposed rule changes.
In addition, the Exchange does not
believe that the proposed changes will
have any impact on intra-market
competition. Specifically, as discussed
above, the proposed clarification does
not alter the substantive functionality
governing the IPO or Opening Auction
processes. Instead, the proposed
changes simply clarify which of the
45 See e.g., the Nasdaq Stock Market, LLC
(‘‘Nasdaq’’) Rules 4753 and 4120(c)(8)–(9).
PO 00000
Frm 00108
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Sfmt 4703
18369
existing IEX Auction processes will be
utilized to begin trading in a new IEXlisted security that is not the subject of
an IPO or otherwise being priced
pursuant to Rule 11.280(h)(9).
Furthermore, the Exchange believes the
proposed rule change is designed to
make IEX’s rules more complete, and
descriptive of the System’s functionality
to avoid any potential confusion among
Members and market participants
regarding such functionality, to the
benefit of all market participants. Lastly,
the Exchange notes that the proposed
changes will apply to all Members on a
fair and equal basis. Accordingly, the
Exchange believes there are no new
intra-market competitive burdens
imposed as a result of the proposed rule
changes.
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 foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) 46 of the Act and Rule 19b–
4(f)(6) thereunder.47
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 48 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 49
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 proposal may
become operative immediately upon
filing. The Exchange states that waiver
of the 30-day operative delay would
avoid any potential confusion regarding
IEX Auctions as IEX continues industry46 15
U.S.C. 78s(b)(3)(A)
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
48 17 CFR 240.19b–4(f)(6).
49 17 CFR 240.19b–4(f)(6)(iii).
47 17
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Federal Register / Vol. 83, No. 81 / Thursday, April 26, 2018 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website 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 No.
SR–IEX–2018–08, and should be
submitted on or before May 17, 2018.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.52
Eduardo A. Aleman,
Assistant Secretary.
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 No. SR–
IEX–2018–08 on the subject line.
amozie on DSK30RV082PROD with NOTICES
wide testing of the technology changes
being made by the Exchange and its
Members to support IEX as a listings
market, including IEX Auctions.50 The
Commission notes that IEX’s proposal
incrementally amends the opening
auction rule to address a scenario that
the Exchange did not originally
contemplate, and does so in a manner
consistent with the Commission’s prior
approval of that rule without raising any
novel issues. In addition, as noted
above, the proposal is consistent with
the rules of another primary listing
market. Accordingly, the Commission
believes the waiver of the operative
delay is consistent with the protection
of investors and the public interest.
Therefore, the Commission hereby
waives the operative delay and
designates the proposal operative upon
filing.51
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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.
SECURITIES AND EXCHANGE
COMMISSION
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 No.
SR–IEX–2018–08. This file number
should be included on the subject line
if email is used. To help the
Commission process and review your
50 See
supra note 42.
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).
51 For
VerDate Sep<11>2014
16:58 Apr 25, 2018
Jkt 244001
[FR Doc. 2018–08726 Filed 4–25–18; 8:45 am]
BILLING CODE 8011–01–P
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Form 1–SA, SEC File No. 270–661, OMB
Control No. 3235–0721.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form 1–SA (17 CFR 239.92) is used to
file semiannual reports by Tier 2 issuers
under Regulation A, an exemption from
registration under the Securities Act of
1933 (15 U.S.C. 77a et seq.). Tier 2
issuers under Regulation A conducting
offerings of up to $50 million within a
12-month period are required to file
Form 1–SA. Form 1–SA provides
semiannual, interim financial
statements and information about the
issuer’s liquidity, capital resources and
operations after the issuer’s second
fiscal quarter. The purpose of the Form
1–SA is to better inform the public
about companies that have conducted
Tier 2 offerings under Regulation A. We
estimate that approximately 36 issuers
file Form 1–SA annually. We estimate
that Form 1–SA takes approximately
187.43 hours to prepare. We estimate
that 85% of the 187.43 hours per
response (159.32 hours) is prepared by
the company for a total annual burden
of 5,736 hours (159.32 hours per
response × 36 responses).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comments
to Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: April 23, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08818 Filed 4–25–18; 8:45 am]
52 17
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 83, Number 81 (Thursday, April 26, 2018)]
[Notices]
[Pages 18366-18370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08726]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83075; File No. SR-IEX-2018-08]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 11.350 To Clarify When a New IEX-Listed Security Will Be Eligible
To Begin Trading With an IPO Auction
April 20, 2018.
