Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Fee Schedule To Establish Fees for the Execution of Retail and Retail Liquidity Provider Orders and To Eliminate Fee Code N From the Fee Schedule, 47330-47334 [2019-19332]
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Federal Register / Vol. 84, No. 174 / Monday, September 9, 2019 / Notices
C. Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments relating to the
proposed rule change have not been
solicited or received. LCH SA will
notify the Commission of any written
comments received by LCH SA.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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–
LCH SA–2019–006 on the subject line.
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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–LCH SA–2019–006. 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
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20:43 Sep 06, 2019
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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 LCH SA and on LCH SA’s
website at: https://www.lch.com/
resources/rules-and-regulations/
proposed-rule-changes-0. 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–LCH SA–2019–006 and
should be submitted on or before
September 30, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–19335 Filed 9–6–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86854; File No. SR–IEX–
2019–08]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Fee Schedule To Establish Fees for the
Execution of Retail and Retail Liquidity
Provider Orders and To Eliminate Fee
Code N From the Fee Schedule
September 3, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on August
22, 2019, 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
10 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.
1 15
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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 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 establish
fees for the execution of Retail and
Retail Liquidity Provider orders and to
eliminate Fee Code N from the Fee
Schedule. Changes to the Fee Schedule
pursuant to this proposal are effective
upon filing,6 and will be implemented
as described herein.
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 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
The Exchange proposes to modify its
Fee Schedule, pursuant to IEX Rule
15.110(a) and (c), to establish fees for
the execution of Retail and Retail
Liquidity Provider orders and to
eliminate Fee Code N from the Fee
Schedule.
Retail Price Improvement Program Fees
On August 9, 2019, the Commission
approved an IEX rule filing to establish
a Retail Price Improvement Program
(‘‘Retail Program’’).7 IEX now proposes
4 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
6 15 U.S.C. 78s(b)(3)(A)(ii).
7 See Securities Exchange Act Release No. 86619
(August 9, 2019), 84 FR 41769 (August 15, 2019)
(SR–IEX–2019–05) (order approving the IEX Retail
Program).
5 17
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Federal Register / Vol. 84, No. 174 / Monday, September 9, 2019 / Notices
to adopt fees for the launch of its Retail
Program.
The Exchange does not propose to
charge any fees for the execution of a
Retail order 8 submitted to IEX by a
Member approved as a Retail Member
Organization (‘‘RMO’’).9 This pricing is
referred to as the ‘‘Retail Order Fee’’ on
the IEX Fee Schedule with a Fee Code
Modifier of R 10 to be provided by the
Exchange on execution reports. In
addition, the Exchange proposes to add
a new footnote 2 to the IEX Fee
Schedule (and renumber current
footnote 2 to be footnote 3) to specify
that Fee Code R applies only to a Retail
order submitted by an IEX Retail
Member Organization that (i) satisfies
the criteria set forth in IEX Rules
11.190(b)(15) and 11.232(a)(1) and (ii) is
a Discretionary Peg order or Midpoint
Peg order with a Time-in-Force of IOC
or FOK only eligible to trade at the
Midpoint Price.
In addition, the Exchange does not
propose to charge any fees for the
execution of a Retail Liquidity Provider
(‘‘RLP’’) 11 order. This pricing is referred
to as the ‘‘Retail Liquidity Provider
Order Fee’’ on the IEX Fee Schedule
with a Fee Code Modifier of A 12 to be
provided by the Exchange on execution
Fee codes
Description
IR ....................
IA ....................
LR ...................
ISR ..................
ISA ..................
IQR 14 .............
LSR .................
LQR 15 ............
ISQR 16 ...........
LSQR 17 ..........
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
As set forthin the Retail Program
filing, IEX will implement the Retail
Program within 90 days of approval and
provide at least ten (10) days’ notice to
Members and market participants of the
implementation timeline.18 Thus, IEX
will issue a trading alert at least 10 days
before the launch of the Retail Program,
informing Members both of the Retail
Program’s imminent launch and of the
new Fee Codes and associated fees set
forth in this filing.
Elimination of Fee Code N
IEX is also proposing to delete Fee
Code Modifier N from the IEX Fee
Schedule. On May 1, 2018, the
Exchange established the use of Fee
Code Modifier N as an ‘‘Additional Fee
Code’’ in connection with a reduction of
the applicable fee for certain executions
that removed non-displayed liquidity
with a spread-crossing eligible order.19
Fee Code Modifier N (and related Fee
Code combinations) was added to
8 See
IEX Rule 11.232(a)(2).
IEX Rule 11.232(a)(1).
10 Fee Code Modifier R appears in the
‘‘Additional Fee Codes’’ section of the Fee
Schedule.
11 See IEX Rule 11.232(a)(3).
12 Fee Code Modifier A appears in the
‘‘Additional Fee Codes’’ section of the Fee
Schedule.
13 The proposed new Fee Code combinations, as
well as Fee Code modifiers R and A, will be
provided to Members on execution reports.
9 See
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Fee
order removes non-displayed liquidity .........................................................................................................
Liquidity Provider order adds non-displayed liquidity to a Retail order .......................................................
order removes displayed liquidity ................................................................................................................
order removes non-displayed liquidity provided by such Member ..............................................................
Liquidity Provider order adds non-displayed liquidity to a Retail order provided by such Member ............
order removes non-displayed liquidity during periods of quote instability ...................................................
order removes displayed liquidity provided by such Member .....................................................................
order removes displayed liquidity during periods of quote instability ..........................................................
order removes non-displayed liquidity provided by such Member during periods of quote instability .......
order removes displayed liquidity provided by such Member during periods of quote instability ...............
