Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Way It Handles Odd Lot Orders by Allowing Them To Be Displayed Orders and To Aggregate To Form a Protected Quotation, 6687-6694 [2021-01402]
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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices
POSTAL REGULATORY COMMISSION
[Docket No. T2021–1; Order No. 5817]
Income Tax Review
Postal Regulatory Commission.
Notice.
AGENCY:
ACTION:
The Commission is
recognizing a recent Postal Service filing
concerning the calculation of the
assumed Federal income tax on
competitive products income for Fiscal
Year 2020. This notice informs the
public of the filing, invites public
comment, and takes other
administrative steps.
DATES: Comments are due: March 5,
2021.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
jbell on DSKJLSW7X2PROD with NOTICES
I. Introduction
In accordance with 39 U.S.C. 3634
and 39 CFR 3060.40 et seq., the Postal
Service filed its calculation of the
assumed Federal income tax on
competitive products income for fiscal
year (FY) 2020.1 The calculation details
the FY 2020 competitive product
revenue and expenses, the competitive
products net income before tax, and the
assumed Federal income tax on that net
income.
II. Notice of Commission Action
In accordance with 39 CFR 3060.42,
the Commission establishes Docket No.
T2021–1 to review the calculation of the
assumed Federal income tax and
supporting documentation.
The Commission invites comments on
whether the Postal Service’s filing in
this docket is consistent with the
policies of 39 U.S.C. 3634 and 39 CFR
3060.40 et seq. Comments are due no
later than March 5, 2021. The Postal
Service’s filing can be accessed via the
1 See Notice of the United States Postal Service
of Submission of the Calculation of the FY 2020
Assumed Federal Income Tax on Competitive
Products, January 14, 2021.
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III. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. T2021–1 to consider the calculation
of the assumed Federal income tax on
competitive products for FY 2020.
2. Pursuant to 39 U.S.C. 505, Jennaca
D. Upperman is appointed to serve as an
officer of the Commission to represent
the interests of the general public in this
proceeding (Public Representative).
3. Comments are due no later than
March 5, 2021.
4. The Secretary shall arrange for
publication of this Order in the Federal
Register.
By the Commission.
Erica A. Barker,
Secretary.
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: January 19, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–01530 Filed 1–19–21; 4:15 pm]
BILLING CODE 8011–01–P
[FR Doc. 2021–01390 Filed 1–21–21; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90933; File No. SR–IEX–
2021–01]
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Wednesday,
January 27, 2021.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
TIME AND DATE:
I. Introduction
II. Notice of Commission Action
III. Ordering Paragraphs
VerDate Sep<11>2014
Commission’s website (https://
www.prc.gov).
The Commission appoints Jennaca D.
Upperman to serve as Public
Representative in this docket.
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Self-Regulatory Organizations:
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
Way It Handles Odd Lot Orders by
Allowing Them To Be Displayed
Orders and To Aggregate To Form a
Protected Quotation
January 15, 2021.
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 January 6,
2021, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III 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
Pursuant to the provisions of Section
19(b)(1) under the Act,3 and Rule 19b–
4 thereunder,4 IEX is filing with the
Commission a proposed rule change to
modify the way it handles odd lot
orders by allowing them to be displayed
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(1).
4 17 CFR 240.19b–4.
2 17
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orders and to aggregate to form a
protected quotation. The Exchange has
designated this rule change as ‘‘noncontroversial’’ under Section 19(b)(3)(A)
of the Act 5 and provided the
Commission with the notice required by
Rule 19b–4(f)(6) thereunder.6
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 the
way it handles odd lot orders 7 by
allowing them to be displayed orders
and to aggregate to form a protected
quotation. Specifically, the Exchange
proposes to amend IEX Rules 11.190(b),
11.220(a), and 11.240(c) to provide that
a User may enter displayed 8 as well as
non-displayed 9 odd lot orders and to
allow displayed odd lot orders to
aggregate to form a Protected
Quotation.10 Additionally, the Exchange
proposes to make related changes to IEX
Rules 11.190(h) and 11.230(a)(4) to
prevent a displayed odd lot order that
is not protected from resulting in a lock
or cross of IEX’s Order Book.11 The
Exchange also proposes to make
conforming changes to IEX Rules
11.190(b) and 11.240(c). This proposal
would align IEX’s treatment of odd lot
orders with that of the other national
5 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
7 An odd lot order is generally any order of less
than 100 shares (the size of a round lot order). See
IEX Rule 11.180(a).
8 See IEX Rule 11.190(b)(1). IEX offers three order
types that may be entered as displayed orders: limit,
reserve, and Discretionary Limit. See IEX Rule
11.190(a)(1), (b)(2), and (b)(7).
9 See IEX Rule 11.190(b)(3).
10 See IEX Rule 1.160(bb).
11 See IEX Rule 1.160(p).
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securities exchanges that trade equities
(i.e., equities exchanges), as detailed
below.
Background
Currently, all odd lot orders on IEX
are treated as non-displayed, whether
the User 12 entered the order into the
System 13 as an odd lot, or if the order
began as a displayed round 14 or
mixed 15 lot order, and was
subsequently decremented to an odd lot
order by execution or User order
amendment.16 When a displayed round
or mixed lot order decrements to a nondisplayed odd lot order, the order also
loses its execution priority as a
displayed order and also receives a new
timestamp resulting in the order being
ranked behind all resting displayed and
non-displayed orders on the Order Book
at the same price level.17 Additionally,
a displayed order that becomes nondisplayed because it decremented to an
odd lot will no longer be disseminated
on IEX’s TOPS,18 DEEP,19 and Data
Platform 20 data feeds (collectively, the
‘‘Data Feeds’’), as applicable.
Odd lots comprise an increasingly
large portion of all securities
transactions—in October 2020, 35.6% of
all trades on IEX were odd lot
executions. Odd lots account for an
even larger percentage of trades on other
equities exchanges—in October 2019,
nearly half of all trades on equities
exchanges were odd lot trades, which
was nearly double the number of odd lot
trades in 2016.21 IEX understands that
this growth in odd lot trading is driven
by the increasing prevalence of stocks
priced above $1,000 per share (which
translates to more than $100,000 in
notional value for the standard round
12 See
IEX Rule 1.160(qq).
IEX Rule 1.160(nn).
14 A round lot order is generally any order of 100
shares or a multiple thereof (e.g., a 1,000 share
order constitutes ten (10) round lots). See IEX Rule
11.180(a).
15 A mixed lot order is generally any order of
more than 100 shares that is not a multiple of 100
shares (e.g., orders for 101 shares and 299 shares are
both mixed lot orders). See IEX Rule 11.180(a).
16 See IEX Rule 11.190(b)(4).
17 See IEX Rule 11.220(a)(1)(C)(vii).
18 See IEX Rule 11.330(a)(1) (describing how,
among other things, TOPS offers aggregated top of
book quotations for all displayed orders resting on
the Order Book).
19 See IEX Rule 11.330(a)(3) (describing how,
among other things, DEEP provides ‘‘aggregated
depth of book quotations for all displayed orders
resting on the Order Book at each price level’’).
20 The IEX Data Platform, known as the ‘‘TOPS
Viewer,’’ offers both aggregated top of book and
aggregated depth of book quotations for all
displayed orders resting on the Order Book. See IEX
Rule 11.330(a)(2). The IEX Data Platform can be
accessed at https://iextrading.com/apps/tops/.
21 See Osipovich, Alexander: ‘‘Tiny ‘Odd Lot’
Trades Reach Record Share of U.S. Stock Market,’’
Wall Street Journal (October 23, 2019).
13 See
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lot of 100 shares), as well as
computerized trading strategies that
increasingly employ odd lots.22
However, odd lots are not subject to the
same requirements as round lot orders
under Regulation NMS, primarily in
that only round lots can be protected
quotations.23 Thus, the Commission’s
Division of Trading and Markets has
provided guidance that:
trading centers are permitted to establish
their own rules for handling odd-lot orders
and the odd-lot portions of mixed-lot orders.
For example, although trading centers are not
required to handle odd-lot orders or the oddlot portions of mixed lot orders in accordance
with the requirements for automated
quotations set forth in Rule 600(b)([4]), they
are free to incorporate such requirements in
their rules if they wish to do so.24
Consistent with the above guidance,
other equities exchanges have adopted
rules that allow for odd lot orders to be
displayed, which affects the orders’
execution priority and quotation
dissemination on each exchange’s depth
of book feed, where applicable.25 In
addition, equities exchanges enable
displayed odd lot orders to aggregate at
the same or multiple price points that
equal at least one round lot to form a
protected quotation under Rule
600(b)(62) of Regulation NMS.26
Similarly, displayed odd lot orders can
also be aggregated with displayed round
and mixed lot orders at the same price
level to form a protected quotation.
When displayed odd lot orders
aggregate to at least one round lot (either
with other odd lot orders or with
displayed round and/or mixed lot
orders) and comprise the best bid or
offer for an exchange, the other equities
exchanges treat the aggregated quotation
as their top of book quotation, which
they disseminate to the appropriate
Securities Information Processor (‘‘SIP’’)
22 See
supra note 21.
NMS defines ‘‘bids’’ and ‘‘offers’’ as
the bid price or offer price for one or more round
lots of an NMS security, and those definitions are
referenced in the definitions of ‘‘quotations,’’
‘‘protected bids,’’ and ‘‘protected offers.’’ See 17
CFR 242.600(b)(8), (b)(66), and (b)(61).
24 See FAQ 7.03: ‘‘Odd-Lot Orders and Odd-Lot
Portions of Mixed-Lot Orders,’’ Division of Trading
and Markets: Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of
Regulation NMS (April 4, 2008), available at https://
www.sec.gov/divisions/marketreg/nmsfaq61011.htm#sec7.
25 See, e.g., The New York Stock Exchange LLC
(‘‘NYSE’’) Rule 7.36(b) (‘‘Display’’) (describing how
unless otherwise instructed, ‘‘odd-lot sized Limit
Orders . . . are considered displayed for ranking
purposes’’).
26 See, e.g., The Nasdaq Stock Market LLC
(‘‘Nasdaq’’) Rule 4756(c) (‘‘Entry and Display of
Quotes and Orders’’) (describing the process for
how Nasdaq aggregates displayed odd lot orders
with other displayed interest to calculate its best
ranked displayed orders for dissemination as the
exchange’s top of book quotation).
23 Regulation
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and their own top of book feeds, as
applicable.27
Based upon informal feedback from
Members,28 IEX understands that there
is general interest in having IEX offer
displayed odd lot orders, so that such
orders are visible on the Exchange’s
depth of book feeds, are eligible to
aggregate to form a protected quotation,
and retain their execution priority
consistent with how displayed odd lot
orders are treated on other equities
exchanges.
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Proposal
The Exchange proposes to amend IEX
Rules 11.190(b), 11.220(a), and 11.240(c)
to provide that Users may enter odd lot
orders as either displayed or nondisplayed, rank displayed odd lot orders
before non-displayed orders at the same
price, show displayed odd lot orders on
IEX’s DEEP and Data Platform data feeds
(collectively the ‘‘Depth of Book Data
Feeds’’), and aggregate displayed odd lot
orders at the same or multiple price
points that equal at least one round lot
for purposes of transmitting the
Exchange’s best ranked displayed orders
to the appropriate SIP for each security
and to IEX’s TOPS and Data Platform
data feeds (collectively the ‘‘Top of
Book Data Feeds’’).29
In addition, the Exchange proposes
two related changes to prevent a
displayed odd lot order that is not
aggregated to form a protected quotation
from resulting in a lock or cross of IEX’s
Order Book, as well as conforming
changes to IEX Rules 11.190(b) and
11.240(c), each as described below.