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 April 17, 2018, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ IEX is
filing with the Commission a proposed rule change to amend Rules
11.350(e) and (a) to clarify that a new IEX-listed security that is not
the subject of an initial public offering (``IPO'') \6\ or otherwise
being priced pursuant to Rule 11.280(h)(9) will be eligible to begin
trading in the Pre-Market Session \7\ and have an Opening Auction \8\
on IEX at the start of Regular Market Hours,\9\ rather than an IPO
Auction,\10\ and to make corresponding changes to certain definitions
governing IPO and Opening Auctions. The Exchange has designated this
rule change as ``non-controversial'' under Section 19(b)(3)(A) of the
Act \11\ and provided the Commission with the notice required by Rule
19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ The term IPO refers to the initial public offering of
securities registered under Section 6 of the Securities Act of 1933.
\7\ See Rule 1.160(z).
\8\ See Rule 11.350(c).
\9\ See Rule 1.160(gg).
\10\ See Rule 11.350(e).
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website 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 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
Overview
On August 4, 2017, the Commission approved a proposed rule change
filed by the Exchange to adopt rules governing auctions in IEX-listed
securities (``IEX Auctions''), including provisions governing the
initial public offering (``IPO'') of IEX-listed securities.\13\ The
Exchange intends to launch a listings program for corporate issuers in
2018. The purpose of this proposed rule change is to amend paragraphs
(e) and (a) of Rule 11.350, and adopt new Supplemental Material .01 and
.02 to Rule 11.350(e) to clarify that a new IEX-listed security that is
not the subject of an initial public offering or otherwise being priced
pursuant to Rule 11.280(h)(9) will be eligible to begin trading in the
Pre-Market Session and have an Opening Auction on IEX at the start of
Regular Market Hours, rather than an IPO Auction, and to make
corresponding changes to certain definitions governing IPO and Opening
Auctions.
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 81316 (August 4,
2017), 82 FR 37474 (August 10, 2017). See also Rule 11.350(e).
---------------------------------------------------------------------------
Pursuant to Rule 11.350(e), the Exchange will conduct an IPO
Auction for securities that are the subject of an initial public
offering on the first day of listing.\14\ In addition, as proposed, the
Exchange will also conduct an IPO Auction on the first day of listing
for a new issue that is not an initial public offering, provided that a
broker-dealer serving in the role of financial advisor to the issuer of
the securities being listed is willing to perform the functions that
are performed by an underwriter with respect to an initial public
offering as specified in Rule 11.280(h)(9) (``specified underwriter
functions'').\15\ For securities that are not the subject of an initial
public offering or other new issues where a broker-dealer is unwilling
to perform the specified underwriter functions, the security will be
eligible to begin trading in the Pre-Market Session and have an Opening
Auction on IEX at the start of Regular Market Hours, instead of
conducting an IPO Auction on the first day of listing.\16\ As an
example, if an issuer with a class of common stock listed on IEX offers
and lists a class of preferred stock on IEX, the offering of the
preferred stock would not constitute an initial public offering and if
there is no broker-dealer serving in the role of financial advisor to
the issuer of the preferred stock that is willing to perform the
specified underwriter functions, the security will be eligible to begin
trading in the Pre-Market Session and have an Opening Auction on IEX at
the start of Regular
[[Page 18367]]
Market Hours, instead of conducting an IPO Auction on the first day of
listing.
