Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add an Offset Peg Order Type, 67074-67078 [2020-23257]
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Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
U.S. markets while FINRA and the other
SROs study the design and operation of
the MWCB mechanism and the LULD
Plan during the period of volatility in
the Spring of 2020.
Further, FINRA understands that
other SROs will file proposals to extend
their rules regarding the market-wide
circuit breaker pilot. Thus, the proposed
rule change will help to ensure
consistency across market centers
without implicating any competitive
issues.
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
FINRA has designated this rule filing
as non-controversial under Section
19(b)(3)(A) 12 of the Act and Rule 19b–
4(f)(6) 13 thereunder. Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) 15 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),16 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
FINRA has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
upon filing. Extending the pilot for an
additional year will allow the
uninterrupted operation of the existing
pilot while FINRA, and the other SROs
conduct a study of the MWCB
mechanism in consultation with market
participants and determine if any
additional changes to the MWCB
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
14 In addition, Rule 19b–4(f)(6)(iii) requires
FINRA to give the Commission written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has waived this requirement.
15 Id.
16 17 CFR 240.19b–4(f)(6)(iii).
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13 17
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mechanism should be made, including
consideration of rules and procedures
for the periodic testing of the MWCB
mechanism with industry participants.
Therefore, the Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. The
Commission hereby designates the
proposed rule change to be operative
upon filing.17
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. 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–FINRA–
2020–033 and should be submitted on
or before November 12, 2020.
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.18
J. Matthew DeLesDernier,
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 Number SR–
FINRA–2020–033 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–FINRA–2020–033. 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
17 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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[FR Doc. 2020–23244 Filed 10–20–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90197; File No. SR–IEX–
2020–16]
Self-Regulatory Organizations:
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Add an
Offset Peg Order Type
October 15, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
5, 2020, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
18 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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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
add a new order type (a ‘‘Offset Peg’’ or
‘‘O-Peg’’ order) that pegs to the primary
quote,6 plus or minus an offset amount.
The Exchange has designated this rule
change as ‘‘non-controversial’’ under
Section 19(b)(3)(A) of the Act 7 and
provided the Commission with the
notice required by Rule 19b–4(f)(6)
thereunder.8
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 the
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
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1. Purpose
The Exchange proposes to amend IEX
Rule 11.190 to add a new Offset Peg or
O-Peg order type that pegs to the
primary quote,9 plus or minus an offset
amount specified by the User.10 In
addition, the Exchange proposes two
accommodating amendments to IEX
Rule 11.190 to describe how O-Peg
orders will behave when executed at the
Midpoint Price 11 and in locked and
crossed markets.
Currently, the Exchange offers three
types of pegged orders—primary peg,
4 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
6 The primary quote is the national best bid for
a buy order or the national best offer for a sell order.
See IEX Rule 1.160(u).
7 15 U.S.C. 78s(b)(3)(A).
8 17 CFR 240.19b–4.
9 See supra note 6.
10 See IEX Rule 1.160(qq).
11 See IEX Rule 1.160(t),
5 17
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midpoint peg and Discretionary Peg 12—
each of which are non-displayed orders
that upon entry into the System 13 and
while resting on the Order Book,14 are
pegged to a reference price based on the
national best bid and offer (‘‘NBBO’’)
and the price of the order is
automatically adjusted by the System in
response to changes in the NBBO.
The Exchange proposes to add a new
type of pegged order—an Offset Peg
order—that is a non-displayed pegged
order that upon entry and when posting
to the Order Book, the price of the order
is automatically adjusted by the System
to be equal to and ranked at the less
aggressive of the primary quote (i.e., the
NBB 15 for buy orders and NBO 16 for
sell orders) plus or minus an offset
amount specified by the User or the
order’s limit price, if any. While resting
on the Order Book, (i) a buy order is
automatically adjusted by the System in
response to changes in the NBB plus or
minus the offset amount up to the
order’s limit price, if any; and (ii) a sell
order is automatically adjusted by the
System in response to changes in the
NBO plus or minus the offset amount
down to the order’s limit price, if any;
and (iii) in locked and crossed markets,
slide one MPV 17 less aggressive than
the locking price or crossing price (i.e.,
the lowest Protected Offer 18 for buy
orders and the highest Protected Bid 19
for sell orders).20 Further, an Offset Peg
order would not be eligible to trade
when the market is locked or crossed,
either upon order entry or when resting
on the Order Book.
While Offset Peg orders would not be
limited to trading more aggressively
than the primary quote, based on
informal feedback from Members, IEX
understands that Offset Peg orders
would be useful to market participants
seeking to trade between the primary
quote and the Midpoint Price.
Accordingly, IEX proposes to amend
subparagraph (b)(13) of IEX Rule 11.190,
which is currently reserved, to add the
Offset Peg order. As proposed, an Offset
Peg order:
(A) Must be a pegged order.
12 IEX has two other order types that are based on
the discretionary peg order type: The Retail
Liquidity Provider order and the Corporate
Discretionary Peg order. See IEX Rule 11.190(b)(14)
and (16).