Implementation of Retail Price
Improvement Program Fees
VerDate Sep<11>2014
reports. The Exchange is not proposing
any changes to the IEX Fee Schedule
with respect to orders other than RLP
orders that execute against a Retail
Order.
The Exchange also proposes
conforming changes to the section of the
IEX Fee Schedule entitled ‘‘Fee Code
Combinations and Associated Fees’’ to
reflect the proposed fees for execution
of Retail orders and RLP orders and new
Fee Code Modifiers R and A.13 The
following describes the proposed Fee
Code Combinations and Associated
Fees:
20:43 Sep 06, 2019
Jkt 247001
denote such executions and provided to
Members on execution reports.
Thereafter, effective August 1, 2018, IEX
reverted to the prior fee of $0.0009 per
share for such executions,20 but did not
eliminate the use of Fee Code Modifier
N and related Fee Code combinations,
which continue to be provided to
Members on execution reports,
notwithstanding that they no longer
impact applicable execution fees
because orders that remove nondisplayed liquidity with a spreadcrossing eligible order are not subject to
a different fee than is otherwise assessed
because the order was spread-crossing
eligible. Thus, Fee Code Modifier N and
related Fee Code combinations are
duplicative of other Fee Code Modifiers
and Fee Code combinations.
Accordingly, IEX proposes to delete Fee
Code Modifier N and Fee Code
combinations that include Fee Code
Modifier N from the IEX Fee Schedule.
The following describes the basis for
each deletion:
14 Fee Code combinations that include Fee Code
Modifier Q are subject to Footnote 1 of the IEX Fee
Schedule which provides as follows:
Crumbling Quote Remove Fee: Executions with
Fee Code Q that exceed the CQRF Threshold are
subject to the Crumbling Quote Remove Fee
identified in the Fee Code Modifiers table.
Executions with Fee Code Q that do not exceed the
CQRF Threshold are subject to the fees identified
in the Fee Codes and Associated Fees table.
15 See supra note 14.
16 See supra note 14.
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FREE.
FREE.
FREE.
FREE.
FREE.
FREE.
FREE.
FREE
FREE.
FREE.
• Fee Code Modifier N describes
execution of an order that removes
liquidity with a spread-crossing eligible
order, specifying that the fee for such an
execution is $0.0009 per share.
However, as explained in the Fee
Schedule, because Fee Code Modifier
‘‘N’’ is an ‘‘Additional Fee Code, the
rates listed in the Fee Codes and
Associated Fees table will apply.’’
Therefore, Fee Code Modifier N is never
the only Fee Code provided to Members
on execution reports, and will only be
provided to Members on execution
reports in the following eight fee code
combinations.
• Fee Code combination IN describes
execution of an order that removes nondisplayed liquidity with a spreadcrossing eligible order, specifying that
the fee for such an execution is $0.0009
per share. Such executions are also
described by Fee Code I which describes
an execution of an order that adds or
removes non-displayed liquidity and is
also subject to a fee of $0.0009 per
share. Consequently, Fee Code
17 See
supra note 14.
Securities Exchange Act Release No. 86241
(June 28, 2019) 84 FR 32238 (July 5, 2019) (SR–IEX–
2019–05).
19 See Securities Exchange Act Release No. 83147
(May 1, 2018), 83 FR 20118 (May 7, 2018) (SR–IEX–
2018–09).
20 See Securities Exchange Act Release No. 83820
(August 10, 2018), 83 FR 40800 (August 16, 2018)
(SR–IEX–2018–17).
18 See
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09SEN1
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Federal Register / Vol. 84, No. 174 / Monday, September 9, 2019 / Notices
combination IN is duplicative of Fee
Code I.
• Fee Code combination LN describes
execution of an order that removes
displayed liquidity with a spreadcrossing eligible order, specifying that
the fee for such execution is $0.0003 per
share. Such executions are also
described by Fee Code L which
describes an execution of an order that
adds or removes displayed liquidity and
is also subject to a fee of $0.0003 per
share. Consequently, Fee Code
combination LN is duplicative of Fee
Code L.
• Fee Code combination ISN
describes execution of an order that
removes non-displayed liquidity
provided by such Member with a
spread-crossing eligible order,
specifying that such executions are free.
Such executions are also described by
Fee Code combination IS which
describes execution of an order that
executes against resting non-displayed
liquidity provided by such Member and
is also free. Consequently, Fee Code
combination ISN is duplicative of Fee
Code Combination IS.
• Fee Code combination IQN
describes execution of an order that
removes non-displayed liquidity during
periods of quote instability with a
spread-crossing eligible order,
specifying that the fee for such
execution is $0.0009 per share. Such
executions are also described by Fee
Code combination IQ which describes
execution of an order that removes nondisplayed liquidity during periods of
quote instability and is also subject to a
fee of $0.0009 per share. Consequently,
Fee Code combination IQN is
duplicative of Fee Code Combination
IQ.
• Fee Code combination LSN
describes execution of an order that
removes displayed liquidity provided
by such Member with a spread-crossing
eligible order, specifying that such
executions are free. Such executions are
also described by Fee Code combination
LS which describes execution of an
order against resting displayed liquidity
provided by such Member and is also
free. Consequently, Fee Code
combination LSN is duplicative of Fee
Code combination LS.
• Fee Code combination LQN
describes execution of an order that
removes displayed liquidity during
periods of quote instability with a
spread-crossing eligible order,
specifying that the fee for such an
execution is $0.0003 per share. Such
executions are also described by Fee
Code LQ which describes an execution
of an order that removes displayed
liquidity during periods of quote
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20:43 Sep 06, 2019
Jkt 247001
instability and is also subject to a fee of
$0.0003 per share. Consequently, Fee
Code combination LQN is duplicative of
Fee Code LQ.