Accordingly, with respect to
displaying odd lot orders, IEX proposes
to amend all the rules describing odd lot
orders as non-displayed to reflect that
odd lot orders may be either displayed
or non-displayed, based upon User
instruction per order. Consistent with
this change, a displayed round lot order
that decrements to an odd lot will retain
its displayed status and execution
priority, and IEX therefore proposes to
remove any references to how
decrementing a displayed round lot to
an odd lot causes the order to lose its
displayed status and execution priority.
Thus, displayed odd lot orders would
have priority over any non-displayed
orders booked at the same price.30
As proposed, IEX will display odd lot
orders in the same manner it displays
round or mixed lot orders, with the
27 See,
e.g., Nasdaq Rule 4756(c).
IEX Rule 1.160(s).
29 These proposed rule changes are consistent
with how other equities exchanges handle
displayed odd lot orders. See supra notes 25 and
26.
30 See IEX Rule 11.220(a)(1)(B).
28 See
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exception that an odd lot order that
cannot be aggregated with other orders
to form at least a round lot, will not be
eligible to form a protected quotation
and to be disseminated as IEX’s top of
book quotation. The proposed changes
also enumerate the manner in which
IEX will aggregate odd lot orders for
purposes of forming a quotation that is
eligible to be a protected quotation.
Specifically, IEX will aggregate all of the
displayed odd lot orders at the highest
price to buy (or lowest price to sell)
wherein the aggregate size of all
displayed buy (sell) interest in the
System greater than or equal (less than
or equal) to that price is one round lot
or greater. When the aggregate quotation
is the Exchange’s best ranked displayed
order, IEX will disseminate this top of
book quotation, rounded down to the
nearest round lot,31 to the appropriate
SIP and the entire size of the top of book
quotation to IEX’s Top of Book Data
Feeds.32 As displayed orders, all of
IEX’s displayed odd lot interest will also
be aggregated at each price level and
disseminated to IEX’s Depth of Book
Data Feeds.33
The following example demonstrates
how, as proposed, odd lot bids 34 would
be aggregated both for dissemination to
IEX’s Data Products and the SIPs, when
applicable:
• Protected NBBO 35 for a stock is
10.00 x 10.10.
• IEX’s order book has two resting
displayed bids for the stock:
Æ Order A is a displayed odd lot to
buy 25 shares at $10.02.
Æ Order B is a displayed odd lot to
buy 65 shares at $10.02.
• Orders A and B do not aggregate to
a protected quotation and will not be
disseminated to the Top of Book Data
Feeds and the SIPs.
• IEX will disseminate to its Depth of
Book Data Feeds that it has interest to
buy 90 shares at $10.02.
• Order C arrives: a displayed odd lot
order to buy 30 shares at $10.01.
• Orders A, B, and C will aggregate to
form a protected quotation at 10.01,
which is disseminated to the SIP (as one
round lot) and Top of Book Data Feeds
as interest to buy 120 shares at $10.01.
• IEX will disseminate to its Depth of
Book Data Feeds that it has interest to
31 The
SIPS only accept quotations in round lots.
IEX Rule 11.330(a)(1) and (2).
33 See IEX Rule 11.330(a)(2) and (3).
34 The example focuses on the aggregation of
displayed odd lot orders to buy, but the same
process applies to aggregating displayed odd lot
orders to sell, with the exception that the displayed
odd lot orders to sell will aggregate at the lowest
price wherein the aggregate size of all displayed
interest to sell is one round lot or greater.
35 See IEX Rule 1.160(cc).
32 See
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6689
buy 90 shares at $10.02 and 30 shares
at $10.01.
As noted above and discussed in the
Statutory Basis section below, these
proposed changes would align IEX’s
treatment of odd lot orders with that of
the other equities exchanges.
Specifically, other equities exchanges
allow odd lot orders to be treated as
displayed or non-displayed 36 and to
aggregate in the manner proposed.37
IEX also proposes several related rule
changes to prevent a displayed odd lot
order that is not protected from
resulting in a lock or cross of IEX’s
Order Book.
First, IEX proposes to modify its nondisplayed price sliding rules to prevent
a displayed odd lot order priced equal
to or more aggressively than the
Midpoint Price 38 from locking or
crossing a non-displayed incoming or
resting order when the orders are unable
to execute against each other because of
the non-displayed order’s specific
conditions.39 This issue does not arise
currently because non-displayed orders
are never priced more aggressively than
the Midpoint Price in accordance with
the ‘‘Midpoint Price Constraint’’ 40 and
a displayed order priced equal to or
more aggressively than the Midpoint
Price would result in a change in the
NBB 41 or NBO 42 and a corresponding
36 See, e.g., NYSE Rule 7.36(b)(1) (describing how
unless otherwise instructed, ‘‘odd-lot sized Limit
Orders . . . are considered displayed for ranking
purposes’’); Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’)
Rule 11.9(c)(2); Nasdaq Rule 4703(b); and MIAX
PEARL, LLC (‘‘MIAX Pearl’’) Rule 2611(a); and
MEMX LLC (‘‘MEMX’’) Rules 11.2(a) and 11.6(q)(2).
See also Securities Exchange Act Release No. 87221
(October 3, 2019), 84 FR 54195 (October 9, 2019)
(SR–LTSE–2019–02) (detailing how the Long Term
Stock Exchange, Inc. (‘‘LTSE’’) removed all
references to odd lot orders being non-displayed,
including removing language about how round lots
decrementing to an odd lot become non-displayed
and lose their priority, and clarifying that displayed
odd lots can aggregate to form a protected
quotation).
37 See, e.g., Nasdaq Rule 4756(c); NYSE Rule
7.36(b)(3); Cboe BZX Rule 21.6(d); MIAX Pearl Rule
2616(b); MEMX Rule 11.9(b)(2); and LTSE Rule
11.410.
38 See IEX Rule 1.160(t).
39 The primary situation in which this would
arise is if the non-displayed order is a Minimum
Quantity order with a User instruction that it
cannot match with an order the size of the
displayed odd lot. See IEX Rule 11.190(b)(11).
Significantly, only non-displayed orders can have
specific conditions such as a Minimum Quantity
that could prevent a match. Id. It is also possible
that a non-displayed order would be subject to
another specific condition that would prevent
matching with a displayed odd lot order in such
circumstances, such as a Corporate Discretionary
Peg (‘‘C-Peg’’) order that cannot match because of
the pricing conditions applicable to C-Peg orders.
See IEX Rule 11.190(b)(16).
40 See IEX Rule 11.190(h)(2).
41 See IEX Rule 1.160(u).
42 See IEX Rule 1.160(u).
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change to the Midpoint Price. However,
with the introduction of displayed, but
unprotected, odd lot orders, there is the
potential that a displayed odd lot order
would post on the Order Book at a price
equal to or more aggressive than the
Midpoint Price and would lock or
cross 43 a contra-side resting nondisplayed order (or be locked or crossed
by an incoming non-displayed order) if
the non-displayed order’s specific
conditions prevent it from matching
with the displayed odd lot order.44
In order to address this possible
scenario, IEX proposes to amend the
non-displayed price-sliding rules so that
the price of a non-displayed order that,
because of its specific conditions, is not
executable against a contra-side
displayed odd lot order that is priced
equal to or more aggressively than the
Midpoint Price is adjusted to one (1)
minimum price variant (‘‘MPV’’) 45 less
aggressive than the price of the contraside displayed odd lot order.
Specifically, IEX proposes to modify
IEX Rule 11.190(h)(2), and add new
subsection (A), to specify that in such a
circumstance, the non-displayed order
will book at a price one (1) MPV less
aggressive than the price of the contraside displayed odd lot order.
These proposed changes to the nondisplayed price sliding rules are thus
designed to address the potential that an
unprotected displayed odd lot order
will result in the IEX Order Book
becoming locked or crossed, by sliding
orders in a reasonably expected manner
based on current IEX rules, and
consistent with the rules of several other
equities exchanges. For example,
Nasdaq re-prices non-displayed orders
to a price one (1) MPV less aggressive
than the price of a resting contra-side
displayed odd lot order if the nondisplayed order would lock or cross the
displayed odd lot order because the
non-displayed order’s minimum
quantity condition prevents the two
orders from matching.46 Similarly, to
avoid a lock or cross on its order book,
NYSE reprices orders with a minimum
trade size (‘‘MTS’’) modifier to a less
aggressive price than the price of a
resting contra-side displayed odd lot
order with which it would have
matched but for the MTS modifier.47
43 A non-displayed order would cross the odd lot
order if the non-displayed order is priced at the
Midpoint and would lock if priced at the same price
as the odd lot order.
44 This scenario would not arise if the contra-side
order is a displayed order because displayed orders
cannot include a minimum quantity and would
execute against the odd lot order.
45 See IEX Rule 11.210.
46 See Nasdaq Rule 4703(e).
47 See NYSE Rule 7.31(i)(3)(C)(i).
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And several other exchanges would
execute a non-displayed order only at a
less aggressive price than a contra-side
unprotected displayed odd lot order to
prevent the displayed odd lot order
crossing each exchange’s order book.48
This proposed change to the nondisplayed price sliding rules applies to
all non-displayed orders except for
Discretionary Peg (‘‘D-Peg’’) and C-Peg
orders, which also can have specific
conditions that prevent them from
matching an aggressively priced contraside displayed odd lot order with which
they would otherwise match. However,
because D-Peg and C-Peg orders book at
a price one (1) MPV less aggressive than
the NBBO,49 they are different from
other non-displayed orders and cannot
lock or cross a displayed odd lot order
priced equal to or more aggressive than
the Midpoint Price.50 However, both DPeg and C-Peg orders have a
‘‘discretionary price’’ that allows them
to exercise discretion and execute up to
the less aggressive of the limit price (if
any) or the Midpoint Price. Therefore,
there is a limited circumstance in which
a D-Peg or C-Peg could execute at a
price that locks or crosses a displayed
odd lot order priced at or more
aggressively than the Midpoint Price.
Accordingly, IEX also proposes to
amend the non-displayed price sliding
rules to state that in this scenario, the
D-Peg or C-Peg order would not be able
to exercise discretion up to the
Midpoint Price, and instead the
discretionary price for a D-Peg or C-Peg
order will be either the less aggressive
of the order’s limit price (if any) or one
(1) MPV less aggressive than the price
of the contra-side unprotected displayed
odd lot order. This manner of limiting
the amount of discretion a D-Peg or CPeg can exercise to prevent locking or
crossing a contra-side displayed odd lot
order is also consistent with other
aspects of the proposed rule change to
avoid locking or crossing an
unprotected displayed odd lot order.
Second, the Exchange proposes to
revise IEX Rule 11.230(a)(4) to provide
that when a displayed order that was
previously subject to price sliding to
avoid locking or crossing a contra-side
protected quotation of an another
48 These exchanges would execute the order at a
price 1⁄2 MPV less aggressive than the contra-side
displayed odd lot. See Cboe BZX Rules
11.13(a)(4)(C) and (D); MEMX Rules 11.10(a)(4)(C)
and (D); and MIAX Pearl Rules 2617(a)(4)(C) and
(D). In the same situation, IEX is proposing to reprice the non-displayed order to a price one (1)
MPV less aggressive than the contra-side displayed
odd lot order, which IEX believes is a minor
distinction from the Cboe BZX, MEMX, and MIAX
1⁄2 MPV approach.