13 See IEX Rule 1.160(nn).
14 See IEX Rule 1.160(p).
15 See IEX Rule 1.160(u).
16 See IEX Rule 1.160(u).
17 See IEX Rule 11.210.
18 See IEX Rule 1.160(bb).
19 See IEX Rule 1.160(bb).
20 As with all pegged orders, each time the price
of an Offset Peg order is adjusted by the System it
receives a new timestamp, as described in IEX Rule
11.220.
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(B) Must have a TIF of DAY, GTT,
GTX, or SYS, as described in IEX Rule
11.190(a)(3).
(C) Is not eligible for routing pursuant
to IEX Rule 11.230(b) and (c)(2).
(D) May not be an ISO, as defined in
paragraph (12) above.
(E) May be submitted with a limit
price or without a limit price (an
‘‘unpriced pegged order’’).
(F) Is eligible to trade only during the
Regular Market Session. As provided in
IEX Rule 11.190(a)(3)(E)(iii), any pegged
order marked with a TIF of DAY that is
submitted to the System before the
opening of the Regular Market Session
will be queued by the System until the
start of the Regular Market Session; any
pegged order that is marked with a TIF
other than DAY will be rejected when
submitted to the System during the PreMarket Session. Any pegged order
submitted into the System after the
closing of the Regular Market Session
will be rejected.
(G) May be a MQTY, as defined in
paragraph (11) below.
(H) Is not eligible to display. Pegged
orders are always non-displayed.
(I) May be an odd lot, round lot, or
mixed lot.
(J) Is eligible to be invited by the
System to Recheck as described in IEX
Rule 11.230(a)(4)(D).
(K) Is not eligible to trade when the
market is locked or crossed.
(L) May be submitted with an offset
amount that is either aggressive or
passive compared to the primary quote.
If the offset amount would result in the
price of an Offset Peg order being more
aggressive than the Midpoint Price, the
offset amount will be reduced so that
the order is priced at the Midpoint Price
until such time as the full value of the
offset amount will not result in the price
of the Offset Peg order being more
aggressive than the Midpoint Price,
except when the order is an active
order.21 If the offset amount would
result in the price of an Offset Peg order
being in an increment smaller than
specified in IEX Rule 11.210, the price
of a buy order will be rounded down
and the price of a sell order will be
rounded up to the nearest permissible
increment. If no offset amount is
specified, the System will consider the
offset amount to be zero.
In addition, the Exchange proposes
two accommodating amendments to
other IEX rules. First, IEX Rule
11.190(a)(3) would be amended to
specify that an Offset Peg may be
executed in sub-pennies if necessary
when the execution is at or constrained
to the midpoint and the order executes
21 See
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IEX Rule 1.160(b).
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at the Midpoint Price. This is consistent
with the fact that midpoint peg orders
and Discretionary Peg orders can
execute at a Midpoint Price in subpennies.22 Second, the Exchange
proposes amendments to IEX Rule
11.190(h) to describe the manner in
which Offset Peg orders will operate in
locked and crossed markets.
Specifically, when the market becomes
locked, Offset Peg orders resting on or
posting to the Order Book will be priced
at the less aggressive of the locking price
plus or minus an offset amount or the
order’s limit price, if any.23 However, an
Offset Peg with an offset amount that
would otherwise result in the order
being priced more aggressive than the
locking price will be priced at the
locking price pursuant to the Midpoint
Price Constraint. When the market
becomes crossed, the Exchange
considers the Midpoint Price to be
indeterminable,24 and resting Offset Peg
orders that would otherwise be subject
to the Midpoint Price Constraint
pursuant to IEX Rule 11.190(h)(3)(D)
(i.e., because the price of the order
would be more aggressive than the
Midpoint Price) will be priced to be no
more aggressive than the crossing price,
the lowest Protected Offer for buy orders
and the highest Protected Bid for sell
orders. Further, as proposed, Offset Peg
orders resting on or posting to the Order
Book while the market is crossed are
priced at the least aggressive of (1) the
crossing price (the lowest Protected
Offer for buy orders and the highest
Protected Bid for sell orders) plus or
minus an offset amount, (2) the crossing
price (the lowest Protected Offer for buy
orders and the highest Protected Bid for
sell orders), or (3) the order’s limit price,
if any.
The methodology for pricing Offset
Peg orders during locked and crossed
markets is designed to price such orders
at the least aggressive price that is
consistent with the terms of the order so
as to avoid exacerbating the lock or
cross.
In addition, Offset Peg orders will not
be eligible to trade when the market is
locked or crossed, and an Offset Peg
order that would otherwise be eligible to
trade against an active order will
surrender its precedence on the Order
Book for the duration of the System
22 An execution at a sub-penny Midpoint Price is
not prohibited by Rule 612 under Regulation NMS
so long as the execution did not result from an
impermissible sub-penny order or quotation. See
Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37556 (June 29, 2005) (File No.
S7–10–04) (‘‘NMS Adopting Release’’).