• Fee Code combination ISQN
describes execution of an order that
removes non-displayed liquidity
provided by such Member during
periods of quote instability with a
spread-crossing eligible order,
specifying that such executions are free.
Such executions are also described by
Fee Code combination ISQ which
describes execution of an order that
removes non-displayed liquidity
provided by such Member during
periods of quote instability and is also
free. Consequently, Fee Code
combination ISQN is duplicative of Fee
Code combination ISQ.
• Fee Code combination LSQN
describes execution of an order that
displayed liquidity provided by such
Member during periods of quote
instability with a spread-crossing
eligible order, specifying that such
executions are free. Such executions are
also described by Fee Code combination
LSQ which describes execution of an
order that removes displayed liquidity
provided by such Member during
periods of quote instability and is also
free. Consequently, Fee Code
combination LSQN is duplicative of Fee
Code combination LSQ.
Implementation of the Elimination of
Fee Code N
The elimination of Fee Code N will be
operative beginning on August 28, 2019,
as described in a trading alert issued on
August 15, 2019.21
2. Statutory Basis
Retail Program Fees
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,22 in general, and
furthers the objectives of Section
6(b)(4) 23 of the Act, in particular, in that
it is designed to provide for the
equitable allocation of reasonable fees
among IEX members and persons using
its facilities. Additionally, IEX believes
that the proposed fees are consistent
with the investor protection objectives
of Section 6(b)(5) 24 of the Act, in
particular, in that they are designed to
prevent fraudulent and manipulative
acts and practices; to promote just and
equitable principles of trade; to foster
cooperation and coordination with
21 See IEX Trading Alert #2019–022 ‘‘Upcoming
Elimination of Fee Code N’’ available at https://
iextrading.com/alerts/#/79.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(4).
24 15 U.S.C. 78f(b)(5).
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persons engaged in facilitating
transactions in securities; 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; and are not designed to
permit unfair discrimination between
customers, brokers, or dealers.
Specifically, the Exchange’s proposal
not to charge fees for the execution of
Retail orders and RLP orders is designed
to maximize participation for the launch
of the IEX Retail Program by
incentivizing market participants to
submit such orders to IEX, thereby
enhancing IEX’s ability to compete with
competing exchange and non-exchange
venues that offer programs for the
execution of the orders of retail
customers. This fee structure is
designed to attract the orders of retail
customers (and counterparties that wish
to trade with retail customers) to the
Exchange, thereby supporting the
competitiveness of the Exchange’s Retail
Program. IEX understands that Members
wishing to participate in the Retail
Program will need to modify and test
their order entry systems in order to do
so, and free pricing is designed to
provide a meaningful economic
incentive for such efforts.
The Retail Program is designed to
offer the potential for meaningful price
improvement to orders of retail
investors, including through
incentivizing market participants to
provide additional liquidity to execute
against the orders of retail investors.25
Offering free execution of Retail orders
and RLP orders is designed to provide
further incentives to send such orders to
IEX.
The Exchange believes that providing
free executions to Retail orders will
incentivize Members and other market
participants that handle orders on
behalf of retail customers to route such
orders to the Exchange. While the Retail
Program offers the opportunity for Retail
orders to obtain meaningful price
improvement at the Midpoint Price,
which should operate as a sufficient
incentive to route such orders to IEX,
the Exchange believes that free pricing
will enhance such incentive. The
Exchange also believes that increasing
the volume of Retail orders routed to
IEX will not only benefit such orders (in
the form of the opportunity for
meaningful price improvement), but
will also incentivize and benefit the
orders of contra-side liquidity providers
that execute against Retail orders that
view interacting with orders of retail
investors as desirable.
25 See
E:\FR\FM\09SEN1.SGM
supra note 7.
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Further, the Exchange understands
that a large majority of orders from retail
investors are executed in the OTC
market across different wholesalers and
dark pools, and exchange retail
programs have not attracted a significant
volume.26 While there are likely a
variety of reasons for this, providing free
pricing for Retail orders and RLP orders
is designed to provide a meaningful
pricing incentives for Members to send
orders of retail investors to IEX as well
as for market participants to provide
liquidity to Retail orders through RLP
orders. The Exchange believes that the
proposed pricing incentives will help to
support the competitiveness of the IEX
Retail Program, by maximizing
participation for its launch, to the
benefit of the retail investor.
IEX also believes that it is equitable
and not unfairly discriminatory to
provide free executions to Retail orders
notwithstanding that not all Members
handle Retail orders. There is ample
precedent for differentiation of retail
order flow in the retail programs of
other exchanges and the Retail
Program.27 Further, other exchanges
provide pricing incentives to retail
orders in the form of lower fees and/or
higher rebates.28 Consequently, the
Exchange does not believe that
providing free executions for Retail
orders raises any new or novel issues
not already considered by the
Commission.
Similarly, the Exchange believes that
providing free executions to RLP orders
will incentivize Exchange members and
other market participants to submit such
orders to IEX. While the Exchange
believes that the Retail Program
provides significant incentives to send
such orders to IEX, specifically the
ability to interact only with Retail
orders which IEX understands is
desirable to many professional market
participants (as described in the rule
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26 See
Securities Exchange Act Release No. 85160
(February 15, 2019), 84 FR 5754, 5762 (February 22,
2019) (SR–NYSE–2018–28) (approving NYSE RLP
on a permanent basis) (‘‘Although the Program
provides the opportunity to achieve significant
price improvement, the Program has not generated
significant activity. . . . The Program’s share of
NYSE volume during [in 2016–17] was below
0.4%’’).