---------------------------------------------------------------------------
\14\ Pursuant to section 12(f)(1)(G)(i)-(ii) of the Securities
and Exchange Act, a security is the subject of an initial public
offering if the offering of the subject security is registered under
the Securities Act of 1933, the issuer of the security, immediately
prior to filing the registration statement with respect to the
offering, was not subject to the reporting requirements of the Act,
and the initial public offering of such security commences at the
opening of trading on the day on which such security commences
trading on the national securities exchange with which such security
is registered. See 15 U.S.C. 78l(f)(1)(G). See also proposed
Supplemental Material .01 to Rule 11.350(e).
\15\ Pursuant to Rule 11.280(h)(9), the process for halting and
initial pricing of a security that is the subject of an IPO shall
also be available for the initial pricing of any other security that
has not been listed on a national securities exchange or traded in
the over-the-counter market pursuant to FINRA Form 211 immediately
prior to the initial pricing, provided that a broker-dealer serving
in the role of financial advisor to the issuer of the securities
being listed is willing to perform the functions under IEX Rule
11.280(h)(8) that are performed by an underwriter with respect to an
initial public offering. See also proposed Supplemental Material .01
to Rule 11.350(e).
\16\ See proposed Supplemental Material .02 to Rule 11.350(e)
and Rule 11.350(c).
---------------------------------------------------------------------------
The Exchange notes that the proposed rule changes do not alter the
substantive functionality governing the IPO or Opening Auction
processes. Instead, the proposed changes are designed to simply clarify
which of the existing IEX Auction processes will be utilized to begin
trading in a new IEX-listed security that is not the subject of an IPO
or otherwise being priced pursuant to Rule 11.280(h)(9), and to make
corresponding changes to certain definitions governing IPO and Opening
Auctions.
IEX IPO Auction
For trading in an IEX-listed security that is the subject of an
IPO, or for the launch of a new issue,\17\ the Exchange will conduct an
IPO Auction pursuant to Rule 11.350(e). Specifically, Users may submit
Auction Eligible Orders\18\ for execution in the IPO Auction at the
start of the Order Acceptance Period,\19\ which begins at 8:00 a.m.\20\
All Auction Eligible Orders designated for participation in the IPO
Auction will be queued on the IPO Auction Book \21\ until the scheduled
auction match, at which time they will be eligible for execution in the
IPO Auction. Pursuant to Rule 11.350(e)(2)(A), the Exchange will begin
to disseminate IEX Auction Information via electronic means at the
start of the Display Only Period,\22\ which begins thirty (30) minutes
prior to the scheduled IPO Auction match, and will be updated every one
second thereafter.\23\ The Exchange will attempt to conduct an IPO
Auction for all IEX-listed securities at the scheduled auction match
time in accordance with the clearing price determination process set
forth in Rule 11.350(e)(2)(C). Auction Eligible Orders will be ranked
and maintained in accordance with IEX auction priority, pursuant to
Rule 11.350(b).
---------------------------------------------------------------------------
\17\ The Exchange notes that new issues are registered
securities that are being listed on the Exchange and sold publicly
for the first time but are not necessarily the subject of an IPO.
\18\ See Rule 11.350(a)(2).
\19\ See Rule 11.350(a)(29).
\20\ All times are in Eastern Time.
\21\ See Rule 11.350(a)(1)(C). For an IPO Auction, the IPO
Auction Book would include Market-On-Open, Limit-On-Open, and market
orders with a time-in-force of DAY, as well as limit orders with a
time in-force of DAY, GTX, GTT, SYS, FOK, or IOC.
\22\ See Rule 11.350(a)(5).
\23\ See Rule 11.350(a)(9).