49 See IEX Rule 1.160(u).
50 See IEX Rule 11.190(b)(10) and (16).
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national securities exchange becomes
eligible to be re-priced to a more
aggressive price as a result of a change
in the NBBO, it will trade with an
unprotected displayed odd lot on the
IEX Order Book that it would lock or
cross as it re-prices. In this
circumstance, the orders will execute
according to the priority of each order,
and the remover of liquidity will be the
order with the newest timestamp.
Under existing rules, any displayed
orders that would be locked or crossed
by a displayed order subject to repricing would either change the
Protected NBBO 51 (if the displayed
order is the best bid or best offer), or reprice such that the displayed order does
not lock or cross the Protected NBBO.52
With the introduction of unprotected
displayed odd lot orders, it is now
possible for a displayed order subject to
display price sliding to re-price to a
price where it locks or crosses a contraside unprotected displayed odd lot
order. Because IEX rules provide that it
will never display a locked market, nor
can a locked or crossed market exist
within the System,53 in such a scenario
IEX must either again re-price one or
both orders, or allow them to execute
against each other. IEX believes that
allowing these two orders to match
when they become executable after repricing is consistent with investor
expectations that marketable orders will
match and could result in price
improvement when the trade is at a
better price than the NBBO. By contrast,
IEX believes that subjecting displayed
orders to additional price sliding to
avoid locking or crossing a small odd lot
order would not benefit investors,
would disadvantage the re-pricing
orders (because they receive a new
timestamp and corresponding reduced
priority), and would create unnecessary
complexity.
IEX’s proposal is consistent with the
manner in which NYSE matches orders
51 See
IEX Rule 11.240(c)(1).
existing rules, a displayed order (all of
which are currently protected quotations) that on
entry would lock or cross another order on the IEX
Order Book will be executed against the resting
order. Further, a displayed order will be subject to
displayed price sliding to avoid locking or crossing
a protected quotation of another national securities
exchange and be subsequently re-priced to a more
aggressive price if the NBBO changes and it would
no longer lock or cross a protected quotation of
another national securities exchange. However, a
displayed order will not be able to re-price to a
more aggressive price if the NBBO has not changed,
even if the contra-side protected quotation is now
an IEX protected quotation. This is because resting
displayed orders do not become active orders that
take other resting orders but wait for potential
execution with either an incoming order or a nondisplayed order that has become active through the
recheck process.
53 See IEX Rule 11.230(a)(4)(C).
52 Under
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that become marketable against each
other as a result of one or both orders
re-pricing.54 And this proposal is also
analogous to how several exchanges
with post-only order types allow such
orders to take liquidity and match under
limited circumstances when repricing.55
Similarly, IEX’s proposal to have the
orders execute according to the priority
of each order is consistent with IEX’s
order priority rule,56 other exchange’s
rules,57 and the manner in which the
System invites resting orders to recheck
the IEX Order Book.58 And the proposal
to have the newest order be the remover
of liquidity is consistent with the
existing practice that the newer arriving
order takes any liquidity it finds on an
exchange’s order book.59
Accordingly, IEX proposes to amend
IEX rules as described below:
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• Modify IEX Rule 11.190(b)(1)
(‘‘Displayed Order’’) to remove the language
in subsection (H) providing that displayed
orders must be at least one round lot, and
that a round lot that decrements to an odd
lot will be treated as non-displayed and will
receive a new timestamp, and add new text
specifying that displayed orders can be odd
lots, mixed lots, or round lots.
• Modify IEX Rule 11.190(b)(2) (‘‘Reserve
Order’’) to remove the language in subsection
(2)(H) providing that reserve orders must be
at least one round lot, and to remove the
language stating that if the displayed portion
of the reserve order decrements to less than
a round lot it loses its displayed status and
receives a new timestamp. And add new text
specifying that if a displayed reserve order is
decremented to less than one round lot, the
order will continue to be treated as a
displayed order and will retain its priority.
• Modify IEX Rule 11.190(b)(4) (‘‘Odd Lot
Order’’) to remove the language providing
54 See NYSE Rules 7.37(b)(8) and (9) (Resting
orders that are repriced and become marketable
against contra-side orders on order book will trade
consistent with their ranking, and resting orders on
both sides of market that reprice and become
marketable against one another will trade consistent
with their ranking).
55 See Cboe BZX Rule 11.9(g)(2)(D) (a displayed
post only order subject to display-price sliding that
can remove displayed liquidity from the exchange’s
order book will execute if the execution value
(including fees/rebates) equals or exceeds the
execution value of the post only order providing
liquidity); see also Cboe BZX Rule 11.9(c)(6)
(describing the circumstances in which a post only
order becomes the remover of liquidity). MEMX,
MIAX Pearl, and Nasdaq all offer similar
functionality in which a post only order subject to
price sliding can become the remover of liquidity
when the execution results in at least as much price
improvement as the if the post only order remained
a liquidity provider. See MEMX Rule
11.6(j)(1)(A)(iv); MIAX Pearl Rule 2614(g)(1)(D);
Nasdaq Rule 4702(b)(4)(A).
56 See IEX Rule 11.220.
57 See supra note 54.
58 See IEX Rule 11.230(a)(4)(D).
59 See, e.g., NYSE Rule 7.31(d)(3)(B) (when two
midpoint liquidity orders match, the order with the
newer timestamp is the liquidity-removing order).
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that all odd lot orders are non-displayed, and
that a displayed order that decrements to less
than a round lot is treated by the System as
a non-displayed order, and add language
specifying that odd lot orders marked for
display are only eligible to be protected
quotations if aggregated to form at least one
round lot.
• Modify IEX Rule 11.190(b)(5) (‘‘Mixed
Lot Order’’) to remove the language providing
that any displayed mixed lot order that
decrements to less than a round lot is treated
by the System as a non-displayed order.
• Modify Rule IEX 11.190(b)(7)
(‘‘Discretionary Limit Order’’) to remove the
text in subsection (E)(vii) describing how DLimit orders can only be displayed if they are
at least one round lot, and that if a D-Limit
order is decremented to less than a round lot
it will be treated as non-displayed and given
a new timestamp.
• Modify IEX Rule 11.220 (‘‘Priority of
Orders’’) to remove subsection (a)(1)(C)(vii),
which states that a displayed order that
decrements to less than a round lot receives
a new timestamp and is considered a nondisplayed order. And renumber subsection
(a)(1)(C)(viii) to (a)(1)(C)(vii), because of the
removal of the current subsection
(a)(1)(C)(vii).
• Modify IEX Rule 11.220(a)(3)
(‘‘Decrementing Order Quantity and
Priority’’) to remove the two references to
how a displayed round lot order becomes a
non-displayed order if the order is
decremented to less than a round lot, as set
forth in the to-be-removed Rule
11.220(a)(1)(C)(vii).
• Modify IEX Rule 11.240(c)
(‘‘Dissemination of Quotation Information’’)
by adding new subsection (2) providing that
pursuant to Rule 602 of Reg NMS, the
Exchange will transmit for display to the
appropriate SIP for each security the
aggregate best ranked orders, as detailed in
the following subsections:
Æ Add new subsection (A), which specifies
that the best priced buy order will be the
highest price to buy wherein the aggregate
size of all displayed buy interest greater than
or equal to that price is one round lot or
higher.
Æ Add new subsection (B), which specifies
that the aggregated best priced buy order in
subsection (A) will be rounded down to the
nearest round lot.
Æ Add new subsection (C), which specifies
that the best priced sell order will be the
lowest price to sell wherein the aggregate size
of all displayed sell interest less than or
equal to that price is one round lot or higher.
Æ Add new (D), which specifies that the
aggregated best priced sell order in
subsection (C) will be rounded down to the
nearest round lot.
• Amend IEX Rule 11.190 to prevent a
displayed odd lot order priced equal to or
more aggressively than the Midpoint Price
from locking or crossing a non-displayed
incoming or resting order when the orders
are unable to execute against each other
because of the non-displayed order’s specific
conditions as follows:
Æ Modify IEX Rule 11.190(h)(2) (‘‘NonDisplayed Price Sliding’’) to add language
providing that a displayed odd lot order
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6691
booked at a price equal to or more aggressive
than the Midpoint Price will affect the resting
or discretionary price of non-displayed
resting orders as set forth in new subsections
(A) and (B).
D Add subsection (A) specifying that a
non-displayed order (other than a D-Peg or CPeg) that would otherwise be executable
against a contra-side displayed odd lot order
priced equal to or more aggressively than the
Midpoint Price, but for the non-displayed
order’s specific conditions, will be ranked
and displayed by the System at one (1) MPV
less aggressive than the price of the contraside displayed odd lot order.
D Add subsection (B) specifying that a DPeg or C-Peg order that would otherwise be
executable against a contra-side displayed
odd lot order priced equal to or more
aggressively than the Midpoint Price, but for
the D-Peg or C-Peg order’s specific
conditions, will be booked by the System in
the manner set forth in Rule 11.190(b)(10) or
Rule 11.190(b)(16), respectively, but the
discretionary price of the order will be
limited to the less aggressive of the limit
price, if any, or one (1) MPV less aggressive
than the price of the contra-side displayed
odd lot order.
Æ Modify IEX Rule 11.190(b)(10) (‘‘D-Peg’’)
to make a conforming change specifying that
the order’s discretionary price may be
changed as set forth in new IEX Rule
11.190(h)(2)(B).
Æ Modify IEX Rule 11.190(b)(16) (‘‘C-Peg’’)
to make a conforming change specifying that
the order’s discretionary price may be
changed as set forth in new IEX Rule
11.190(h)(2)(B).
• Amend IEX Rule 11.230 to provide that
when a displayed order that was previously
subject to price sliding to avoid locking or
crossing a contra-side protected quotation of
an another national securities exchange
becomes eligible to be re-priced to a more
aggressive price as a result of a change in the
NBBO it will trade with an unprotected
displayed odd lot on the IEX Order Book that
it would lock or cross as it re-prices as
follows:
Æ Add subsection (E) to IEX Rule
11.230(a)(4) which specifies that in the case
of a displayed order previously subject to
price sliding, upon a change to the Order
Book or the NBBO that would result in the
displayed order re-pricing to a more
aggressive price that would lock or cross a
resting unprotected displayed odd lot order,
the re-pricing order and the displayed odd lot
order will execute according to the priority
of each order, and the remover of liquidity
will be the order with the newest timestamp.
• Make two conforming changes to IEX
Rule 11.240(c)(1):
Æ Move the phrase ‘‘pursuant to IEX Rule
11.220’’ to be clear it applies to both bestranked orders to buy and best ranked orders
to sell
Æ Remove the extraneous sentence about
the Exchange maintaining connectivity to the
SIPs, which is already addressed in detail in
IEX Rule 11.510.
Implementation
This proposed rule change will be
immediately effective upon filing, but
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subject to the thirty (30) day operative
delay. The Exchange anticipates
implementing the rule change within
ninety (90) days of the effective date and
will provide at least ten (10) days’
notice to Members and market
participants of the implementation
timeline.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,60 in general, and
furthers the objectives of Section
6(b)(5),61 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
providing for displayed odd lot orders is
consistent with the protection of
investors and the public interest
because it is designed to incentivize the
entry of additional displayed limit
orders on IEX by providing the
opportunity for odd lot orders to receive
displayed order execution priority and
visibility, thereby enhancing price
discovery and the overall liquidity
profile on the Exchange to the benefit of
all market participants.