27 See supra note 26; see also Securities Exchange
Act Release No. 71176 (December 23, 2013), 78 FR
79524 (December 30, 2013) (SR–NYSEArca–2013–
107) (approving NYSE Arca retail pilot program);
Securities Exchange Act Release No. 68303
(November 27, 2012), 77 FR 71652 (December 3,
2012) (SR–BYX–2012–019) (approving Cboe BYX
retail pilot program); Securities Exchange Act
Release No. 73702 (November 28, 2014), 79 FR
72049 (December 4, 2014) (SR–BX–2014–048)
(approving NASDAQ BX retail pilot program).
28 See, e.g., Nasdaq BX price list available at
https://www.nasdaqtrader.com/Trader.aspx?id=bx_
pricing.
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20:43 Sep 06, 2019
Jkt 247001
filing adopting the Retail Program), the
Exchange believes that free pricing will
enhance such incentive and help to
maximize participation for launch of its
Retail Program as discussed above.
IEX also believes that it is equitable
and not unfairly discriminatory to
provide free executions to RLP orders
that execute against retail orders but not
to other liquidity providing orders that
execute against retail orders for several
reasons.29 First, all Members are eligible
to submit RLP orders to IEX, and the
Exchange believes that a broad spectrum
of Members may be interested in
submitting RLP orders because of the
ability to interact only with Retail
orders. Thus, while a different fee will
be charged for RLP and non-RLP orders
that execute against Retail orders, the
difference is not based on the type of
Member submitting the order but on the
type of order, and all Members can
submit an RLP order.
Additionally, in order to maximize
the likelihood that Retail orders will be
executed, the Exchange believes that it
is important to provide meaningful
incentives for Members to enter
liquidity providing orders to execute
against Retail orders. Free execution for
RLP orders is designed to provide such
an incentive. Further, to the extent that
free execution for RLP orders is
successful in incentivizing Members to
submit RLP orders, Members submitting
Retail orders to the Exchange will
benefit from the increased liquidity.
Moreover, non-RLP providing orders
have higher priority than RLP orders
and are eligible to execute against any
marketable contra-side order. The
Exchange believes that this
differentiation in trading opportunities
warrants a higher fee, even when
executing against a Retail order.
Finally, other exchanges provide
lower fees to special order types that
provide liquidity to retail orders.30
Consequently, the Exchange does not
believe that providing free executions
for Retail orders raises any new or novel
issues not already considered by the
Commission.
47333
reasonable fees among IEX members and
persons using its facilities. The
Exchange also believes that deletion of
Fee Code N and related Fee Code
combinations is consistent with Section
6(b)(5) 33 of the Act, in particular, in that
it is designed to prevent fraudulent and
manipulative acts and practices; to
promote just and equitable principles of
trade; to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities;
and 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; and
are not designed to permit unfair
discrimination between customers,
brokers, or dealers.
The Exchange believes that it is
consistent with the Act to delete the
functionally obsolete Fee Code N and
related Fee Code combinations from its
Fee Schedule, to avoid any potential
confusion among Members. The
Exchange further believes that the
modification to the Fee Schedule is
reasonable, equitable, and not unfairly
discriminatory because all Members
will be subject to the same fee structure.
As described in the Purpose section
above, this proposed rule change does
not change any fees charged by IEX, but
rather eliminates an obsolete, vestigial
Fee Code and its corresponding Fee
Code combinations. Thus, the proposed
fee change will provide clarity to market
participants that IEX execution of
spread-crossing eligible orders does not
impact applicable fees, therefore making
the Exchange’s Fee Schedule clearer and
more deterministic to the benefit of all
market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Retail Program Fees
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, IEX believes that charging no
Deletion of Fee Code N
fees for the execution of Retail orders
The Exchange believes that deletion
and RLP orders would continue to
of Fee Code N and related Fee Code
enhance competition and execution
combinations is consistent with Section quality for retail order flow among
6(b) of the Act,31 in general, and furthers execution venues and contribute to the
the objectives of Section 6(b)(4) 32 of the public price discovery process.
Act, in particular, in that it is designed
The Exchange does not believe that
to provide for the equitable allocation of the proposed rule change will impose
any burden on intermarket competition
29 Where a Member submits a non-RLP order and
since competing venues have and can
the same Member takes that liquidity with a Retail
continue to adopt similar fees for orders
order, execution is also free.
30 See, e.g., supra note 28.
executing in their retail programs,
31 15
32 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
Frm 00101
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U.S.C. 78f(b)(5).
09SEN1
47334
Federal Register / Vol. 84, No. 174 / Monday, September 9, 2019 / Notices
subject to the SEC rule change process.
Further, the Exchange operates in a
highly competitive market in which
market participants can easily direct
their orders to competing venues,
including off-exchange venues, if fees
are viewed as non-competitive.
The Exchange also 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. While Retail orders
and RLP orders will be treated
differently, those differences are not
based on the type of Member entering
orders but on whether the order is for
a retail customer or an entity seeking to
transact with a retail customer, and
there is no restriction on whether a
Member can handle retail customer
orders. Further, any Member can enter
an RLP order.
Deletion of Fee Code N
The Exchange does not believe that
deletion of Fee Code N and related Fee
Code combinations will impose any
burden on intermarket or intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. Deletion of Fee
Code N and related Fee Code
combinations is not proposed for any
competitive reason but to provide
clarity to market participants that IEX
execution of spread-crossing eligible
orders does not impact applicable fees,
therefore making the Exchange’s Fee
Schedule clearer and more deterministic
to the benefit of all market participants.