---------------------------------------------------------------------------
The Exchange will generally attempt to conduct an IPO Auction
beginning at 10:15 a.m. Pursuant to Rule 11.280(g)(7), IEX will declare
a regulatory halt before the start of the Pre-Market Session for a
security that is the subject of an IPO on IEX, and therefore there will
be no Continuous Book for such security. The Order Acceptance Period
for an IPO Auction may be extended at the time of the auction match
pursuant to Rules 11.350(e)(2)(B)(i)-(iv):
Automatically for five (5) minutes when there are
unmatched shares from market orders on the IPO Auction Book;
Automatically for five (5) minutes when the Indicative
Clearing Price \24\ at the time of the IPO Auction match differs by the
greater of five percent (5%) or fifty cents ($0.50) from any of the
previous fifteen (15) Indicative Clearing Price disseminations;
---------------------------------------------------------------------------
\24\ See Rule 11.350(a)(9)(E).
---------------------------------------------------------------------------
Automatically during the Pre-Launch Period \25\ when the
IPO Auction match price is above (below) the upper (lower) price band
selected by the underwriter pursuant to proposed Rule 11.280(h)(8),
until the clearing price is within such bands; or
---------------------------------------------------------------------------
\25\ See Rule 11.280(h)(8).
---------------------------------------------------------------------------
Manually upon request from the underwriter at any time
prior to the auction match.
Furthermore, Rule 11.280(h)(8) governs the process for resuming
from a trading halt initiated under Rule 11.280(g)(7) for a security
that is the subject of an IPO. Thus, in addition to the systemic
processes described above that govern the IPO Auction match, there is a
series of procedural steps to complete an IPO Auction, which include
input from and coordination with the IPO underwriter. Specifically,
pursuant to Rule 11.280(h), thirty (30) minutes after the start of the
Display Only Period, unless extended by the underwriter, the security
will enter a Pre-Launch Period of indeterminate duration. The Pre-
Launch Period will end immediately after the transition to the Regular
Market Session following the IPO Auction match,\26\ pending:
---------------------------------------------------------------------------
\26\ See Rule 11.350(e)(3).
---------------------------------------------------------------------------
Notification from the underwriter that the security is
ready to trade;
Subsequent approval of the Indicative Clearing Price at
the time of such notification; and
Validation that each of the conditions for the extension
of the Order Acceptance Period set forth in Rules 11.350(e)(2)(B)(i)-
(iv) are not satisfied.
Lastly, pursuant to Rule 11.280(h)(9), the process for halting and
initial pricing of a security that is the subject of an IPO shall also
be available for the initial pricing of any other security that has not
been listed on a national securities exchange or traded in the over-
the-counter market pursuant to FINRA Form 211 immediately prior to the
initial pricing, provided that a broker-dealer serving in the role of
financial advisor to the issuer of the securities being listed is
willing to perform the functions under IEX Rule 11.280(h)(8) that are
performed by an underwriter with respect to an IPO.
IEX Opening Auction
Pursuant to Rule 11.350(c)(1), Users may submit orders eligible for
execution in the Opening Auction \27\ at the beginning of the Pre-
Market Session, which begins at 8:00 a.m. Any orders designated for the
Opening Auction Book \28\ will be queued until 9:30 a.m. at which time
they will be eligible to be executed in the Opening Auction. In
addition to orders on the Opening Auction Book, limit orders on the
Continuous Book with a time-in-force of SYS or GTT are eligible to
execute in the Opening Auction (``Pre-market Continuous Book'').\29\
The Exchange does not place any restrictions on the entry of orders to
the Pre-market Continuous Book to avoid unnecessary disruptions to
continuous trading.
---------------------------------------------------------------------------
\27\ See Rule 11.350(c).
\28\ Pursuant to Rule 11.350(a)(1)(A), orders on the Opening
Auction Book would include MOO orders, LOO orders, market orders
with a time-in-force of DAY, and limit orders with a time-in-force
of DAY or GTX.
\29\ See Rule 11.190(a)(1)(E)(iv) and (vi).