The Exchange further believes that
treating displayed odd lot orders in the
same manner as it treats displayed
round or mixed lot orders (with the
exception that non-aggregated displayed
odd lots cannot form a Protected
Quotation) is consistent with the Act
because such treatment is designed to
remove impediments to and perfect the
mechanism of a free and open market
and national market system by
standardizing the treatment of all
displayed liquidity on the Exchange,
and as discussed in the Purpose section,
conforming IEX’s treatment of odd lots
with those of the other equities
exchanges.
Additionally, the Exchange believes
that making displayed odd lot orders
eligible to aggregate to form Protected
Quotations is consistent with the
protection of investors and the public
interest because such functionality is
designed to increase displayed liquidity
on IEX. Specifically, the proposed rule
change will enable odd lots priced at the
Protected NBBO to increase the size of
60 15
61 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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the Protected NBBO and enable odd lots
priced more aggressively then the
Protected NBBO to narrow the Protected
NBBO (if they can be aggregated to at
least one round lot), thereby
contributing to the public price
discovery process and offering potential
price improvement opportunities to
market participants that might
otherwise be unaware of such better
priced interest.
Furthermore, the Exchange believes
that allowing odd lots to aggregate to
form a quotation and be eligible to be
the Exchange’s Protected Quotation is
consistent with the Act because such
functionality is designed to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
providing market participants greater
visibility into liquidity available on the
Exchange via the SIPs and IEX’s Data
Feeds.
In addition, since this proposed rule
change would make IEX’s treatment of
odd lot orders consistent with that of
the other equities exchanges,62 IEX
believes that it will promote just and
equitable principles of trade and foster
cooperation and coordination with
persons engaged in facilitating securities
transactions because market participants
will no longer have to potentially adjust
their order routing strategies or trading
algorithms to reflect that odd lots are
never displayed on IEX, and will be
readily able to accommodate the
dissemination of displayed odd lots on
IEX’s Depth of Book Data Feeds.
Moreover, IEX does not believe that
these proposed changes raise any new
or novel issues not already considered
by the Commission since other equities
exchanges have substantially similar
rules.
Furthermore, as discussed in the
Purpose section, IEX believes that the
proposed revisions to the non-displayed
price sliding rules and the execution
rules for displayed orders subject to
price sliding are consistent with the
protection of investors and the public
interest because they are designed to
avoid an unprotected odd lot order
resulting in a locked or crossed market
in a manner that would be reasonably
expected based on current IEX rules and
design, consistent with the rules of
several other equities exchanges, and
designed to avoid unnecessary
complexity.
Specifically, the Exchange believes
that the proposed changes to IEX’s nondisplayed price sliding rules are
consistent with the Act because such
changes would prevent the unlikely, but
62 See
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possible, situation in which an
unprotected odd lot order priced equal
to or more aggressively than the
Midpoint Price would result in a cross
of IEX’s Order Book because the
displayed odd lot is unable to match
with a non-displayed order priced at or
more aggressively than the Midpoint
Price because of the non-displayed
order’s specific conditions. These
proposed changes are also designed to
protect against a D-Peg or C-Peg order
exercising discretion to the point that it
executes at a price that locks or crosses
the price of a contra-side displayed odd
lot. The Exchange notes that these
changes are designed to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
protecting market participants from
having their non-displayed orders be
inadvertently crossed by an unprotected
displayed odd lot. This proposed
change is also consistent with
Regulation NMS’s goals of avoiding
crossed markets.
Similarly, the Exchange believes that
the proposed change to IEX’s execution
rules to allow displayed orders
previously subject to price sliding to
match with liquidity provided by a
contra-side unprotected displayed odd
lot order that the re-pricing order would
otherwise lock or cross are consistent
with the Act because the proposed rule
change is designed to protect investors
and the public interest by facilitating
the execution of marketable orders that
would otherwise be blocked from
executing by the price sliding rules in
order to prevent the market from
becoming locked or crossed, while
increasing price improvement
opportunities (by allowing the orders to
execute at prices more aggressive than
the Protected NBBO). Furthermore, as
discussed in the Purpose section, this
proposed change is consistent with
investor expectations and will minimize
the unnecessary complexity that would
result from requiring an unprotected
displayed odd lot order priced more
aggressively than the Protected NBBO to
force a marketable contra-side displayed
order to continually re-price to avoid
locking or crossing the contra-side
displayed odd lot order.
Moreover, as noted in the Purpose
section, other exchanges have adopted
similar mechanisms to prevent
displayed odd lot orders from resulting
in a locked or crossed market (both for
non-displayed and displayed orders).
Therefore, the Exchange believes that
these aspects of the proposed rule
change also do not raise any material
new or novel issues not previously
considered by the Commission.
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Additionally, IEX believes that the
proposed conforming changes to IEX
Rules 11.190(b)(10) and (16) and
11.240(c)(1) further the purposes of the
Act because they provide greater clarity
and consistency to the IEX Rule Book
thereby reducing the potential for
confusion of any market participants.
Specifically, the proposed conforming
changes to IEX Rules 11.190(b)(10) and
(16) will prevent any confusion to
market participants about how D-Peg
and C-Peg orders’ discretionary prices
would be impacted by the presence of
a contra-side non-displayed order with
specific conditions that prevented the
otherwise marketable orders from
matching. Similarly, the proposed
conforming change to IEX Rule
11.240(c)(1) will make clear to market
participants that the same priority rules
apply to determining both the bestranked order to buy and the best-ranked
order to sell, and to reduce any possible
confusion that could arise from the
mention of how IEX connects to the
SIPs, when all connectivity is addressed
in great detail in IEX Rule 11.510.
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.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
To the contrary, the proposal is
designed to enhance IEX’s
competitiveness with other markets by
adopting rules providing for displayed
odd lots that are comparable to those in
place at other equities exchanges. As
discussed in the Purpose section, the
proposal is designed to incentivize the
entry of additional displayed limit
orders on IEX by providing the
opportunity for odd lot orders to receive
displayed order execution priority and
visibility, thereby enhancing price
discovery, and increasing the overall
displayed liquidity profile on the
Exchange to the benefit of all market
participants.
IEX’s proposed approach to prevent
the potential occurrence of an
unprotected displayed odd lot order
locking or crossing IEX’s Order Book is
based upon the approaches of other
equities exchanges that are designed to
mitigate the same issue in a manner
consistent with each exchange’s
particular technical design and
functionality. IEX’s proposed rule
changes are designed to function in
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reasonably predictable ways consistent
with the expectations of market
participants and competing equities
exchanges that may route odd lot orders
to the Exchange. To the extent there are
minor differences in IEX’s proposed
approach to address the potential that
an unprotected displayed odd lot order
could result in a locked or crossed
market, the differences are not based on
competitive considerations but rather
simply to provide for reasonably
predictable outcomes in a manner
consistent with IEX’s system design.
The Exchange also does not believe
that the proposed rule change will
impose any burden on intramarket
competition because it will apply to all
Members in the same manner. All
Members are eligible to enter displayed
odd lot orders and all Members may
continue to use non-displayed odd lot
orders. Moreover, the proposal would
provide potential benefits to all
Members to the extent that there is more
liquidity available on IEX as a result of
the ability to enter displayed odd lot
orders. As discussed above, the proposal
is intended to incentivize the entry of
additional odd lot orders, which would
provide additional available liquidity to
all Members.
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) 63 of the Act and
Rule 19b–4(f)(6) 64 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.
The Exchange believes that the
proposed rule change meets the criteria
of subparagraph (f)(6) of Rule 19b–4 65
because it is consistent with the
protection of investors and the public
interest because it is designed to
incentivize the entry of additional
displayed limit orders on IEX by
providing the opportunity for odd lot
orders to receive displayed order
execution priority and visibility, thereby
enhancing price discovery and the
overall liquidity profile on the Exchange
to the benefit of all market participants,
as discussed in the Purpose, Statutory
Basis, and Burden on Competition
sections. Further, the Exchange believes
that the proposed rule change is
consistent with the protection of
investors and the public interest
because it would standardize the
treatment of all displayed liquidity on
the Exchange, and as discussed in the
Purpose and Statutory Basis sections,
substantially conform IEX’s treatment of
odd lots with those of the other equities
exchanges in a manner consistent with
the existing IEX rules and investor
expectations.
IEX also does not believe that the
proposed changes raise any new or
novel material issues that have not
already been considered by the
Commission because it would
substantially conform IEX’s treatment of
odd lot orders to the manner in which
such orders are treated by other equities
exchanges, as discussed in the Purpose
and Statutory Basis sections.
Specifically, the manner in which IEX
proposes to allow odd lot orders to be
displayed and aggregated to form a
protected quote is substantially similar
to the functionality of the other equities
exchanges.66 Similarly, IEX’s proposed
approach to prevent a displayed odd lot
order from locking or crossing a nondisplayed contra-side order that has a
specific condition that prevent the
orders from matching is consistent with
Nasdaq and NYSE rules,67 and also
similar to the rules of the Cboe BZX,
MEMX, and MIAX Pearl exchanges.68
Finally, the manner in which IEX will
match one or more displayed odd lot
orders that become executable against a
contra-side displayed order as a result of
a re-pricing triggered by market changes
is consistent with the approaches taken
by several other exchanges that match
resting orders that re-price to a point of
marketability.69 Accordingly, the
Exchange does not believe that the
proposed approaches raise any new or
novel issues not previously considered
by the Commission.
Accordingly, the Exchange has
designated this rule filing as noncontroversial under Section 19(b)(3)(A)
66 See
63 15
U.S.C. 78s(b)(3)(A).
64 17 CFR 240.19b–4(f)(6).
65 17 CFR 240.19b–4(f)(6).
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supra notes 25 and 26.
supra notes 46 and 47.
68 See supra note 48.
69 See supra notes 54 and 55.
67 See
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of the Act 70 and paragraph (f)(6) of Rule
19b–4 thereunder.71 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) 72 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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2021–01 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–2021–01. 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
70 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
72 15 U.S.C. 78s(b)(2)(B).
71 17
VerDate Sep<11>2014
19:27 Jan 21, 2021
Jkt 253001
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–2021–01, and should
be submitted on or before February 12,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.73
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–01402 Filed 1–21–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90932/January 15, 2021]
Order Making Fiscal Year 2021 Annual
Adjustments to Transaction Fee Rates
I. Background
Section 31 of the Securities Exchange
Act of 1934 (‘‘Exchange Act’’) requires
each national securities exchange and
national securities association to pay
transaction fees to the Commission.1
Specifically, Section 31(b) requires each
national securities exchange to pay to
the Commission fees based on the
aggregate dollar amount of sales of
certain securities (‘‘covered sales’’)
transacted on the exchange.2 Section
31(c) requires each national securities
association to pay to the Commission
fees based on the aggregate dollar
amount of covered sales transacted by or
through any member of the association
other than on an exchange.3
Section 31 of the Exchange Act
requires the Commission to annually
adjust the fee rates applicable under
Sections 31(b) and (c) to a uniform
adjusted rate.4 Specifically, the
Commission must adjust the fee rates to
a uniform adjusted rate that is
reasonably likely to produce aggregate
fee collections (including assessments
on security futures transactions) equal
to the regular appropriation to the
73 17
CFR 200.30–3(a)(12).