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.
jbell on DSK3GLQ082PROD with NOTICES
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–2019–08 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
Number SR–IEX–2019–08. 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
offices of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–IEX–2019–08, and should
be submitted on or before September 30,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–19332 Filed 9–6–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86857; File No. SR–
NASDAQ–2019–066]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Clarify Rule
4120(c)(9)
September 3, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
21, 2019, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. 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
The Exchange proposes to clarify Rule
4120(c)(9) without changing its
substance.
The text of the proposed rule change
is set forth below. Proposed new
language is italicized; deleted text is in
brackets.
*
*
*
*
*
The Nasdaq Stock Market Rules
*
*
*
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
20:43 Sep 06, 2019
35 15
Jkt 247001
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00102
Fmt 4703
Sfmt 4703
*
4120. Limit Up-Limit Down Plan and
Trading Halts
(a)–(b) No change.
(c) Procedure for Initiating and
Terminating a Trading Halt
(1)–(8) No change.
(9) For purposes of this Rule and Rule
4753, the process for halting and initial
pricing of a security that is the subject
of an initial public offering shall also be
available for the initial pricing of any
other security that has not been listed
36 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
34 15
*
E:\FR\FM\09SEN1.SGM
09SEN1
]]>Agencies
[Federal Register Volume 84, Number 174 (Monday, September 9, 2019)]
[Notices]
[Pages 47330-47334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19332]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86854; File No. SR-IEX-2019-08]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Its Fee Schedule To Establish Fees for the Execution of Retail and
Retail Liquidity Provider Orders and To Eliminate Fee Code N From the
Fee Schedule
September 3, 2019.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on August 22, 2019, 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 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 establish fees for the execution of Retail and
Retail Liquidity Provider orders and to eliminate Fee Code N from the
Fee Schedule. Changes to the Fee Schedule pursuant to this proposal are
effective upon filing,\6\ and will be implemented as described herein.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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 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
The Exchange proposes to modify its Fee Schedule, pursuant to IEX
Rule 15.110(a) and (c), to establish fees for the execution of Retail
and Retail Liquidity Provider orders and to eliminate Fee Code N from
the Fee Schedule.
Retail Price Improvement Program Fees
On August 9, 2019, the Commission approved an IEX rule filing to
establish a Retail Price Improvement Program (``Retail Program'').\7\
IEX now proposes
[[Page 47331]]
to adopt fees for the launch of its Retail Program.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 86619 (August 9,
2019), 84 FR 41769 (August 15, 2019) (SR-IEX-2019-05) (order
approving the IEX Retail Program).
---------------------------------------------------------------------------
The Exchange does not propose to charge any fees for the execution
of a Retail order \8\ submitted to IEX by a Member approved as a Retail
Member Organization (``RMO'').\9\ This pricing is referred to as the
``Retail Order Fee'' on the IEX Fee Schedule with a Fee Code Modifier
of R \10\ to be provided by the Exchange on execution reports. In
addition, the Exchange proposes to add a new footnote 2 to the IEX Fee
Schedule (and renumber current footnote 2 to be footnote 3) to specify
that Fee Code R applies only to a Retail order submitted by an IEX
Retail Member Organization that (i) satisfies the criteria set forth in
IEX Rules 11.190(b)(15) and 11.232(a)(1) and (ii) is a Discretionary
Peg order or Midpoint Peg order with a Time-in-Force of IOC or FOK only
eligible to trade at the Midpoint Price.
---------------------------------------------------------------------------
\8\ See IEX Rule 11.232(a)(2).
\9\ See IEX Rule 11.232(a)(1).
\10\ Fee Code Modifier R appears in the ``Additional Fee Codes''
section of the Fee Schedule.
---------------------------------------------------------------------------
In addition, the Exchange does not propose to charge any fees for
the execution of a Retail Liquidity Provider (``RLP'') \11\ order. This
pricing is referred to as the ``Retail Liquidity Provider Order Fee''
on the IEX Fee Schedule with a Fee Code Modifier of A \12\ to be
provided by the Exchange on execution reports. The Exchange is not
proposing any changes to the IEX Fee Schedule with respect to orders
other than RLP orders that execute against a Retail Order.
---------------------------------------------------------------------------
\11\ See IEX Rule 11.232(a)(3).
\12\ Fee Code Modifier A appears in the ``Additional Fee Codes''
section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange also proposes conforming changes to the section of the
IEX Fee Schedule entitled ``Fee Code Combinations and Associated Fees''
to reflect the proposed fees for execution of Retail orders and RLP
orders and new Fee Code Modifiers R and A.\13\ The following describes
the proposed Fee Code Combinations and Associated Fees:
---------------------------------------------------------------------------
\13\ The proposed new Fee Code combinations, as well as Fee Code
modifiers R and A, will be provided to Members on execution reports.
------------------------------------------------------------------------
Fee codes Description Fee
------------------------------------------------------------------------
IR.................... Retail order removes non- FREE.
displayed liquidity.
IA.................... Retail Liquidity FREE.
Provider order adds non-
displayed liquidity to
a Retail order.
LR.................... Retail order removes FREE.
displayed liquidity.
ISR................... Retail order removes non- FREE.
displayed liquidity
provided by such Member.
ISA................... Retail Liquidity FREE.
Provider order adds non-
displayed liquidity to
a Retail order provided
by such Member.
IQR \14\.............. Retail order removes non- FREE.
displayed liquidity
during periods of quote
instability.
LSR................... Retail order removes FREE.
displayed liquidity
provided by such Member.
LQR \15\.............. Retail order removes FREE
displayed liquidity
during periods of quote
instability.
ISQR \16\............. Retail order removes non- FREE.
displayed liquidity
provided by such Member
during periods of quote
instability.