23 See IEX Rule 11.190(h)(3)(C).
24 See IEX Rule 11.190(h)(3)(D).
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processing the current active order,
pursuant to IEX Rule 11.220(a)(5).
The manner in which Offset Peg
orders will operate in locked and
crossed markets (as proposed) is similar
to the manner in which other pegged
order types operate, except that other
pegged orders are eligible to trade when
the market is locked or crossed. Offset
Peg orders are designed to enable a
market participant to capture part of the
spread between the NBBO; when the
NBBO is locked or crossed there is
uncertainty as to the spread.
Consequently, the Exchange believes
that Offset Peg orders should not trade
in such circumstances.
The Exchange notes that for many
years other national securities
exchanges have offered order types that
peg to the NBB and/or NBO plus or
minus an offset amount.25 In this regard,
the Exchange notes that this proposed
rule change is substantially similar to
order types offered by the Nasdaq Stock
Market LLC (‘‘Nasdaq’’), NYSE Arca,
Inc. (‘‘Arca’’) and CBOE BZX Exchange,
Inc. (‘‘BZX’’), each of which offer a
nondisplayed primary or market pegged
order type or attribute that pegs to the
inside quotation on the same side of the
market (i.e., the NBB for a buy order and
the NBO for a sell order) and may also
specify an aggressive or passive offset
amount.26
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,27 in general, and
furthers the objectives of Section
6(b)(5),28 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.
Specifically, the Exchange believes that
the proposed rule change is consistent
with the protection of investors and the
public interest because it is designed to
increase competition among execution
venues by providing an additional
pegged order type that market
participants can use to trade at an offset
25 See, e.g., Securities Exchange Act Release No.
52449 (September 15, 2005), 70 FR 55647
(September 22, 2005) (File No. SR–NASD–2005–
107).
26 See Nasdaq Rule 4703(d), NYSE Arca Rule
7.31–E(h)(1), and Cboe BZX Rule 11.9(c)(8)(A).
27 15 U.S.C. 78f(b).
28 15 U.S.C. 78f(b)(5).
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to the primary quote, as described in the
Purpose section and thereby enable the
Exchange to better compete with order
types on other national securities
exchanges that offer similar features to
market participants.
Further, IEX believes that the
proposal is consistent with the
protection of investors and the public
interest in that the Offset Peg order type
would provide additional flexibility to
market participants in their use of
pegging orders. As described in the
Purpose section, IEX already offers
several different types of pegging orders
that trade with reference to the primary
quote (Discretionary Peg and primary
peg), at the Midpoint Price (Midpoint
Peg), and in some cases with the ability
to also exercise price discretion in
specified circumstances (Discretionary
Peg and primary peg). As proposed, the
Offset Peg order would function in a
similar manner but provide flexibility to
market participants to specify an offset
to the primary quote. Such functionality
could be used for a number of purposes,
including to mitigate risk by posting an
order at a price that is lower or higher
than the prevailing NBB or NBO.
Although broker-dealers could
implement similar functionality on their
own by consuming market data feeds
and sending limit orders to the
Exchange at prices that are offset from
the NBBO, implementing this
functionality through an exchange order
type ensures that it is widely available
to market participants on a fair and nondiscriminatory basis. At the same time,
the offset instruction would be offered
on a purely voluntary basis, and with
flexibility for Users to choose the
amount of any offset, thereby providing
flexibility to continue using current
pegged order types without a User
specified offset and to choose different
offsets based on a User’s specific needs.
The Exchange does not believe that
providing flexibility to Users to select
the amount of any offset raises any
significant or novel concerns, since
similar offset functionality is already
available on other national securities
exchanges, as discussed in the Purpose
section.29
Further, IEX believes that it is
consistent with the Act to not permit an
Offset Peg order to trade when the
market is locked or crossed. While IEX’s
current pegged order types are eligible
to trade in such circumstances, they are
repriced away from the locking and
crossing price (except for Midpoint Peg
orders in a locked market which
continue to be priced at the locking
Midpoint Price) which is designed to
29 See
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reduce the incidence of trading when
the market is locked or crossed. As
noted in the Purpose section, Offset Peg
orders are designed to enable a market
participant to capture part of the spread
between the NBBO; when the NBBO is
locked or crossed there is uncertainty as
to the spread. Consequently, the
Exchange believes that Offset Peg orders
should not trade in such
circumstances.30 Moreover, similar
order types on other national securities
exchange are explicitly not eligible to
trade in locked and crossed markets.31
Additionally, IEX believes that the
methodology for pricing Offset Peg
orders during locked and crossed
markets is consistent with the Act
because it is designed to price such
orders at the least aggressive price that
is consistent with the terms of the order
so as to avoid exacerbating the lock or
cross.
In addition, the Exchange believes
that it is consistent with the Act to
round the price of a buy order down and
a sell order up to the nearest permissible
increment if the offset amount would
result in the price of an Offset Peg order
being in an increment smaller than
specified in IEX Rule 11.210. Rounding
assures that IEX is compliant with
Regulation NMS Rule 612 32 and IEX
Rule 11.210. Moreover, this approach is
consistent with the way other national
30 In contrast, IEX’s other pegged order types are
designed to enable a market participant to capture
liquidity pursuant to the terms of the order type so
the Exchange has chosen not to impose a restriction
on trading in locked and crossed markets.