U.S.C. 78ee.
2 15 U.S.C. 78ee(b).
3 15 U.S.C. 78ee(c).
4 In some circumstances, the SEC also must make
a mid-year adjustment to the fee rates applicable
under Sections 31(b) and (c).
1 15
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
Commission for the applicable fiscal
year.5
The Commission is required to
publish notice of the new fee rates
under Section 31 not later than 30 days
after the date on which an Act making
a regular appropriation for the
applicable fiscal year is enacted.6 On
December 27, 2020, the President signed
into law the Consolidated
Appropriations Act, 2021, which
includes total appropriations of
$1,926,162,000 to the SEC for fiscal year
2021.
II. Fiscal Year 2021 Annual Adjustment
to the Fee Rate
The new fee rate is determined by (1)
subtracting the sum of fees estimated to
be collected prior to the effective date of
the new fee rate 7 and estimated
assessments on security futures
transactions to be collected under
Section 31(d) of the Exchange Act for all
of fiscal year 2021 8 from an amount
equal to the regular appropriation to the
Commission for fiscal year 2021, and (2)
dividing by the estimated aggregate
dollar amount of covered sales for the
remainder of the fiscal year following
the effective date of the new fee rate.9
As noted above, the Consolidated
Appropriations Act, 2021, includes total
appropriations of $1,926,162,000 to the
Commission for fiscal year 2021.10 The
5 15 U.S.C. 78ee(j)(1) (the Commission must
adjust the rates under Sections 31(b) and (c) to a
‘‘uniform adjusted rate that, when applied to the
baseline estimate of the aggregate dollar amount of
sales for such fiscal year, is reasonably likely to
produce aggregate fee collections under [Section 31]
(including assessments collected under [Section
31(d)]) that are equal to the regular appropriation
to the Commission by Congress for such fiscal
year.’’).
6 15 U.S.C. 78ee(g).
7 The sum of fees to be collected prior to the
effective date of the new fee rate is determined by
applying the current fee rate to the dollar amount
of covered sales prior to the effective date of the
new fee rate. The exchanges and FINRA have
provided data on the dollar amount of covered sales
through November, 2020. To calculate the dollar
amount of covered sales from December, 2020 to the
effective date of the new fee rate, the Commission
is using the same methodology it used in fiscal year
2020. This methodology is described in Appendix
A of this order.
8 OneChicago, LLC, the only reporting entity for
single stock futures, ceased operations in
September, 2020; its last R–31 report was filed in
October, 2020. Accordingly, the forecast for the
assessments for all of fiscal year 2021 for single
stock futures is the reported assessments on single
stock futures from September, 2020 by OneChicago,
LLC.
9 To estimate the aggregate dollar amount of
covered sales for the remainder of fiscal year 2021
following the effective date of the new fee rate, the
Commission is using the same methodology it used
previously. This methodology is described in
Appendix A of this order.
10 The President signed into law the
‘‘Consolidated Appropriations Act, 2021’’ on
December 27, 2020. This legislation included an
E:\FR\FM\22JAN1.SGM
22JAN1
]]>Agencies
[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Notices]
[Pages 6687-6694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01402]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90933; File No. SR-IEX-2021-01]
Self-Regulatory Organizations: Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the Way It Handles Odd Lot Orders by Allowing Them To Be Displayed
Orders and To Aggregate To Form a Protected Quotation
January 15, 2021.
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 January 6, 2021, the Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 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,\3\
and Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a
proposed rule change to modify the way it handles odd lot orders by
allowing them to be displayed
[[Page 6688]]
orders and to aggregate to form a protected quotation. The Exchange has
designated this rule change as ``non-controversial'' under Section
19(b)(3)(A) of the Act \5\ and provided the Commission with the notice
required by Rule 19b-4(f)(6) thereunder.\6\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statement 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 the way it handles odd lot orders
\7\ by allowing them to be displayed orders and to aggregate to form a
protected quotation. Specifically, the Exchange proposes to amend IEX
Rules 11.190(b), 11.220(a), and 11.240(c) to provide that a User may
enter displayed \8\ as well as non-displayed \9\ odd lot orders and to
allow displayed odd lot orders to aggregate to form a Protected
Quotation.\10\ Additionally, the Exchange proposes to make related
changes to IEX Rules 11.190(h) and 11.230(a)(4) to prevent a displayed
odd lot order that is not protected from resulting in a lock or cross
of IEX's Order Book.\11\ The Exchange also proposes to make conforming
changes to IEX Rules 11.190(b) and 11.240(c). This proposal would align
IEX's treatment of odd lot orders with that of the other national
securities exchanges that trade equities (i.e., equities exchanges), as
detailed below.
---------------------------------------------------------------------------
\7\ An odd lot order is generally any order of less than 100
shares (the size of a round lot order). See IEX Rule 11.180(a).
\8\ See IEX Rule 11.190(b)(1). IEX offers three order types that
may be entered as displayed orders: limit, reserve, and
Discretionary Limit. See IEX Rule 11.190(a)(1), (b)(2), and (b)(7).
\9\ See IEX Rule 11.190(b)(3).
\10\ See IEX Rule 1.160(bb).
\11\ See IEX Rule 1.160(p).
---------------------------------------------------------------------------
Background
Currently, all odd lot orders on IEX are treated as non-displayed,
whether the User \12\ entered the order into the System \13\ as an odd
lot, or if the order began as a displayed round \14\ or mixed \15\ lot
order, and was subsequently decremented to an odd lot order by
execution or User order amendment.\16\ When a displayed round or mixed
lot order decrements to a non-displayed odd lot order, the order also
loses its execution priority as a displayed order and also receives a
new timestamp resulting in the order being ranked behind all resting
displayed and non-displayed orders on the Order Book at the same price
level.\17\ Additionally, a displayed order that becomes non-displayed
because it decremented to an odd lot will no longer be disseminated on
IEX's TOPS,\18\ DEEP,\19\ and Data Platform \20\ data feeds
(collectively, the ``Data Feeds''), as applicable.
---------------------------------------------------------------------------
\12\ See IEX Rule 1.160(qq).
\13\ See IEX Rule 1.160(nn).
\14\ A round lot order is generally any order of 100 shares or a
multiple thereof (e.g., a 1,000 share order constitutes ten (10)
round lots). See IEX Rule 11.180(a).
\15\ A mixed lot order is generally any order of more than 100
shares that is not a multiple of 100 shares (e.g., orders for 101
shares and 299 shares are both mixed lot orders). See IEX Rule
11.180(a).
\16\ See IEX Rule 11.190(b)(4).
\17\ See IEX Rule 11.220(a)(1)(C)(vii).
\18\ See IEX Rule 11.330(a)(1) (describing how, among other
things, TOPS offers aggregated top of book quotations for all
displayed orders resting on the Order Book).
\19\ See IEX Rule 11.330(a)(3) (describing how, among other
things, DEEP provides ``aggregated depth of book quotations for all
displayed orders resting on the Order Book at each price level'').
\20\ The IEX Data Platform, known as the ``TOPS Viewer,'' offers
both aggregated top of book and aggregated depth of book quotations
for all displayed orders resting on the Order Book. See IEX Rule
11.330(a)(2). The IEX Data Platform can be accessed at https://iextrading.com/apps/tops/.
---------------------------------------------------------------------------
Odd lots comprise an increasingly large portion of all securities
transactions--in October 2020, 35.6% of all trades on IEX were odd lot
executions. Odd lots account for an even larger percentage of trades on
other equities exchanges--in October 2019, nearly half of all trades on
equities exchanges were odd lot trades, which was nearly double the
number of odd lot trades in 2016.\21\ IEX understands that this growth
in odd lot trading is driven by the increasing prevalence of stocks
priced above $1,000 per share (which translates to more than $100,000
in notional value for the standard round lot of 100 shares), as well as
computerized trading strategies that increasingly employ odd lots.\22\
However, odd lots are not subject to the same requirements as round lot
orders under Regulation NMS, primarily in that only round lots can be
protected quotations.\23\ Thus, the Commission's Division of Trading
and Markets has provided guidance that:
---------------------------------------------------------------------------
\21\ See Osipovich, Alexander: ``Tiny `Odd Lot' Trades Reach
Record Share of U.S. Stock Market,'' Wall Street Journal (October
23, 2019).
\22\ See supra note 21.
\23\ Regulation NMS defines ``bids'' and ``offers'' as the bid
price or offer price for one or more round lots of an NMS security,
and those definitions are referenced in the definitions of
``quotations,'' ``protected bids,'' and ``protected offers.'' See 17
CFR 242.600(b)(8), (b)(66), and (b)(61).
trading centers are permitted to establish their own rules for
handling odd-lot orders and the odd-lot portions of mixed-lot
orders. For example, although trading centers are not required to
handle odd-lot orders or the odd-lot portions of mixed lot orders in
accordance with the requirements for automated quotations set forth
in Rule 600(b)([4]), they are free to incorporate such requirements
in their rules if they wish to do so.\24\
---------------------------------------------------------------------------
\24\ See FAQ 7.03: ``Odd-Lot Orders and Odd-Lot Portions of
Mixed-Lot Orders,'' Division of Trading and Markets: Responses to
Frequently Asked Questions Concerning Rule 611 and Rule 610 of
Regulation NMS (April 4, 2008), available at https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm#sec7.
Consistent with the above guidance, other equities exchanges have
adopted rules that allow for odd lot orders to be displayed, which
affects the orders' execution priority and quotation dissemination on
each exchange's depth of book feed, where applicable.\25\ In addition,
equities exchanges enable displayed odd lot orders to aggregate at the
same or multiple price points that equal at least one round lot to form
a protected quotation under Rule 600(b)(62) of Regulation NMS.\26\
Similarly, displayed odd lot orders can also be aggregated with
displayed round and mixed lot orders at the same price level to form a
protected quotation. When displayed odd lot orders aggregate to at
least one round lot (either with other odd lot orders or with displayed
round and/or mixed lot orders) and comprise the best bid or offer for
an exchange, the other equities exchanges treat the aggregated
quotation as their top of book quotation, which they disseminate to the
appropriate Securities Information Processor (``SIP'')
[[Page 6689]]
and their own top of book feeds, as applicable.\27\
---------------------------------------------------------------------------
\25\ See, e.g., The New York Stock Exchange LLC (``NYSE'') Rule
7.36(b) (``Display'') (describing how unless otherwise instructed,
``odd-lot sized Limit Orders . . . are considered displayed for
ranking purposes'').
\26\ See, e.g., The Nasdaq Stock Market LLC (``Nasdaq'') Rule
4756(c) (``Entry and Display of Quotes and Orders'') (describing the
process for how Nasdaq aggregates displayed odd lot orders with
other displayed interest to calculate its best ranked displayed
orders for dissemination as the exchange's top of book quotation).
\27\ See, e.g., Nasdaq Rule 4756(c).
---------------------------------------------------------------------------
Based upon informal feedback from Members,\28\ IEX understands that
there is general interest in having IEX offer displayed odd lot orders,
so that such orders are visible on the Exchange's depth of book feeds,
are eligible to aggregate to form a protected quotation, and retain
their execution priority consistent with how displayed odd lot orders
are treated on other equities exchanges.
---------------------------------------------------------------------------
\28\ See IEX Rule 1.160(s).