LSQR \17\............. Retail order removes FREE.
displayed liquidity
provided by such Member
during periods of quote
instability.
------------------------------------------------------------------------
Implementation of Retail Price Improvement Program Fees
As set forth in the Retail Program filing, IEX will implement the
Retail Program within 90 days of approval and provide at least ten (10)
days' notice to Members and market participants of the implementation
timeline.\18\ Thus, IEX will issue a trading alert at least 10 days
before the launch of the Retail Program, informing Members both of the
Retail Program's imminent launch and of the new Fee Codes and
associated fees set forth in this filing.
---------------------------------------------------------------------------
\14\ Fee Code combinations that include Fee Code Modifier Q are
subject to Footnote 1 of the IEX Fee Schedule which provides as
follows:
Crumbling Quote Remove Fee: Executions with Fee Code Q that
exceed the CQRF Threshold are subject to the Crumbling Quote Remove
Fee identified in the Fee Code Modifiers table. Executions with Fee
Code Q that do not exceed the CQRF Threshold are subject to the fees
identified in the Fee Codes and Associated Fees table.
\15\ See supra note 14.
\16\ See supra note 14.
\17\ See supra note 14.
\18\ See Securities Exchange Act Release No. 86241 (June 28,
2019) 84 FR 32238 (July 5, 2019) (SR-IEX-2019-05).
---------------------------------------------------------------------------
Elimination of Fee Code N
IEX is also proposing to delete Fee Code Modifier N from the IEX
Fee Schedule. On May 1, 2018, the Exchange established the use of Fee
Code Modifier N as an ``Additional Fee Code'' in connection with a
reduction of the applicable fee for certain executions that removed
non-displayed liquidity with a spread-crossing eligible order.\19\ Fee
Code Modifier N (and related Fee Code combinations) was added to denote
such executions and provided to Members on execution reports.
Thereafter, effective August 1, 2018, IEX reverted to the prior fee of
$0.0009 per share for such executions,\20\ but did not eliminate the
use of Fee Code Modifier N and related Fee Code combinations, which
continue to be provided to Members on execution reports,
notwithstanding that they no longer impact applicable execution fees
because orders that remove non-displayed liquidity with a spread-
crossing eligible order are not subject to a different fee than is
otherwise assessed because the order was spread-crossing eligible.
Thus, Fee Code Modifier N and related Fee Code combinations are
duplicative of other Fee Code Modifiers and Fee Code combinations.
Accordingly, IEX proposes to delete Fee Code Modifier N and Fee Code
combinations that include Fee Code Modifier N from the IEX Fee
Schedule. The following describes the basis for each deletion:
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 83147 (May 1,
2018), 83 FR 20118 (May 7, 2018) (SR-IEX-2018-09).
\20\ See Securities Exchange Act Release No. 83820 (August 10,
2018), 83 FR 40800 (August 16, 2018) (SR-IEX-2018-17).
---------------------------------------------------------------------------
Fee Code Modifier N describes execution of an order that
removes liquidity with a spread-crossing eligible order, specifying
that the fee for such an execution is $0.0009 per share. However, as
explained in the Fee Schedule, because Fee Code Modifier ``N'' is an
``Additional Fee Code, the rates listed in the Fee Codes and Associated
Fees table will apply.'' Therefore, Fee Code Modifier N is never the
only Fee Code provided to Members on execution reports, and will only
be provided to Members on execution reports in the following eight fee
code combinations.
Fee Code combination IN describes execution of an order
that removes non-displayed liquidity with a spread-crossing eligible
order, specifying that the fee for such an execution is $0.0009 per
share. Such executions are also described by Fee Code I which describes
an execution of an order that adds or removes non-displayed liquidity
and is also subject to a fee of $0.0009 per share. Consequently, Fee
Code
[[Page 47332]]
combination IN is duplicative of Fee Code I.
Fee Code combination LN describes execution of an order
that removes displayed liquidity with a spread-crossing eligible order,
specifying that the fee for such execution is $0.0003 per share. Such
executions are also described by Fee Code L which describes an
execution of an order that adds or removes displayed liquidity and is
also subject to a fee of $0.0003 per share. Consequently, Fee Code
combination LN is duplicative of Fee Code L.
Fee Code combination ISN describes execution of an order
that removes non-displayed liquidity provided by such Member with a
spread-crossing eligible order, specifying that such executions are
free. Such executions are also described by Fee Code combination IS
which describes execution of an order that executes against resting
non-displayed liquidity provided by such Member and is also free.
Consequently, Fee Code combination ISN is duplicative of Fee Code
Combination IS.
Fee Code combination IQN describes execution of an order
that removes non-displayed liquidity during periods of quote
instability with a spread-crossing eligible order, specifying that the
fee for such execution is $0.0009 per share. Such executions are also
described by Fee Code combination IQ which describes execution of an
order that removes non-displayed liquidity during periods of quote
instability and is also subject to a fee of $0.0009 per share.
Consequently, Fee Code combination IQN is duplicative of Fee Code
Combination IQ.
Fee Code combination LSN describes execution of an order
that removes displayed liquidity provided by such Member with a spread-
crossing eligible order, specifying that such executions are free. Such
executions are also described by Fee Code combination LS which
describes execution of an order against resting displayed liquidity
provided by such Member and is also free. Consequently, Fee Code
combination LSN is duplicative of Fee Code combination LS.
Fee Code combination LQN describes execution of an order
that removes displayed liquidity during periods of quote instability
with a spread-crossing eligible order, specifying that the fee for such
an execution is $0.0003 per share. Such executions are also described
by Fee Code LQ which describes an execution of an order that removes
displayed liquidity during periods of quote instability and is also
subject to a fee of $0.0003 per share. Consequently, Fee Code
combination LQN is duplicative of Fee Code LQ.