31 See, e.g., NYSE Arca Rule 7.31–E(h)(1)(B).
32 See 17 CFR 242.612 and FAQs 8, 1, and 2 in
Division of Market Regulation: Responses to
Frequently Asked Questions Concerning Rule 612
(Minimum Pricing Increment) of Regulation NMS,
available at https://www.sec.gov/divisions/
marketreg/subpenny612faq.htm which provides
that although exchanges (and broker-dealers) may
not accept and round orders in NMS stocks
explicitly priced in sub-penny increments (FAQs 8
and 1), they may accept such orders when the order
is not ‘‘explicitly’’ priced in an impermissible subpenny increment, meaning that a calculation must
be performed to obtain the price of the order, in
which case the exchange or broker-dealer may
round the price of the stock to determine the
‘‘actual explicit price for the order.’’ (FAQ 2). IEX
believes that Offset Peg orders would not be
explicitly priced in sub-penny increments even if
the offset amount specified is in a sub-penny
increment because the Exchange would need to
perform a calculation to obtain the price of the
order by applying the offset amount to the NBB or
NBO as applicable. Accordingly, IEX believes that
rounding as proposed is consistent with Rule 612
under Regulation NMS and relevant FAQs, which
provides that exchanges (and broker-dealers) may
not accept and round orders in NMS stocks
explicitly priced in sub-penny increments (FAQs 8
and 1), except for when the order is not ‘‘explicitly’’
priced in an impermissible sub-penny increment, in
which case the exchange may round the price of the
stock to determine the ‘‘actual explicit price for the
order.’’ (FAQ 2).
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securities exchanges handle pegged
orders.33
Thus, IEX does not believe that the
proposed changes raise any new or
novel material issues that have not
already been considered by the
Commission in connection with existing
order types offered by the IEX and other
national securities exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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, the proposal is a competitive
response to similar order types available
on other exchanges.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
Competing exchanges have and can
continue to adopt similar order types,
subject to the SEC rule change process,
as discussed in the Purpose and
Statutory Basis sections.34
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. All Members would
be eligible to use an Offset Peg order
type on the same terms.
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 Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 35 of the Act and
Rule 19b–4(f)(6) 36 thereunder. Because
the proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
33 See, e.g., Cboe U.S. Equities FIX Specification
(Version 2.8.18) describing treatment of Tag 211
regarding ‘‘Pegged Difference’’ available at https://
cdn.cboe.com/resources/membership/Cboe_US_
Equities_FIX_Specification.pdf.
34 See supra notes 26 and 29.
35 15 U.S.C. 78s(b)(3)(A).
36 17 CFR 240.19b–4(f)(6).
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67077
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.
The Exchange believes that the
proposed rule change meets the criteria
of subparagraph (f)(6) of Rule 19b–4 37
because it is substantially similar to
order types previously approved or
considered by the Commission and as
discussed in the Statutory Basis and
Burden on Competition sections.38
Thus, IEX does not believe that the
proposed changes raise any new or
novel material issues that have not
already been considered by the
Commission.
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) 39 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–2020–16 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–2020–16. 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
37 17
CFR 240.19b–4(f)(6).
supra notes 26, 29, and 34.
39 15 U.S.C. 78s(b)(2)(B).
38 See
E:\FR\FM\21OCN1.SGM
21OCN1
67078
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
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
Number SR–IEX–2020–16, and should
be submitted on or before November 12,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23257 Filed 10–20–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–90206; File No. SR–BX–
2020–031]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Current
Pilot Program Related to BX Rule
11890
khammond on DSKJM1Z7X2PROD with NOTICES
October 15, 2020.
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 October
13, 2020, Nasdaq BX, Inc. (‘‘BX’’ 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
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
current pilot program related to BX Rule
11890 (Clearly Erroneous Transactions)
to the close of business on April 20,
2021.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, 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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange 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
SECURITIES AND EXCHANGE
COMMISSION
40 17
comments on the proposed rule change
from interested persons.
The purpose of the proposed rule
change is to extend the current pilot
program related to Rule 11890, Clearly
Erroneous Transactions, to the close of
business on April 20, 2021. The pilot
program is currently due to expire on
October 20, 2020.
On September 10, 2010, the
Commission approved, on a pilot basis,
changes to Rule 11890 that, among other
things: (i) Provided for uniform
treatment of clearly erroneous execution
reviews in multi-stock events involving
twenty or more securities; and (ii)
reduced the ability of the Exchange to
deviate from the objective standards set
forth in the rule.3 In 2013, the Exchange
adopted a provision designed to address
the operation of the Plan.4 Finally, in
2014, the Exchange adopted two
additional provisions providing that: (i)
A series of transactions in a particular
3 See Securities Exchange Act Release No. 62886
(September 10, 2010), 75 FR 56613 (September 16,
2010) (SR–BX–2010–040).