---------------------------------------------------------------------------
Proposal
The Exchange proposes to amend IEX Rules 11.190(b), 11.220(a), and
11.240(c) to provide that Users may enter odd lot orders as either
displayed or non-displayed, rank displayed odd lot orders before non-
displayed orders at the same price, show displayed odd lot orders on
IEX's DEEP and Data Platform data feeds (collectively the ``Depth of
Book Data Feeds''), and aggregate displayed odd lot orders at the same
or multiple price points that equal at least one round lot for purposes
of transmitting the Exchange's best ranked displayed orders to the
appropriate SIP for each security and to IEX's TOPS and Data Platform
data feeds (collectively the ``Top of Book Data Feeds'').\29\
---------------------------------------------------------------------------
\29\ These proposed rule changes are consistent with how other
equities exchanges handle displayed odd lot orders. See supra notes
25 and 26.
---------------------------------------------------------------------------
In addition, the Exchange proposes two related changes to prevent a
displayed odd lot order that is not aggregated to form a protected
quotation from resulting in a lock or cross of IEX's Order Book, as
well as conforming changes to IEX Rules 11.190(b) and 11.240(c), each
as described below.
Accordingly, with respect to displaying odd lot orders, IEX
proposes to amend all the rules describing odd lot orders as non-
displayed to reflect that odd lot orders may be either displayed or
non-displayed, based upon User instruction per order. Consistent with
this change, a displayed round lot order that decrements to an odd lot
will retain its displayed status and execution priority, and IEX
therefore proposes to remove any references to how decrementing a
displayed round lot to an odd lot causes the order to lose its
displayed status and execution priority. Thus, displayed odd lot orders
would have priority over any non-displayed orders booked at the same
price.\30\
---------------------------------------------------------------------------
\30\ See IEX Rule 11.220(a)(1)(B).
---------------------------------------------------------------------------
As proposed, IEX will display odd lot orders in the same manner it
displays round or mixed lot orders, with the exception that an odd lot
order that cannot be aggregated with other orders to form at least a
round lot, will not be eligible to form a protected quotation and to be
disseminated as IEX's top of book quotation. The proposed changes also
enumerate the manner in which IEX will aggregate odd lot orders for
purposes of forming a quotation that is eligible to be a protected
quotation. Specifically, IEX will aggregate all of the displayed odd
lot orders at the highest price to buy (or lowest price to sell)
wherein the aggregate size of all displayed buy (sell) interest in the
System greater than or equal (less than or equal) to that price is one
round lot or greater. When the aggregate quotation is the Exchange's
best ranked displayed order, IEX will disseminate this top of book
quotation, rounded down to the nearest round lot,\31\ to the
appropriate SIP and the entire size of the top of book quotation to
IEX's Top of Book Data Feeds.\32\ As displayed orders, all of IEX's
displayed odd lot interest will also be aggregated at each price level
and disseminated to IEX's Depth of Book Data Feeds.\33\
---------------------------------------------------------------------------
\31\ The SIPS only accept quotations in round lots.
\32\ See IEX Rule 11.330(a)(1) and (2).
\33\ See IEX Rule 11.330(a)(2) and (3).
---------------------------------------------------------------------------
The following example demonstrates how, as proposed, odd lot bids
\34\ would be aggregated both for dissemination to IEX's Data Products
and the SIPs, when applicable:
---------------------------------------------------------------------------
\34\ The example focuses on the aggregation of displayed odd lot
orders to buy, but the same process applies to aggregating displayed
odd lot orders to sell, with the exception that the displayed odd
lot orders to sell will aggregate at the lowest price wherein the
aggregate size of all displayed interest to sell is one round lot or
greater.
---------------------------------------------------------------------------
Protected NBBO \35\ for a stock is 10.00 x 10.10.
---------------------------------------------------------------------------
\35\ See IEX Rule 1.160(cc).
---------------------------------------------------------------------------
IEX's order book has two resting displayed bids for the
stock:
[cir] Order A is a displayed odd lot to buy 25 shares at $10.02.
[cir] Order B is a displayed odd lot to buy 65 shares at $10.02.
Orders A and B do not aggregate to a protected quotation
and will not be disseminated to the Top of Book Data Feeds and the
SIPs.
IEX will disseminate to its Depth of Book Data Feeds that
it has interest to buy 90 shares at $10.02.
Order C arrives: a displayed odd lot order to buy 30
shares at $10.01.
Orders A, B, and C will aggregate to form a protected
quotation at 10.01, which is disseminated to the SIP (as one round lot)
and Top of Book Data Feeds as interest to buy 120 shares at $10.01.
IEX will disseminate to its Depth of Book Data Feeds that
it has interest to buy 90 shares at $10.02 and 30 shares at $10.01.
As noted above and discussed in the Statutory Basis section below,
these proposed changes would align IEX's treatment of odd lot orders
with that of the other equities exchanges. Specifically, other equities
exchanges allow odd lot orders to be treated as displayed or non-
displayed \36\ and to aggregate in the manner proposed.\37\
---------------------------------------------------------------------------
\36\ See, e.g., NYSE Rule 7.36(b)(1) (describing how unless
otherwise instructed, ``odd-lot sized Limit Orders . . . are
considered displayed for ranking purposes''); Cboe BZX Exchange,
Inc. (``Cboe BZX'') Rule 11.9(c)(2); Nasdaq Rule 4703(b); and MIAX
PEARL, LLC (``MIAX Pearl'') Rule 2611(a); and MEMX LLC (``MEMX'')
Rules 11.2(a) and 11.6(q)(2). See also Securities Exchange Act
Release No. 87221 (October 3, 2019), 84 FR 54195 (October 9, 2019)
(SR-LTSE-2019-02) (detailing how the Long Term Stock Exchange, Inc.
(``LTSE'') removed all references to odd lot orders being non-
displayed, including removing language about how round lots
decrementing to an odd lot become non-displayed and lose their
priority, and clarifying that displayed odd lots can aggregate to
form a protected quotation).
\37\ See, e.g., Nasdaq Rule 4756(c); NYSE Rule 7.36(b)(3); Cboe
BZX Rule 21.6(d); MIAX Pearl Rule 2616(b); MEMX Rule 11.9(b)(2); and
LTSE Rule 11.410.
---------------------------------------------------------------------------
IEX also proposes several related rule changes to prevent a
displayed odd lot order that is not protected from resulting in a lock
or cross of IEX's Order Book.
First, IEX proposes to modify its non-displayed price sliding rules
to prevent a displayed odd lot order priced equal to or more
aggressively than the Midpoint Price \38\ from locking or crossing a
non-displayed incoming or resting order when the orders are unable to
execute against each other because of the non-displayed order's
specific conditions.\39\ This issue does not arise currently because
non-displayed orders are never priced more aggressively than the
Midpoint Price in accordance with the ``Midpoint Price Constraint''
\40\ and a displayed order priced equal to or more aggressively than
the Midpoint Price would result in a change in the NBB \41\ or NBO \42\
and a corresponding
[[Page 6690]]
change to the Midpoint Price. However, with the introduction of
displayed, but unprotected, odd lot orders, there is the potential that
a displayed odd lot order would post on the Order Book at a price equal
to or more aggressive than the Midpoint Price and would lock or cross
\43\ a contra-side resting non-displayed order (or be locked or crossed
by an incoming non-displayed order) if the non-displayed order's
specific conditions prevent it from matching with the displayed odd lot
order.\44\
---------------------------------------------------------------------------
\38\ See IEX Rule 1.160(t).
\39\ The primary situation in which this would arise is if the
non-displayed order is a Minimum Quantity order with a User
instruction that it cannot match with an order the size of the
displayed odd lot. See IEX Rule 11.190(b)(11). Significantly, only
non-displayed orders can have specific conditions such as a Minimum
Quantity that could prevent a match. Id. It is also possible that a
non-displayed order would be subject to another specific condition
that would prevent matching with a displayed odd lot order in such
circumstances, such as a Corporate Discretionary Peg (``C-Peg'')
order that cannot match because of the pricing conditions applicable
to C-Peg orders. See IEX Rule 11.190(b)(16).
\40\ See IEX Rule 11.190(h)(2).
\41\ See IEX Rule 1.160(u).
\42\ See IEX Rule 1.160(u).
\43\ A non-displayed order would cross the odd lot order if the
non-displayed order is priced at the Midpoint and would lock if
priced at the same price as the odd lot order.
\44\ This scenario would not arise if the contra-side order is a
displayed order because displayed orders cannot include a minimum
quantity and would execute against the odd lot order.
---------------------------------------------------------------------------
In order to address this possible scenario, IEX proposes to amend
the non-displayed price-sliding rules so that the price of a non-
displayed order that, because of its specific conditions, is not
executable against a contra-side displayed odd lot order that is priced
equal to or more aggressively than the Midpoint Price is adjusted to
one (1) minimum price variant (``MPV'') \45\ less aggressive than the
price of the contra-side displayed odd lot order. Specifically, IEX
proposes to modify IEX Rule 11.190(h)(2), and add new subsection (A),
to specify that in such a circumstance, the non-displayed order will
book at a price one (1) MPV less aggressive than the price of the
contra-side displayed odd lot order.
---------------------------------------------------------------------------
\45\ See IEX Rule 11.210.
---------------------------------------------------------------------------
These proposed changes to the non-displayed price sliding rules are
thus designed to address the potential that an unprotected displayed
odd lot order will result in the IEX Order Book becoming locked or
crossed, by sliding orders in a reasonably expected manner based on
current IEX rules, and consistent with the rules of several other
equities exchanges. For example, Nasdaq re-prices non-displayed orders
to a price one (1) MPV less aggressive than the price of a resting
contra-side displayed odd lot order if the non-displayed order would
lock or cross the displayed odd lot order because the non-displayed
order's minimum quantity condition prevents the two orders from
matching.\46\ Similarly, to avoid a lock or cross on its order book,
NYSE reprices orders with a minimum trade size (``MTS'') modifier to a
less aggressive price than the price of a resting contra-side displayed
odd lot order with which it would have matched but for the MTS
modifier.\47\ And several other exchanges would execute a non-displayed
order only at a less aggressive price than a contra-side unprotected
displayed odd lot order to prevent the displayed odd lot order crossing
each exchange's order book.\48\
---------------------------------------------------------------------------
\46\ See Nasdaq Rule 4703(e).
\47\ See NYSE Rule 7.31(i)(3)(C)(i).
\48\ These exchanges would execute the order at a price \1/2\
MPV less aggressive than the contra-side displayed odd lot. See Cboe
BZX Rules 11.13(a)(4)(C) and (D); MEMX Rules 11.10(a)(4)(C) and (D);
and MIAX Pearl Rules 2617(a)(4)(C) and (D). In the same situation,
IEX is proposing to re-price the non-displayed order to a price one
(1) MPV less aggressive than the contra-side displayed odd lot
order, which IEX believes is a minor distinction from the Cboe BZX,
MEMX, and MIAX \1/2\ MPV approach.