Fee Code combination ISQN describes execution of an order
that removes non-displayed liquidity provided by such Member during
periods of quote instability with a spread-crossing eligible order,
specifying that such executions are free. Such executions are also
described by Fee Code combination ISQ which describes execution of an
order that removes non-displayed liquidity provided by such Member
during periods of quote instability and is also free. Consequently, Fee
Code combination ISQN is duplicative of Fee Code combination ISQ.
Fee Code combination LSQN describes execution of an order
that displayed liquidity provided by such Member during periods of
quote instability with a spread-crossing eligible order, specifying
that such executions are free. Such executions are also described by
Fee Code combination LSQ which describes execution of an order that
removes displayed liquidity provided by such Member during periods of
quote instability and is also free. Consequently, Fee Code combination
LSQN is duplicative of Fee Code combination LSQ.
Implementation of the Elimination of Fee Code N
The elimination of Fee Code N will be operative beginning on August
28, 2019, as described in a trading alert issued on August 15,
2019.\21\
---------------------------------------------------------------------------
\21\ See IEX Trading Alert #2019-022 ``Upcoming Elimination of
Fee Code N'' available at https://iextrading.com/alerts/#/79.
---------------------------------------------------------------------------
2. Statutory Basis
Retail Program Fees
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\22\ in general, and furthers the
objectives of Section 6(b)(4) \23\ of the Act, in particular, in that
it is designed to provide for the equitable allocation of reasonable
fees among IEX members and persons using its facilities. Additionally,
IEX believes that the proposed fees are consistent with the investor
protection objectives of Section 6(b)(5) \24\ of the Act, in
particular, in that they are designed to prevent fraudulent and
manipulative acts and practices; to promote just and equitable
principles of trade; to foster cooperation and coordination with
persons engaged in facilitating transactions in securities; 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; and are not designed to permit unfair discrimination
between customers, brokers, or dealers.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(4).
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Specifically, the Exchange's proposal not to charge fees for the
execution of Retail orders and RLP orders is designed to maximize
participation for the launch of the IEX Retail Program by incentivizing
market participants to submit such orders to IEX, thereby enhancing
IEX's ability to compete with competing exchange and non-exchange
venues that offer programs for the execution of the orders of retail
customers. This fee structure is designed to attract the orders of
retail customers (and counterparties that wish to trade with retail
customers) to the Exchange, thereby supporting the competitiveness of
the Exchange's Retail Program. IEX understands that Members wishing to
participate in the Retail Program will need to modify and test their
order entry systems in order to do so, and free pricing is designed to
provide a meaningful economic incentive for such efforts.
The Retail Program is designed to offer the potential for
meaningful price improvement to orders of retail investors, including
through incentivizing market participants to provide additional
liquidity to execute against the orders of retail investors.\25\
Offering free execution of Retail orders and RLP orders is designed to
provide further incentives to send such orders to IEX.
---------------------------------------------------------------------------
\25\ See supra note 7.
---------------------------------------------------------------------------
The Exchange believes that providing free executions to Retail
orders will incentivize Members and other market participants that
handle orders on behalf of retail customers to route such orders to the
Exchange. While the Retail Program offers the opportunity for Retail
orders to obtain meaningful price improvement at the Midpoint Price,
which should operate as a sufficient incentive to route such orders to
IEX, the Exchange believes that free pricing will enhance such
incentive. The Exchange also believes that increasing the volume of
Retail orders routed to IEX will not only benefit such orders (in the
form of the opportunity for meaningful price improvement), but will
also incentivize and benefit the orders of contra-side liquidity
providers that execute against Retail orders that view interacting with
orders of retail investors as desirable.
[[Page 47333]]
Further, the Exchange understands that a large majority of orders
from retail investors are executed in the OTC market across different
wholesalers and dark pools, and exchange retail programs have not
attracted a significant volume.\26\ While there are likely a variety of
reasons for this, providing free pricing for Retail orders and RLP
orders is designed to provide a meaningful pricing incentives for
Members to send orders of retail investors to IEX as well as for market
participants to provide liquidity to Retail orders through RLP orders.
The Exchange believes that the proposed pricing incentives will help to
support the competitiveness of the IEX Retail Program, by maximizing
participation for its launch, to the benefit of the retail investor.
---------------------------------------------------------------------------
\26\ See Securities Exchange Act Release No. 85160 (February 15,
2019), 84 FR 5754, 5762 (February 22, 2019) (SR-NYSE-2018-28)
(approving NYSE RLP on a permanent basis) (``Although the Program
provides the opportunity to achieve significant price improvement,
the Program has not generated significant activity. . . . The
Program's share of NYSE volume during [in 2016-17] was below
0.4%'').
---------------------------------------------------------------------------
IEX also believes that it is equitable and not unfairly
discriminatory to provide free executions to Retail orders
notwithstanding that not all Members handle Retail orders. There is
ample precedent for differentiation of retail order flow in the retail
programs of other exchanges and the Retail Program.\27\ Further, other
exchanges provide pricing incentives to retail orders in the form of
lower fees and/or higher rebates.\28\ Consequently, the Exchange does
not believe that providing free executions for Retail orders raises any
new or novel issues not already considered by the Commission.