4 See Securities Exchange Act Release No. 68818
(February 1, 2013), 78 FR 9100 (February 7, 2013)
(SR–BX–2013–010).
PO 00000
Frm 00153
Fmt 4703
Sfmt 4703
security on one or more trading days
may be viewed as one event if all such
transactions were effected based on the
same fundamentally incorrect or grossly
misinterpreted issuance information
resulting in a severe valuation error for
all such transactions; and (ii) in the
event of any disruption or malfunction
in the operation of the electronic
communications and trading facilities of
an Exchange, another SRO, or
responsible single plan processor in
connection with the transmittal or
receipt of a trading halt, an Officer,
acting on his or her own motion, shall
nullify any transaction that occurs after
a trading halt has been declared by the
primary listing market for a security and
before such trading halt has officially
ended according to the primary listing
market.5
These changes were originally
scheduled to operate for a pilot period
to coincide with the pilot period for the
Plan to Address Extraordinary Market
Volatility (the ‘‘Limit Up-Limit Down
Plan’’ or ‘‘LULD Plan’’).6 In April 2019,
the Commission approved an
amendment to the LULD Plan for it to
operate on a permanent, rather than
pilot, basis.7 In light of that change, the
Exchange amended Rule 11890 to untie
the pilot program’s effectiveness from
that of the LULD Plan and to extend the
pilot’s effectiveness to the close of
business on October 18, 2019.8 The
Exchange later amended Rule 11890 to
extend the pilot’s effectiveness to the
close of business on April 20, 2020,9
and subsequently, to the close of
business on October 20, 2020.10
The Exchange now proposes to amend
Rule 11890 to extend the pilot’s
effectiveness for a further six months
until the close of business on April 20,
2021. If the pilot period is not either
extended, replaced or approved as
permanent, the prior versions of
paragraphs (a)(2)(C), (c)(1), (b)(i), and
(b)(ii) shall be in effect, and the
provisions of paragraphs (g) through (i)
5 See Securities Exchange Act Release No. 72434
(June 19, 2014), 79 FR 36110 (June 25, 2014) (SR–
BX–2014–021).
6 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (the
‘‘Limit Up-Limit Down Release’’).
7 See Securities Exchange Act Release No. 85623
(April 11, 2019), 84 FR 16086 (April 17, 2019)
(approving Eighteenth Amendment to LULD Plan).
8 See Securities Exchange Act Release No. 85613
(April 11, 2019), 84 FR 16077 (April 17, 2019) (SR–
BX–2019–009).
9 See Securities Exchange Act Release No. 87359
(October 18, 2019), 84 FR 57131 (October 24, 2019)
(SR–BX–2019–037).
10 See Securities Exchange Act Release No. 88505
(March 27, 2020), 85 FR 18626 (April 2, 2020) (SR–
BX–2020–005).
E:\FR\FM\21OCN1.SGM
21OCN1
]]>Agencies
[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67074-67078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23257]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90197; File No. SR-IEX-2020-16]
Self-Regulatory Organizations: Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Add an
Offset Peg Order Type
October 15, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 5, 2020, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 67075]]
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 add a new order type (a ``Offset Peg'' or ``O-
Peg'' order) that pegs to the primary quote,\6\ plus or minus an offset
amount. The Exchange has designated this rule change as ``non-
controversial'' under Section 19(b)(3)(A) of the Act \7\ and provided
the Commission with the notice required by Rule 19b-4(f)(6)
thereunder.\8\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ The primary quote is the national best bid for a buy order
or the national best offer for a sell order. See IEX Rule 1.160(u).
\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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 the
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
The Exchange proposes to amend IEX Rule 11.190 to add a new Offset
Peg or O-Peg order type that pegs to the primary quote,\9\ plus or
minus an offset amount specified by the User.\10\ In addition, the
Exchange proposes two accommodating amendments to IEX Rule 11.190 to
describe how O-Peg orders will behave when executed at the Midpoint
Price \11\ and in locked and crossed markets.
---------------------------------------------------------------------------
\9\ See supra note 6.
\10\ See IEX Rule 1.160(qq).
\11\ See IEX Rule 1.160(t),
---------------------------------------------------------------------------
Currently, the Exchange offers three types of pegged orders--
primary peg, midpoint peg and Discretionary Peg \12\--each of which are
non-displayed orders that upon entry into the System \13\ and while
resting on the Order Book,\14\ are pegged to a reference price based on
the national best bid and offer (``NBBO'') and the price of the order
is automatically adjusted by the System in response to changes in the
NBBO.
---------------------------------------------------------------------------
\12\ IEX has two other order types that are based on the
discretionary peg order type: The Retail Liquidity Provider order
and the Corporate Discretionary Peg order. See IEX Rule
11.190(b)(14) and (16).
\13\ See IEX Rule 1.160(nn).
\14\ See IEX Rule 1.160(p).