---------------------------------------------------------------------------
This proposed change to the non-displayed price sliding rules
applies to all non-displayed orders except for Discretionary Peg (``D-
Peg'') and C-Peg orders, which also can have specific conditions that
prevent them from matching an aggressively priced contra-side displayed
odd lot order with which they would otherwise match. However, because
D-Peg and C-Peg orders book at a price one (1) MPV less aggressive than
the NBBO,\49\ they are different from other non-displayed orders and
cannot lock or cross a displayed odd lot order priced equal to or more
aggressive than the Midpoint Price.\50\ However, both D-Peg and C-Peg
orders have a ``discretionary price'' that allows them to exercise
discretion and execute up to the less aggressive of the limit price (if
any) or the Midpoint Price. Therefore, there is a limited circumstance
in which a D-Peg or C-Peg could execute at a price that locks or
crosses a displayed odd lot order priced at or more aggressively than
the Midpoint Price. Accordingly, IEX also proposes to amend the non-
displayed price sliding rules to state that in this scenario, the D-Peg
or C-Peg order would not be able to exercise discretion up to the
Midpoint Price, and instead the discretionary price for a D-Peg or C-
Peg order will be either the less aggressive of the order's limit price
(if any) or one (1) MPV less aggressive than the price of the contra-
side unprotected displayed odd lot order. This manner of limiting the
amount of discretion a D-Peg or C-Peg can exercise to prevent locking
or crossing a contra-side displayed odd lot order is also consistent
with other aspects of the proposed rule change to avoid locking or
crossing an unprotected displayed odd lot order.
---------------------------------------------------------------------------
\49\ See IEX Rule 1.160(u).
\50\ See IEX Rule 11.190(b)(10) and (16).
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Second, the Exchange proposes to revise IEX Rule 11.230(a)(4) to
provide that when a displayed order that was previously subject to
price sliding to avoid locking or crossing a contra-side protected
quotation of an another national securities exchange becomes eligible
to be re-priced to a more aggressive price as a result of a change in
the NBBO, it will trade with an unprotected displayed odd lot on the
IEX Order Book that it would lock or cross as it re-prices. In this
circumstance, the orders will execute according to the priority of each
order, and the remover of liquidity will be the order with the newest
timestamp.
Under existing rules, any displayed orders that would be locked or
crossed by a displayed order subject to re-pricing would either change
the Protected NBBO \51\ (if the displayed order is the best bid or best
offer), or re-price such that the displayed order does not lock or
cross the Protected NBBO.\52\ With the introduction of unprotected
displayed odd lot orders, it is now possible for a displayed order
subject to display price sliding to re-price to a price where it locks
or crosses a contra-side unprotected displayed odd lot order. Because
IEX rules provide that it will never display a locked market, nor can a
locked or crossed market exist within the System,\53\ in such a
scenario IEX must either again re-price one or both orders, or allow
them to execute against each other. IEX believes that allowing these
two orders to match when they become executable after re-pricing is
consistent with investor expectations that marketable orders will match
and could result in price improvement when the trade is at a better
price than the NBBO. By contrast, IEX believes that subjecting
displayed orders to additional price sliding to avoid locking or
crossing a small odd lot order would not benefit investors, would
disadvantage the re-pricing orders (because they receive a new
timestamp and corresponding reduced priority), and would create
unnecessary complexity.
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\51\ See IEX Rule 11.240(c)(1).
\52\ Under existing rules, a displayed order (all of which are
currently protected quotations) that on entry would lock or cross
another order on the IEX Order Book will be executed against the
resting order. Further, a displayed order will be subject to
displayed price sliding to avoid locking or crossing a protected
quotation of another national securities exchange and be
subsequently re-priced to a more aggressive price if the NBBO
changes and it would no longer lock or cross a protected quotation
of another national securities exchange. However, a displayed order
will not be able to re-price to a more aggressive price if the NBBO
has not changed, even if the contra-side protected quotation is now
an IEX protected quotation. This is because resting displayed orders
do not become active orders that take other resting orders but wait
for potential execution with either an incoming order or a non-
displayed order that has become active through the recheck process.
\53\ See IEX Rule 11.230(a)(4)(C).
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IEX's proposal is consistent with the manner in which NYSE matches
orders
[[Page 6691]]
that become marketable against each other as a result of one or both
orders re-pricing.\54\ And this proposal is also analogous to how
several exchanges with post-only order types allow such orders to take
liquidity and match under limited circumstances when re-pricing.\55\
---------------------------------------------------------------------------
\54\ See NYSE Rules 7.37(b)(8) and (9) (Resting orders that are
repriced and become marketable against contra-side orders on order
book will trade consistent with their ranking, and resting orders on
both sides of market that reprice and become marketable against one
another will trade consistent with their ranking).
\55\ See Cboe BZX Rule 11.9(g)(2)(D) (a displayed post only
order subject to display-price sliding that can remove displayed
liquidity from the exchange's order book will execute if the
execution value (including fees/rebates) equals or exceeds the
execution value of the post only order providing liquidity); see
also Cboe BZX Rule 11.9(c)(6) (describing the circumstances in which
a post only order becomes the remover of liquidity). MEMX, MIAX
Pearl, and Nasdaq all offer similar functionality in which a post
only order subject to price sliding can become the remover of
liquidity when the execution results in at least as much price
improvement as the if the post only order remained a liquidity
provider. See MEMX Rule 11.6(j)(1)(A)(iv); MIAX Pearl Rule
2614(g)(1)(D); Nasdaq Rule 4702(b)(4)(A).
---------------------------------------------------------------------------
Similarly, IEX's proposal to have the orders execute according to
the priority of each order is consistent with IEX's order priority
rule,\56\ other exchange's rules,\57\ and the manner in which the
System invites resting orders to recheck the IEX Order Book.\58\ And
the proposal to have the newest order be the remover of liquidity is
consistent with the existing practice that the newer arriving order
takes any liquidity it finds on an exchange's order book.\59\
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\56\ See IEX Rule 11.220.
\57\ See supra note 54.
\58\ See IEX Rule 11.230(a)(4)(D).
\59\ See, e.g., NYSE Rule 7.31(d)(3)(B) (when two midpoint
liquidity orders match, the order with the newer timestamp is the
liquidity-removing order).
---------------------------------------------------------------------------
Accordingly, IEX proposes to amend IEX rules as described below:
Modify IEX Rule 11.190(b)(1) (``Displayed Order'') to
remove the language in subsection (H) providing that displayed
orders must be at least one round lot, and that a round lot that
decrements to an odd lot will be treated as non-displayed and will
receive a new timestamp, and add new text specifying that displayed
orders can be odd lots, mixed lots, or round lots.
Modify IEX Rule 11.190(b)(2) (``Reserve Order'') to
remove the language in subsection (2)(H) providing that reserve
orders must be at least one round lot, and to remove the language
stating that if the displayed portion of the reserve order
decrements to less than a round lot it loses its displayed status
and receives a new timestamp. And add new text specifying that if a
displayed reserve order is decremented to less than one round lot,
the order will continue to be treated as a displayed order and will
retain its priority.
Modify IEX Rule 11.190(b)(4) (``Odd Lot Order'') to
remove the language providing that all odd lot orders are non-
displayed, and that a displayed order that decrements to less than a
round lot is treated by the System as a non-displayed order, and add
language specifying that odd lot orders marked for display are only
eligible to be protected quotations if aggregated to form at least
one round lot.
Modify IEX Rule 11.190(b)(5) (``Mixed Lot Order'') to
remove the language providing that any displayed mixed lot order
that decrements to less than a round lot is treated by the System as
a non-displayed order.
Modify Rule IEX 11.190(b)(7) (``Discretionary Limit
Order'') to remove the text in subsection (E)(vii) describing how D-
Limit orders can only be displayed if they are at least one round
lot, and that if a D-Limit order is decremented to less than a round
lot it will be treated as non-displayed and given a new timestamp.
Modify IEX Rule 11.220 (``Priority of Orders'') to
remove subsection (a)(1)(C)(vii), which states that a displayed
order that decrements to less than a round lot receives a new
timestamp and is considered a non-displayed order. And renumber
subsection (a)(1)(C)(viii) to (a)(1)(C)(vii), because of the removal
of the current subsection (a)(1)(C)(vii).
Modify IEX Rule 11.220(a)(3) (``Decrementing Order
Quantity and Priority'') to remove the two references to how a
displayed round lot order becomes a non-displayed order if the order
is decremented to less than a round lot, as set forth in the to-be-
removed Rule 11.220(a)(1)(C)(vii).
Modify IEX Rule 11.240(c) (``Dissemination of Quotation
Information'') by adding new subsection (2) providing that pursuant
to Rule 602 of Reg NMS, the Exchange will transmit for display to
the appropriate SIP for each security the aggregate best ranked
orders, as detailed in the following subsections:
[cir] Add new subsection (A), which specifies that the best
priced buy order will be the highest price to buy wherein the
aggregate size of all displayed buy interest greater than or equal
to that price is one round lot or higher.
[cir] Add new subsection (B), which specifies that the
aggregated best priced buy order in subsection (A) will be rounded
down to the nearest round lot.
[cir] Add new subsection (C), which specifies that the best
priced sell order will be the lowest price to sell wherein the
aggregate size of all displayed sell interest less than or equal to
that price is one round lot or higher.
[cir] Add new (D), which specifies that the aggregated best
priced sell order in subsection (C) will be rounded down to the
nearest round lot.
Amend IEX Rule 11.190 to prevent a displayed odd lot
order priced equal to or more aggressively than the Midpoint Price
from locking or crossing a non-displayed incoming or resting order
when the orders are unable to execute against each other because of
the non-displayed order's specific conditions as follows:
[cir] Modify IEX Rule 11.190(h)(2) (``Non-Displayed Price
Sliding'') to add language providing that a displayed odd lot order
booked at a price equal to or more aggressive than the Midpoint
Price will affect the resting or discretionary price of non-
displayed resting orders as set forth in new subsections (A) and
(B).
[ssquf] Add subsection (A) specifying that a non-displayed order
(other than a D-Peg or C-Peg) that would otherwise be executable
against a contra-side displayed odd lot order priced equal to or
more aggressively than the Midpoint Price, but for the non-displayed
order's specific conditions, will be ranked and displayed by the
System at one (1) MPV less aggressive than the price of the contra-
side displayed odd lot order.
[ssquf] Add subsection (B) specifying that a D-Peg or C-Peg
order that would otherwise be executable against a contra-side
displayed odd lot order priced equal to or more aggressively than
the Midpoint Price, but for the D-Peg or C-Peg order's specific
conditions, will be booked by the System in the manner set forth in
Rule 11.190(b)(10) or Rule 11.190(b)(16), respectively, but the
discretionary price of the order will be limited to the less
aggressive of the limit price, if any, or one (1) MPV less
aggressive than the price of the contra-side displayed odd lot
order.
[cir] Modify IEX Rule 11.190(b)(10) (``D-Peg'') to make a
conforming change specifying that the order's discretionary price
may be changed as set forth in new IEX Rule 11.190(h)(2)(B).
[cir] Modify IEX Rule 11.190(b)(16) (``C-Peg'') to make a
conforming change specifying that the order's discretionary price
may be changed as set forth in new IEX Rule 11.190(h)(2)(B).
Amend IEX Rule 11.230 to provide that when a displayed
order that was previously subject to price sliding to avoid locking
or crossing a contra-side protected quotation of an another national
securities exchange becomes eligible to be re-priced to a more
aggressive price as a result of a change in the NBBO it will trade
with an unprotected displayed odd lot on the IEX Order Book that it
would lock or cross as it re-prices as follows:
[cir] Add subsection (E) to IEX Rule 11.230(a)(4) which
specifies that in the case of a displayed order previously subject
to price sliding, upon a change to the Order Book or the NBBO that
would result in the displayed order re-pricing to a more aggressive
price that would lock or cross a resting unprotected displayed odd
lot order, the re-pricing order and the displayed odd lot order will
execute according to the priority of each order, and the remover of
liquidity will be the order with the newest timestamp.