---------------------------------------------------------------------------
\27\ See supra note 26; see also Securities Exchange Act Release
No. 71176 (December 23, 2013), 78 FR 79524 (December 30, 2013) (SR-
NYSEArca-2013-107) (approving NYSE Arca retail pilot program);
Securities Exchange Act Release No. 68303 (November 27, 2012), 77 FR
71652 (December 3, 2012) (SR-BYX-2012-019) (approving Cboe BYX
retail pilot program); Securities Exchange Act Release No. 73702
(November 28, 2014), 79 FR 72049 (December 4, 2014) (SR-BX-2014-048)
(approving NASDAQ BX retail pilot program).
\28\ See, e.g., Nasdaq BX price list available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
---------------------------------------------------------------------------
Similarly, the Exchange believes that providing free executions to
RLP orders will incentivize Exchange members and other market
participants to submit such orders to IEX. While the Exchange believes
that the Retail Program provides significant incentives to send such
orders to IEX, specifically the ability to interact only with Retail
orders which IEX understands is desirable to many professional market
participants (as described in the rule filing adopting the Retail
Program), the Exchange believes that free pricing will enhance such
incentive and help to maximize participation for launch of its Retail
Program as discussed above.
IEX also believes that it is equitable and not unfairly
discriminatory to provide free executions to RLP orders that execute
against retail orders but not to other liquidity providing orders that
execute against retail orders for several reasons.\29\ First, all
Members are eligible to submit RLP orders to IEX, and the Exchange
believes that a broad spectrum of Members may be interested in
submitting RLP orders because of the ability to interact only with
Retail orders. Thus, while a different fee will be charged for RLP and
non-RLP orders that execute against Retail orders, the difference is
not based on the type of Member submitting the order but on the type of
order, and all Members can submit an RLP order.
---------------------------------------------------------------------------
\29\ Where a Member submits a non-RLP order and the same Member
takes that liquidity with a Retail order, execution is also free.
---------------------------------------------------------------------------
Additionally, in order to maximize the likelihood that Retail
orders will be executed, the Exchange believes that it is important to
provide meaningful incentives for Members to enter liquidity providing
orders to execute against Retail orders. Free execution for RLP orders
is designed to provide such an incentive. Further, to the extent that
free execution for RLP orders is successful in incentivizing Members to
submit RLP orders, Members submitting Retail orders to the Exchange
will benefit from the increased liquidity. Moreover, non-RLP providing
orders have higher priority than RLP orders and are eligible to execute
against any marketable contra-side order. The Exchange believes that
this differentiation in trading opportunities warrants a higher fee,
even when executing against a Retail order.
Finally, other exchanges provide lower fees to special order types
that provide liquidity to retail orders.\30\ Consequently, the Exchange
does not believe that providing free executions for Retail orders
raises any new or novel issues not already considered by the
Commission.
---------------------------------------------------------------------------
\30\ See, e.g., supra note 28.
---------------------------------------------------------------------------
Deletion of Fee Code N
The Exchange believes that deletion of Fee Code N and related Fee
Code combinations is consistent with Section 6(b) of the Act,\31\ in
general, and furthers the objectives of Section 6(b)(4) \32\ of the
Act, in particular, in that it is designed to provide for the equitable
allocation of reasonable fees among IEX members and persons using its
facilities. The Exchange also believes that deletion of Fee Code N and
related Fee Code combinations is consistent with Section 6(b)(5) \33\
of the Act, in particular, in that it is designed to prevent fraudulent
and manipulative acts and practices; to promote just and equitable
principles of trade; to foster cooperation and coordination with
persons engaged in facilitating transactions in securities; and 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; and are not designed to permit
unfair discrimination between customers, brokers, or dealers.
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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(4).
\33\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that it is consistent with the Act to delete
the functionally obsolete Fee Code N and related Fee Code combinations
from its Fee Schedule, to avoid any potential confusion among Members.
The Exchange further believes that the modification to the Fee Schedule
is reasonable, equitable, and not unfairly discriminatory because all
Members will be subject to the same fee structure.
As described in the Purpose section above, this proposed rule
change does not change any fees charged by IEX, but rather eliminates
an obsolete, vestigial Fee Code and its corresponding Fee Code
combinations. Thus, the proposed fee change will provide clarity to
market participants that IEX execution of spread-crossing eligible
orders does not impact applicable fees, therefore making the Exchange's
Fee Schedule clearer and more deterministic to the benefit of all
market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
Retail Program Fees
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. To the contrary, IEX
believes that charging no fees for the execution of Retail orders and
RLP orders would continue to enhance competition and execution quality
for retail order flow among execution venues and contribute to the
public price discovery process.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition since competing venues
have and can continue to adopt similar fees for orders executing in
their retail programs,
[[Page 47334]]
subject to the SEC rule change process. Further, the Exchange operates
in a highly competitive market in which market participants can easily
direct their orders to competing venues, including off-exchange venues,
if fees are viewed as non-competitive.
The Exchange also 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. While Retail
orders and RLP orders will be treated differently, those differences
are not based on the type of Member entering orders but on whether the
order is for a retail customer or an entity seeking to transact with a
retail customer, and there is no restriction on whether a Member can
handle retail customer orders. Further, any Member can enter an RLP
order.
Deletion of Fee Code N
The Exchange does not believe that deletion of Fee Code N and
related Fee Code combinations will impose any burden on intermarket or
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Deletion of Fee Code N and
related Fee Code combinations is not proposed for any competitive
reason but to provide clarity to market participants that IEX execution
of spread-crossing eligible orders does not impact applicable fees,
therefore making the Exchange's Fee Schedule clearer and more
deterministic to the benefit of all market participants.
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 [email protected]. Please include
File Number SR-IEX-2019-08 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 Number SR-IEX-2019-08. 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 offices of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-IEX-2019-08, and should be submitted on
or before September 30, 2019.
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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19332 Filed 9-6-19; 8:45 am]
BILLING CODE 8011-01-P