---------------------------------------------------------------------------
Pursuant to proposed Rule 11.350(c)(2), beginning at the Opening
Auction Lock-in Time \30\ and updated every one second thereafter, the
Exchange will disseminate IEX Auction Information via electronic means.
The Exchange will attempt to conduct an Opening Auction for all IEX-
listed securities at the start of Regular Market Hours (i.e., 9:30
a.m.) in accordance with the clearing price determination process set
forth in Rule 11.350(c)(2)(B). All orders eligible for execution in the
Opening Auction (i.e., orders on the Opening Auction Book and orders on
the Pre-Market Continuous Book that are not Auction Ineligible Orders)
\31\ are Auction Eligible Orders. Auction Eligible Orders will be
ranked and maintained in accordance with IEX auction priority, pursuant
to Rule 11.350(b). Moreover, pursuant to Rule 11.350(a)(2), non-
displayed buy (sell) orders on the Pre-Market Continuous Book with a
resting price (as defined in Rule 11.350(b)(1)(A)(i)) within the
Reference Price Range \32\ will be priced at the lower (upper)
threshold of the Reference Price Range for the purpose of
[[Page 18368]]
determining the clearing price,\33\ but will be ranked and eligible for
execution in the Opening Auction match at the order's resting
price.\34\
---------------------------------------------------------------------------
\30\ See Rule 11.350(a)(22).
\31\ See Rule 11.350(a)(3).
\32\ See Rule 11.350(a)(30).
\33\ Note, non-displayed buy (sell) orders on the Continuous
Book with a resting price (as defined in Rule 11.350(b)(1)(A)(i))
within the Reference Price Range will be priced at the at the lower
(upper) threshold of the Reference Price Range for the purpose of
determining the clearing price and the Indicative Clearing Price
disseminated in IEX Auction Information as set forth in Rule
11.350(a)(9)(E).
\34\ The Exchange notes that in the case of an IPO, Halt, or
Volatility Auction, there is no continuous trading and therefore no
Continuous Book. Accordingly, there would be no non-displayed
interest on the Continuous Book to which this functionality would
apply.
---------------------------------------------------------------------------
Proposed Changes
The Exchange proposes to clarify that a new IEX-listed security
that is not the subject of an IPO or otherwise being priced pursuant to
Rule 11.280(h)(9) (i.e., a financial advisor to the issuer is willing
to perform the specified underwriter functions for a security that was
not listed on a national securities exchange or traded pursuant to
FINRA form 211 immediately prior to the initial pricing) will be
eligible to begin trading in the Pre-Market Session and have an Opening
Auction on IEX at the start of Regular Market Hours, rather than an IPO
Auction. As described above, current Exchange Rule 11.350(e) states in
relevant part that an IPO Auction will be utilized for the launch of a
new issue. However, pursuant to Rule 11.280(g)(7), IEX may only issue a
regulatory halt before the start of the Pre-Market Session for a
security that is the subject of an IPO on IEX, or pursuant to Rule
11.280(h)(9).
Therefore, the IPO Auction process, which pre-supposes there is no
trading in the security prior to the IPO Auction match, would be
suboptimal for the launch of a new issue that is not an IPO or
otherwise being priced pursuant to Rule 11.280(h)(9), because the
Exchange does not have authority to initiate a regulatory trading halt,
and thus such securities would be eligible for trading during the Pre-
Market Session. The IPO Auction process is designed to aggregate all
existing liquidity in a security and execute the maximum number of
shares at a price that accurately reflects supply and demand. The IPO
Auction is not designed to account for continuous trading, and thus
running an IPO Auction alongside continuous trading could result in
auction pricing that does not account for all available interest in, or
reflect the current market for, the security. Accordingly, the Exchange
is proposing to clarify that an IEX-listed security that is not the
subject of an IPO or otherwise being priced pursuant to Rule
11.280(h)(9) will be eligible to begin trading in the Pre-Market
Session and have an Opening Auction on IEX at the start of Regular
Market Hours, rather than an IPO Auction.