Make two conforming changes to IEX Rule 11.240(c)(1):
[cir] Move the phrase ``pursuant to IEX Rule 11.220'' to be
clear it applies to both best-ranked orders to buy and best ranked
orders to sell
[cir] Remove the extraneous sentence about the Exchange
maintaining connectivity to the SIPs, which is already addressed in
detail in IEX Rule 11.510.
Implementation
This proposed rule change will be immediately effective upon
filing, but
[[Page 6692]]
subject to the thirty (30) day operative delay. The Exchange
anticipates implementing the rule change within ninety (90) days of the
effective date and will provide at least ten (10) days' notice to
Members and market participants of the implementation timeline.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\60\ in general, and furthers the
objectives of Section 6(b)(5),\61\ 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 providing for displayed odd lot orders is consistent with
the protection of investors and the public interest because it is
designed to incentivize the entry of additional displayed limit orders
on IEX by providing the opportunity for odd lot orders to receive
displayed order execution priority and visibility, thereby enhancing
price discovery and the overall liquidity profile on the Exchange to
the benefit of all market participants.
---------------------------------------------------------------------------
\60\ 15 U.S.C. 78f(b).
\61\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange further believes that treating displayed odd lot
orders in the same manner as it treats displayed round or mixed lot
orders (with the exception that non-aggregated displayed odd lots
cannot form a Protected Quotation) is consistent with the Act because
such treatment is designed to remove impediments to and perfect the
mechanism of a free and open market and national market system by
standardizing the treatment of all displayed liquidity on the Exchange,
and as discussed in the Purpose section, conforming IEX's treatment of
odd lots with those of the other equities exchanges.
Additionally, the Exchange believes that making displayed odd lot
orders eligible to aggregate to form Protected Quotations is consistent
with the protection of investors and the public interest because such
functionality is designed to increase displayed liquidity on IEX.
Specifically, the proposed rule change will enable odd lots priced at
the Protected NBBO to increase the size of the Protected NBBO and
enable odd lots priced more aggressively then the Protected NBBO to
narrow the Protected NBBO (if they can be aggregated to at least one
round lot), thereby contributing to the public price discovery process
and offering potential price improvement opportunities to market
participants that might otherwise be unaware of such better priced
interest.
Furthermore, the Exchange believes that allowing odd lots to
aggregate to form a quotation and be eligible to be the Exchange's
Protected Quotation is consistent with the Act because such
functionality is designed to remove impediments to and perfect the
mechanism of a free and open market and a national market system by
providing market participants greater visibility into liquidity
available on the Exchange via the SIPs and IEX's Data Feeds.
In addition, since this proposed rule change would make IEX's
treatment of odd lot orders consistent with that of the other equities
exchanges,\62\ IEX believes that it will promote just and equitable
principles of trade and foster cooperation and coordination with
persons engaged in facilitating securities transactions because market
participants will no longer have to potentially adjust their order
routing strategies or trading algorithms to reflect that odd lots are
never displayed on IEX, and will be readily able to accommodate the
dissemination of displayed odd lots on IEX's Depth of Book Data Feeds.
Moreover, IEX does not believe that these proposed changes raise any
new or novel issues not already considered by the Commission since
other equities exchanges have substantially similar rules.
---------------------------------------------------------------------------
\62\ See supra notes 25 and 26.
---------------------------------------------------------------------------
Furthermore, as discussed in the Purpose section, IEX believes that
the proposed revisions to the non-displayed price sliding rules and the
execution rules for displayed orders subject to price sliding are
consistent with the protection of investors and the public interest
because they are designed to avoid an unprotected odd lot order
resulting in a locked or crossed market in a manner that would be
reasonably expected based on current IEX rules and design, consistent
with the rules of several other equities exchanges, and designed to
avoid unnecessary complexity.
Specifically, the Exchange believes that the proposed changes to
IEX's non-displayed price sliding rules are consistent with the Act
because such changes would prevent the unlikely, but possible,
situation in which an unprotected odd lot order priced equal to or more
aggressively than the Midpoint Price would result in a cross of IEX's
Order Book because the displayed odd lot is unable to match with a non-
displayed order priced at or more aggressively than the Midpoint Price
because of the non-displayed order's specific conditions. These
proposed changes are also designed to protect against a D-Peg or C-Peg
order exercising discretion to the point that it executes at a price
that locks or crosses the price of a contra-side displayed odd lot. The
Exchange notes that these changes are designed to remove impediments to
and perfect the mechanism of a free and open market and a national
market system by protecting market participants from having their non-
displayed orders be inadvertently crossed by an unprotected displayed
odd lot. This proposed change is also consistent with Regulation NMS's
goals of avoiding crossed markets.
Similarly, the Exchange believes that the proposed change to IEX's
execution rules to allow displayed orders previously subject to price
sliding to match with liquidity provided by a contra-side unprotected
displayed odd lot order that the re-pricing order would otherwise lock
or cross are consistent with the Act because the proposed rule change
is designed to protect investors and the public interest by
facilitating the execution of marketable orders that would otherwise be
blocked from executing by the price sliding rules in order to prevent
the market from becoming locked or crossed, while increasing price
improvement opportunities (by allowing the orders to execute at prices
more aggressive than the Protected NBBO). Furthermore, as discussed in
the Purpose section, this proposed change is consistent with investor
expectations and will minimize the unnecessary complexity that would
result from requiring an unprotected displayed odd lot order priced
more aggressively than the Protected NBBO to force a marketable contra-
side displayed order to continually re-price to avoid locking or
crossing the contra-side displayed odd lot order.
Moreover, as noted in the Purpose section, other exchanges have
adopted similar mechanisms to prevent displayed odd lot orders from
resulting in a locked or crossed market (both for non-displayed and
displayed orders). Therefore, the Exchange believes that these aspects
of the proposed rule change also do not raise any material new or novel
issues not previously considered by the Commission.
[[Page 6693]]
Additionally, IEX believes that the proposed conforming changes to
IEX Rules 11.190(b)(10) and (16) and 11.240(c)(1) further the purposes
of the Act because they provide greater clarity and consistency to the
IEX Rule Book thereby reducing the potential for confusion of any
market participants. Specifically, the proposed conforming changes to
IEX Rules 11.190(b)(10) and (16) will prevent any confusion to market
participants about how D-Peg and C-Peg orders' discretionary prices
would be impacted by the presence of a contra-side non-displayed order
with specific conditions that prevented the otherwise marketable orders
from matching. Similarly, the proposed conforming change to IEX Rule
11.240(c)(1) will make clear to market participants that the same
priority rules apply to determining both the best-ranked order to buy
and the best-ranked order to sell, and to reduce any possible confusion
that could arise from the mention of how IEX connects to the SIPs, when
all connectivity is addressed in great detail in IEX Rule 11.510.
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.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. To the contrary,
the proposal is designed to enhance IEX's competitiveness with other
markets by adopting rules providing for displayed odd lots that are
comparable to those in place at other equities exchanges. As discussed
in the Purpose section, the proposal is designed to incentivize the
entry of additional displayed limit orders on IEX by providing the
opportunity for odd lot orders to receive displayed order execution
priority and visibility, thereby enhancing price discovery, and
increasing the overall displayed liquidity profile on the Exchange to
the benefit of all market participants.
IEX's proposed approach to prevent the potential occurrence of an
unprotected displayed odd lot order locking or crossing IEX's Order
Book is based upon the approaches of other equities exchanges that are
designed to mitigate the same issue in a manner consistent with each
exchange's particular technical design and functionality. IEX's
proposed rule changes are designed to function in reasonably
predictable ways consistent with the expectations of market
participants and competing equities exchanges that may route odd lot
orders to the Exchange. To the extent there are minor differences in
IEX's proposed approach to address the potential that an unprotected
displayed odd lot order could result in a locked or crossed market, the
differences are not based on competitive considerations but rather
simply to provide for reasonably predictable outcomes in a manner
consistent with IEX's system design.
The Exchange also does not believe that the proposed rule change
will impose any burden on intramarket competition because it will apply
to all Members in the same manner. All Members are eligible to enter
displayed odd lot orders and all Members may continue to use non-
displayed odd lot orders. Moreover, the proposal would provide
potential benefits to all Members to the extent that there is more
liquidity available on IEX as a result of the ability to enter
displayed odd lot orders. As discussed above, the proposal is intended
to incentivize the entry of additional odd lot orders, which would
provide additional available liquidity to all Members.
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) \63\ of the Act and Rule 19b-4(f)(6) \64\
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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\63\ 15 U.S.C. 78s(b)(3)(A).
\64\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change meets the
criteria of subparagraph (f)(6) of Rule 19b-4 \65\ because it is
consistent with the protection of investors and the public interest
because it is designed to incentivize the entry of additional displayed
limit orders on IEX by providing the opportunity for odd lot orders to
receive displayed order execution priority and visibility, thereby
enhancing price discovery and the overall liquidity profile on the
Exchange to the benefit of all market participants, as discussed in the
Purpose, Statutory Basis, and Burden on Competition sections. Further,
the Exchange believes that the proposed rule change is consistent with
the protection of investors and the public interest because it would
standardize the treatment of all displayed liquidity on the Exchange,
and as discussed in the Purpose and Statutory Basis sections,
substantially conform IEX's treatment of odd lots with those of the
other equities exchanges in a manner consistent with the existing IEX
rules and investor expectations.
---------------------------------------------------------------------------
\65\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
IEX also does not believe that the proposed changes raise any new
or novel material issues that have not already been considered by the
Commission because it would substantially conform IEX's treatment of
odd lot orders to the manner in which such orders are treated by other
equities exchanges, as discussed in the Purpose and Statutory Basis
sections. Specifically, the manner in which IEX proposes to allow odd
lot orders to be displayed and aggregated to form a protected quote is
substantially similar to the functionality of the other equities
exchanges.\66\ Similarly, IEX's proposed approach to prevent a
displayed odd lot order from locking or crossing a non-displayed
contra-side order that has a specific condition that prevent the orders
from matching is consistent with Nasdaq and NYSE rules,\67\ and also
similar to the rules of the Cboe BZX, MEMX, and MIAX Pearl
exchanges.\68\ Finally, the manner in which IEX will match one or more
displayed odd lot orders that become executable against a contra-side
displayed order as a result of a re-pricing triggered by market changes
is consistent with the approaches taken by several other exchanges that
match resting orders that re-price to a point of marketability.\69\
Accordingly, the Exchange does not believe that the proposed approaches
raise any new or novel issues not previously considered by the
Commission.
---------------------------------------------------------------------------
\66\ See supra notes 25 and 26.
\67\ See supra notes 46 and 47.
\68\ See supra note 48.
\69\ See supra notes 54 and 55.
---------------------------------------------------------------------------
Accordingly, the Exchange has designated this rule filing as non-
controversial under Section 19(b)(3)(A)
[[Page 6694]]
of the Act \70\ and paragraph (f)(6) of Rule 19b-4 thereunder.\71\ 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) \72\ of the Act to determine whether the proposed rule
change should be approved or disapproved.
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\70\ 15 U.S.C. 78s(b)(3)(A).
\71\ 17 CFR 240.19b-4.
\72\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2021-01 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-2021-01. 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-2021-01, and should be submitted on
or before February 12, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\73\
---------------------------------------------------------------------------
\73\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01402 Filed 1-21-21; 8:45 am]
BILLING CODE 8011-01-P