---------------------------------------------------------------------------
The Exchange proposes to add a new type of pegged order--an Offset
Peg order--that is a non-displayed pegged order that upon entry and
when posting to the Order Book, the price of the order is automatically
adjusted by the System to be equal to and ranked at the less aggressive
of the primary quote (i.e., the NBB \15\ for buy orders and NBO \16\
for sell orders) plus or minus an offset amount specified by the User
or the order's limit price, if any. While resting on the Order Book,
(i) a buy order is automatically adjusted by the System in response to
changes in the NBB plus or minus the offset amount up to the order's
limit price, if any; and (ii) a sell order is automatically adjusted by
the System in response to changes in the NBO plus or minus the offset
amount down to the order's limit price, if any; and (iii) in locked and
crossed markets, slide one MPV \17\ less aggressive than the locking
price or crossing price (i.e., the lowest Protected Offer \18\ for buy
orders and the highest Protected Bid \19\ for sell orders).\20\
Further, an Offset Peg order would not be eligible to trade when the
market is locked or crossed, either upon order entry or when resting on
the Order Book.
---------------------------------------------------------------------------
\15\ See IEX Rule 1.160(u).
\16\ See IEX Rule 1.160(u).
\17\ See IEX Rule 11.210.
\18\ See IEX Rule 1.160(bb).
\19\ See IEX Rule 1.160(bb).
\20\ As with all pegged orders, each time the price of an Offset
Peg order is adjusted by the System it receives a new timestamp, as
described in IEX Rule 11.220.
---------------------------------------------------------------------------
While Offset Peg orders would not be limited to trading more
aggressively than the primary quote, based on informal feedback from
Members, IEX understands that Offset Peg orders would be useful to
market participants seeking to trade between the primary quote and the
Midpoint Price.
Accordingly, IEX proposes to amend subparagraph (b)(13) of IEX Rule
11.190, which is currently reserved, to add the Offset Peg order. As
proposed, an Offset Peg order:
(A) Must be a pegged order.
(B) Must have a TIF of DAY, GTT, GTX, or SYS, as described in IEX
Rule 11.190(a)(3).
(C) Is not eligible for routing pursuant to IEX Rule 11.230(b) and
(c)(2).
(D) May not be an ISO, as defined in paragraph (12) above.
(E) May be submitted with a limit price or without a limit price
(an ``unpriced pegged order'').
(F) Is eligible to trade only during the Regular Market Session. As
provided in IEX Rule 11.190(a)(3)(E)(iii), any pegged order marked with
a TIF of DAY that is submitted to the System before the opening of the
Regular Market Session will be queued by the System until the start of
the Regular Market Session; any pegged order that is marked with a TIF
other than DAY will be rejected when submitted to the System during the
Pre-Market Session. Any pegged order submitted into the System after
the closing of the Regular Market Session will be rejected.
(G) May be a MQTY, as defined in paragraph (11) below.
(H) Is not eligible to display. Pegged orders are always non-
displayed.
(I) May be an odd lot, round lot, or mixed lot.
(J) Is eligible to be invited by the System to Recheck as described
in IEX Rule 11.230(a)(4)(D).
(K) Is not eligible to trade when the market is locked or crossed.
(L) May be submitted with an offset amount that is either
aggressive or passive compared to the primary quote. If the offset
amount would result in the price of an Offset Peg order being more
aggressive than the Midpoint Price, the offset amount will be reduced
so that the order is priced at the Midpoint Price until such time as
the full value of the offset amount will not result in the price of the
Offset Peg order being more aggressive than the Midpoint Price, except
when the order is an active order.\21\ If the offset amount would
result in the price of an Offset Peg order being in an increment
smaller than specified in IEX Rule 11.210, the price of a buy order
will be rounded down and the price of a sell order will be rounded up
to the nearest permissible increment. If no offset amount is specified,
the System will consider the offset amount to be zero.
---------------------------------------------------------------------------
\21\ See IEX Rule 1.160(b).
---------------------------------------------------------------------------
In addition, the Exchange proposes two accommodating amendments to
other IEX rules. First, IEX Rule 11.190(a)(3) would be amended to
specify that an Offset Peg may be executed in sub-pennies if necessary
when the execution is at or constrained to the midpoint and the order
executes
[[Page 67076]]
at the Midpoint Price. This is consistent with the fact that midpoint
peg orders and Discretionary Peg orders can execute at a Midpoint Price
in sub-pennies.\22\ Second, the Exchange proposes amendments to IEX
Rule 11.190(h) to describe the manner in which Offset Peg orders will
operate in locked and crossed markets. Specifically, when the market
becomes locked, Offset Peg orders resting on or posting to the Order
Book will be priced at the less aggressive of the locking price plus or
minus an offset amount or the order's limit price, if any.\23\ However,
an Offset Peg with an offset amount that would otherwise result in the
order being priced more aggressive than the locking price will be
priced at the locking price pursuant to the Midpoint Price Constraint.