Lastly, the Exchange proposes to make corresponding changes to
Rules 11.350(a)(6) and (7), which define the terms ``Final Consolidated
Last Sale Eligible Trade'',\35\ and ``Final Last Sale Eligible
Trade'',\36\ respectively. Specifically, the Exchange proposes to add a
new subparagraph (i) to paragraph (A) of Rules 11.350(a)(6) and (7) to
specify that if there is no qualifying previous official closing price
for a security that is not the subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9), the Final Consolidated Last Sale
Eligible Trade and the Final Last Sale Eligible Trade will be equal to
issue price. Furthermore, the Exchange proposes to amend subparagraph
(B) of Rules 11.350(a)(6) and (7) to replace the broad language
referencing ``the launch of a new issue'' with a more specific cross
reference to the initial pricing of any other security pursuant to Rule
11.280(h)(9). Thus, as proposed:
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\35\ Pursuant to Rule 11.350(a)(6), the Final Consolidated Last
Sale Eligible Trade is the last trade prior to the end of Regular
Market Hours, or where applicable, prior to trading in the security
being halted or paused, that is last sale eligible and reported to
the Consolidated Tape System (``Consolidated Tape''), rounded to the
nearest MPV or Midpoint Price calculated by the System, whichever is
closer. If there is no qualifying Final Consolidated Last Sale
Eligible Trade for the current day, the previous official closing
price; and in the case of an IPO or the initial pricing of any other
security pursuant to Rule 11.280(h)(9), the issue price. See also
Rules 11.350(a)(30) and (33), as well as Rules 11.350(d)(4)(B)(i)
and (ii), which utilize the defined term in a variety of contexts,
none of which are significantly impacted by the proposed changes.
\36\ Pursuant to Rule 11.350(a)(7), the Final Last Sale Eligible
Trade is the last trade on IEX prior to the end of Regular Market
Hours, or where applicable, prior to trading in the security being
halted or paused, that is last sale eligible and reported to the
Consolidated Tape. If there is no qualifying Final Last Sale
Eligible Trade for the current day, the previous official closing
price; and in the case of an IPO or launch of a new issue, the issue
price. See also Rules 11.350(d)(2)(B) and (D); as well as Rule
11.350(f)(3)(B)(ii), which each utilize the defined term in a
variety of contexts, none of which are significantly impacted by the
proposed changes.
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For a security that is not the subject of an IPO or
otherwise being priced pursuant to Rule 11.280(h)(9):
[cir] The security will be eligible to begin trading in the Pre-
Market Session and have an Opening Auction on IEX at the start of
Regular Market Hours, rather than an IPO Auction; and
[cir] The Final Consolidated Last Sale Eligible Trade will be equal
to the last trade prior to the end of Regular Market Hours, rounded to
the nearest Minimum Price Variant (``MPV'') or Midpoint Price
calculated by the System, whichever is closer: \37\
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\37\ However, where applicable, it will be the last trade prior
to trading in the security being halted or paused, that is last sale
eligible and reported to the Consolidated Tape, rounded to the
nearest MPV or Midpoint Price calculated by the System, whichever is
closer. See Rule 11.210 specifying the MPV and Rule 1.160(t)
defining Midpoint Price.
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[ssquf] If there is no qualifying Final Consolidated Last Sale
Eligible Trade for the current day, the previous official closing
price; or
[ssquf] If there is no qualifying previous official closing price
for a security that is not the subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9), the issue price.
o The Final Last Sale Eligible Trade will be equal to the last
trade on IEX prior to the end of Regular Market Hours,\38\ or if there
is no qualifying Final Last Sale Eligible Trade for the current day,
the issue price.
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\38\ However, where applicable, it will be the last trade prior
to trading in the security being halted or paused, that is last sale
eligible and reported to the Consolidated Tape.