When the market becomes crossed, the Exchange considers the Midpoint
Price to be indeterminable,\24\ and resting Offset Peg orders that
would otherwise be subject to the Midpoint Price Constraint pursuant to
IEX Rule 11.190(h)(3)(D) (i.e., because the price of the order would be
more aggressive than the Midpoint Price) will be priced to be no more
aggressive than the crossing price, the lowest Protected Offer for buy
orders and the highest Protected Bid for sell orders. Further, as
proposed, Offset Peg orders resting on or posting to the Order Book
while the market is crossed are priced at the least aggressive of (1)
the crossing price (the lowest Protected Offer for buy orders and the
highest Protected Bid for sell orders) plus or minus an offset amount,
(2) the crossing price (the lowest Protected Offer for buy orders and
the highest Protected Bid for sell orders), or (3) the order's limit
price, if any.
---------------------------------------------------------------------------
\22\ An execution at a sub-penny Midpoint Price is not
prohibited by Rule 612 under Regulation NMS so long as the execution
did not result from an impermissible sub-penny order or quotation.
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR
37496, 37556 (June 29, 2005) (File No. S7-10-04) (``NMS Adopting
Release'').
\23\ See IEX Rule 11.190(h)(3)(C).
\24\ See IEX Rule 11.190(h)(3)(D).
---------------------------------------------------------------------------
The methodology for pricing Offset Peg orders during locked and
crossed markets is designed to price such orders at the least
aggressive price that is consistent with the terms of the order so as
to avoid exacerbating the lock or cross.
In addition, Offset Peg orders will not be eligible to trade when
the market is locked or crossed, and an Offset Peg order that would
otherwise be eligible to trade against an active order will surrender
its precedence on the Order Book for the duration of the System
processing the current active order, pursuant to IEX Rule 11.220(a)(5).
The manner in which Offset Peg orders will operate in locked and
crossed markets (as proposed) is similar to the manner in which other
pegged order types operate, except that other pegged orders are
eligible to trade when the market is locked or crossed. Offset Peg
orders are designed to enable a market participant to capture part of
the spread between the NBBO; when the NBBO is locked or crossed there
is uncertainty as to the spread. Consequently, the Exchange believes
that Offset Peg orders should not trade in such circumstances.
The Exchange notes that for many years other national securities
exchanges have offered order types that peg to the NBB and/or NBO plus
or minus an offset amount.\25\ In this regard, the Exchange notes that
this proposed rule change is substantially similar to order types
offered by the Nasdaq Stock Market LLC (``Nasdaq''), NYSE Arca, Inc.
(``Arca'') and CBOE BZX Exchange, Inc. (``BZX''), each of which offer a
nondisplayed primary or market pegged order type or attribute that pegs
to the inside quotation on the same side of the market (i.e., the NBB
for a buy order and the NBO for a sell order) and may also specify an
aggressive or passive offset amount.\26\
---------------------------------------------------------------------------
\25\ See, e.g., Securities Exchange Act Release No. 52449
(September 15, 2005), 70 FR 55647 (September 22, 2005) (File No. SR-
NASD-2005-107).
\26\ See Nasdaq Rule 4703(d), NYSE Arca Rule 7.31-E(h)(1), and
Cboe BZX Rule 11.9(c)(8)(A).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\27\ in general, and furthers the
objectives of Section 6(b)(5),\28\ 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. Specifically, the Exchange
believes that the proposed rule change is consistent with the
protection of investors and the public interest because it is designed
to increase competition among execution venues by providing an
additional pegged order type that market participants can use to trade
at an offset to the primary quote, as described in the Purpose section
and thereby enable the Exchange to better compete with order types on
other national securities exchanges that offer similar features to
market participants.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Further, IEX believes that the proposal is consistent with the
protection of investors and the public interest in that the Offset Peg
order type would provide additional flexibility to market participants
in their use of pegging orders. As described in the Purpose section,
IEX already offers several different types of pegging orders that trade
with reference to the primary quote (Discretionary Peg and primary
peg), at the Midpoint Price (Midpoint Peg), and in some cases with the
ability to also exercise price discretion in specified circumstances
(Discretionary Peg and primary peg). As proposed, the Offset Peg order
would function in a similar manner but provide flexibility to market
participants to specify an offset to the primary quote. Such
functionality could be used for a number of purposes, including to
mitigate risk by posting an order at a price that is lower or higher
than the prevailing NBB or NBO. Although broker-dealers could implement
similar functionality on their own by consuming market data feeds and
sending limit orders to the Exchange at prices that are offset from the
NBBO, implementing this functionality through an exchange order type
ensures that it is widely available to market participants on a fair
and non-discriminatory basis. At the same time, the offset instruction
would be offered on a purely voluntary basis, and with flexibility for
Users to choose the amount of any offset, thereby providing flexibility
to continue using current pegged order types without a User specified
offset and to choose different offsets based on a User's specific
needs. The Exchange does not believe that providing flexibility to
Users to select the amount of any offset raises any significant or
novel concerns, since similar offset functionality is already available
on other national securities exchanges, as discussed in the Purpose
section.\29\
---------------------------------------------------------------------------
\29\ See supra note 26.