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For a security that is the subject of an IPO or otherwise
being priced pursuant to Rule 11.280(h)(9):
[cir] The Exchange will conduct an IPO Auction;
[cir] The Final Consolidated Last Sale Eligible Trade will be equal
to the last trade prior to the end of Regular Market Hours, rounded to
the nearest MPV or Midpoint Price calculated by the System, whichever
is closer: \39\
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\39\ See supra note 37.
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[ssquf] If there is no qualifying Final Consolidated Last Sale
Eligible Trade for the current day, the issue price.
[cir] The Final Last Sale Eligible Trade will be equal to the last
trade on IEX prior to the end of Regular Market Hours: \40\
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\40\ See supra note 38.
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[ssquf] If there is no qualifying Final Last Sale Eligible Trade
for the current day, the issue price.
The Exchange believes the proposed modifications to paragraphs (e)
and (a) of Rule 11.350 and the addition of Supplemental Material .01
and .02 to Rule 11.350(e) are designed to avoid any potential confusion
regarding which of the IEX Auctions will be utilized to process an IEX-
listed security that is not the subject of an IPO or otherwise being
priced pursuant to Rule 11.280(h)(9), and therefore further clarifies
the Exchange's auction processing. In addition, as announced in IEX
Trading Alerts #2017-015 and #2017-046, the Exchange intends to become
a primary listing exchange and support its first
[[Page 18369]]
IEX-listed security in 2018.\41\ As part of the listings initiative,
the Exchange is providing a series of industry wide weekend tests for
the Exchange and its Members to exercise the various technology changes
required to support IEX Auctions and listings functionality.\42\
Accordingly, the Exchange is proposing to clarify paragraphs (e) and
(a) of Rule 11.350 and add Supplemental Material .01 and .02 to Rule
11.350(e) as described above in advance of the industry wide testing
period in 2018 in order to avoid potential confusion, and allow Members
and other market participants time to develop, test, and deploy any
necessary changes to support IEX Auctions.
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\41\ See IEX Trading Alert #2017-015 (Listings Specifications,
Testing Opportunities, and Timelines), May 31, 2017. See also IEX
Trading Alert #2017-046 (IEX Listings Timeline Update), originally
published on Monday, October 30, 2017, and re-published on Tuesday,
October 31, 2017.
\42\ See, e.g., IEX Trading Alert #2017-028 (First Listings
Functionality Industry Test on Saturday, August 26), August 17,
2017; IEX Trading Alert #2017-037 (Second Listings Functionality
Industry Test on Saturday, September 9), September 7, 2017; IEX
Trading Alert #2017-039 (Third Listings Functionality Industry Test
on Saturday, September 23), September 18, 2017; IEX Trading Alert
#2017-040 (Rescheduled 4th Listing Functionality Industry Test),
September 29, 2017; IEX Trading Alert #2017-046 (IEX Listings
Timeline Update), originally published on Monday, October 30, 2017,
and re-published on Tuesday, October 31, 2017; and IEX Trading Alert
#2017-047 (Fourth Listings Functionality Industry Test on Saturday,
November 4), October 31, 2017.
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2. Statutory Basis
IEX believes that the proposed rule changes are consistent with the
provisions of Section 6(b) \43\ of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act \44\ in particular, in that
they are 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.
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\43\ 15 U.S.C. 78f.
\44\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes to paragraphs (e)
and (a) of Rule 11.350 and the addition of Supplemental Material .01
and .02 to Rule 11.350(e) are consistent with the protection of
investors and the public interest in that they do not alter the
substantive functionality governing the IPO or Opening Auction
processes. Instead, the proposed changes simply clarify which of the
existing IEX Auction processes will be utilized to begin trading in a
new IEX-listed security that is not the subject of an IPO or otherwise
being priced pursuant to Rule 11.280(h)(9). In this regard, the
Exchange believes that the choice of which auction applies is
consistent with the Act because the IPO Auction presupposes that a
financial advisor is willing to perform the specified underwriter
functions and it would not make sense to use an IPO Auction in the
absence of such a financial advisor. Further, the proposed progression
of reference prices that will be utilized as the Final Consolidated
Last Sale Eligible Trade and the Final Last Sale Eligible Trade for a
security that is not the subject of an IPO or otherwise being priced
pursuant to Rule 11.280(h)(9) is consistent with the protection of
investors and the public interest in that such prices most accurately
reflect the market for the security and are also consistent with the
Exchange's current reference prices.
Furthermore, the Exchange believes the proposed rule changes are
consistent with the protection of investors and the public interest
because as described above, the IPO Auction is not designed to account
for continuous trading, and thus running an IPO Auction alongside
continuous trading could result in auction pricing that does not
account for all available interest in, or reflect the current market
for, the security. Accordingly, the Exchange proposes to clarify that
an IEX-listed security that is not the subject of an IPO or otherwise
being priced pursuant to Rule 11.280(h)(9) will be eligible to begin
trading in the Pre-Market Session and have an Opening Auction on IEX at
the start of Regular Market Hours, rather than an IPO Auction.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule changes will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, in that the proposed rule
changes are consistent with the rules of other primary listing
markets.\45\ Thus, the Exchange believes there are no new inter-market
competitive burdens imposed as a result of the proposed rule changes.
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\45\ See e.g., the Nasdaq Stock Market, LLC (``Nasdaq'') Rules
4753 and 4120(c)(8)-(9).
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In addition, the Exchange does not believe that the proposed
changes will have any impact on intra-market competition. Specifically,
as discussed above, the proposed clarification does not alter the
substantive functionality governing the IPO or Opening Auction
processes. Instead, the proposed changes simply clarify which of the
existing IEX Auction processes will be utilized to begin trading in a
new IEX-listed security that is not the subject of an IPO or otherwise
being priced pursuant to Rule 11.280(h)(9). Furthermore, the Exchange
believes the proposed rule change is designed to make IEX's rules more
complete, and descriptive of the System's functionality to avoid any
potential confusion among Members and market participants regarding
such functionality, to the benefit of all market participants. Lastly,
the Exchange notes that the proposed changes will apply to all Members
on a fair and equal basis. Accordingly, the Exchange believes there are
no new intra-market competitive burdens imposed as a result of the
proposed rule changes.
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 foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \46\ of the Act and Rule 19b-
4(f)(6) thereunder.\47\
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\46\ 15 U.S.C. 78s(b)(3)(A)
\47\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and the 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 pursuant to Rule 19b-4(f)(6) under the
Act \48\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \49\ 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 proposal may become operative immediately upon filing. The Exchange
states that waiver of the 30-day operative delay would avoid any
potential confusion regarding IEX Auctions as IEX continues industry-
[[Page 18370]]
wide testing of the technology changes being made by the Exchange and
its Members to support IEX as a listings market, including IEX
Auctions.\50\ The Commission notes that IEX's proposal incrementally
amends the opening auction rule to address a scenario that the Exchange
did not originally contemplate, and does so in a manner consistent with
the Commission's prior approval of that rule without raising any novel
issues. In addition, as noted above, the proposal is consistent with
the rules of another primary listing market. Accordingly, the
Commission believes the waiver of the operative delay is consistent
with the protection of investors and the public interest. Therefore,
the Commission hereby waives the operative delay and designates the
proposal operative upon filing.\51\
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\48\ 17 CFR 240.19b-4(f)(6).
\49\ 17 CFR 240.19b-4(f)(6)(iii).
\50\ See supra note 42.
\51\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-IEX-2018-08 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 No. SR-IEX-2018-08. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website 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 No. SR-IEX-2018-08, and should be submitted on or
before May 17, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
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\52\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08726 Filed 4-25-18; 8:45 am]
BILLING CODE 8011-01-P