---------------------------------------------------------------------------
Further, IEX believes that it is consistent with the Act to not
permit an Offset Peg order to trade when the market is locked or
crossed. While IEX's current pegged order types are eligible to trade
in such circumstances, they are repriced away from the locking and
crossing price (except for Midpoint Peg orders in a locked market which
continue to be priced at the locking Midpoint Price) which is designed
to
[[Page 67077]]
reduce the incidence of trading when the market is locked or crossed.
As noted in the Purpose section, Offset Peg orders are designed to
enable a market participant to capture part of the spread between the
NBBO; when the NBBO is locked or crossed there is uncertainty as to the
spread. Consequently, the Exchange believes that Offset Peg orders
should not trade in such circumstances.\30\ Moreover, similar order
types on other national securities exchange are explicitly not eligible
to trade in locked and crossed markets.\31\ Additionally, IEX believes
that the methodology for pricing Offset Peg orders during locked and
crossed markets is consistent with the Act because it is designed to
price such orders at the least aggressive price that is consistent with
the terms of the order so as to avoid exacerbating the lock or cross.
---------------------------------------------------------------------------
\30\ In contrast, IEX's other pegged order types are designed to
enable a market participant to capture liquidity pursuant to the
terms of the order type so the Exchange has chosen not to impose a
restriction on trading in locked and crossed markets.
\31\ See, e.g., NYSE Arca Rule 7.31-E(h)(1)(B).
---------------------------------------------------------------------------
In addition, the Exchange believes that it is consistent with the
Act to round the price of a buy order down and a sell order up to the
nearest permissible increment if the offset amount would result in the
price of an Offset Peg order being in an increment smaller than
specified in IEX Rule 11.210. Rounding assures that IEX is compliant
with Regulation NMS Rule 612 \32\ and IEX Rule 11.210. Moreover, this
approach is consistent with the way other national securities exchanges
handle pegged orders.\33\
---------------------------------------------------------------------------
\32\ See 17 CFR 242.612 and FAQs 8, 1, and 2 in Division of
Market Regulation: Responses to Frequently Asked Questions
Concerning Rule 612 (Minimum Pricing Increment) of Regulation NMS,
available at https://www.sec.gov/divisions/marketreg/subpenny612faq.htm which provides that although exchanges (and
broker-dealers) may not accept and round orders in NMS stocks
explicitly priced in sub-penny increments (FAQs 8 and 1), they may
accept such orders when the order is not ``explicitly'' priced in an
impermissible sub-penny increment, meaning that a calculation must
be performed to obtain the price of the order, in which case the
exchange or broker-dealer may round the price of the stock to
determine the ``actual explicit price for the order.'' (FAQ 2). IEX
believes that Offset Peg orders would not be explicitly priced in
sub-penny increments even if the offset amount specified is in a
sub-penny increment because the Exchange would need to perform a
calculation to obtain the price of the order by applying the offset
amount to the NBB or NBO as applicable. Accordingly, IEX believes
that rounding as proposed is consistent with Rule 612 under
Regulation NMS and relevant FAQs, which provides that exchanges (and
broker-dealers) may not accept and round orders in NMS stocks
explicitly priced in sub-penny increments (FAQs 8 and 1), except for
when the order is not ``explicitly'' priced in an impermissible sub-
penny increment, in which case the exchange may round the price of
the stock to determine the ``actual explicit price for the order.''
(FAQ 2).
\33\ See, e.g., Cboe U.S. Equities FIX Specification (Version
2.8.18) describing treatment of Tag 211 regarding ``Pegged
Difference'' available at https://cdn.cboe.com/resources/membership/Cboe_US_Equities_FIX_Specification.pdf.
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Thus, IEX does not believe that the proposed changes raise any new
or novel material issues that have not already been considered by the
Commission in connection with existing order types offered by the IEX
and other national securities exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
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, the
proposal is a competitive response to similar order types available on
other exchanges.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Competing
exchanges have and can continue to adopt similar order types, subject
to the SEC rule change process, as discussed in the Purpose and
Statutory Basis sections.\34\
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\34\ See supra notes 26 and 29.
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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. All Members
would be eligible to use an Offset Peg order type on the same terms.
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 Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \35\ of the Act and Rule 19b-4(f)(6) \36\
thereunder. Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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\35\ 15 U.S.C. 78s(b)(3)(A).
\36\ 17 CFR 240.19b-4(f)(6).
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The Exchange believes that the proposed rule change meets the
criteria of subparagraph (f)(6) of Rule 19b-4 \37\ because it is
substantially similar to order types previously approved or considered
by the Commission and as discussed in the Statutory Basis and Burden on
Competition sections.\38\ Thus, IEX does not believe that the proposed
changes raise any new or novel material issues that have not already
been considered by the Commission.
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\37\ 17 CFR 240.19b-4(f)(6).
\38\ See supra notes 26, 29, and 34.
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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) \39\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\39\ 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-2020-16 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-2020-16. 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
[[Page 67078]]
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 Number SR-IEX-
2020-16, and should be submitted on or before November 12, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23257 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P
