Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing of Proposed Rule Change To Enhance the IEX Retail Price Improvement Program for the Benefit of Retail Investors, 19912-19917 [2021-07676]
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Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07677 Filed 4–14–21; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91523; File No. SR–IEX–
2021–06]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing of Proposed Rule Change To
Enhance the IEX Retail Price
Improvement Program for the Benefit
of Retail Investors
April 9, 2021.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule
19b–4 thereunder,3 notice is hereby
given that, on April 1, 2021, the
Investors Exchange LLC (‘‘IEX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule
19b–4 thereunder,5 IEX is filing with the
Commission a proposed rule change to
enhance its Retail Price Improvement
Program for the benefit of retail
investors.
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(1).
5 17 CFR 240.19b–4.
1 15
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on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
1. Purpose
The purpose of the proposed rule
change is to enhance the Exchange’s
Retail Price Improvement Program for
the benefit of retail investors.
Specifically, the Exchange proposes to
make the following four changes: (i)
Revise the definition of Retail order 6 in
IEX Rule 11.190(b)(15) to apply only to
the trading interest of a natural person
that does not place more than 390
equity orders per day on average during
a calendar month for its own beneficial
account(s); 7 (ii) provide Order Book 8
priority to Retail Liquidity Provider
(‘‘RLP’’) orders 9 at the Midpoint Price 10
ahead of other non-displayed orders
priced to execute at the Midpoint Price;
(iii) disseminate a ‘‘Retail Liquidity
Identifier’’ through the Exchange’s
proprietary market data feeds and the
appropriate securities information
processor (‘‘SIP’’) when RLP order
interest aggregated to form at least one
round lot for a particular security is
available in the System,11 provided that
the RLP order interest is resting at the
Midpoint Price and is priced at least
$0.001 better than the NBB 12 or NBO; 13
and (iv) amend the definition of RLP
orders so such orders can only be
midpoint peg orders,14 cannot be
Discretionary Peg orders,15 and cannot
include a minimum quantity
restriction.16 The proposed changes are
designed to further support and enhance
6 See
IEX Rules 11.190(b)(15) and 11.232(a)(2).
existing restrictions applicable to a Retail
order, that it must reflect trading interest of a
natural person with no change made to the terms
of the underlying order of the natural person with
respect to price (except in the case of a market order
that is changed to a marketable limit order) or side
of market and that does not originate from a trading
algorithm or any other computerized methodology,
will continue to apply.
8 See IEX Rule 1.160(p).
9 See IEX Rules 11.190(b)(14) and 11.232(a)(3).
10 The term ‘‘Midpoint Price’’ means the midpoint
of the NBBO. See IEX Rule 1.160(t). The term
‘‘NBBO’’ means the national best bid or offer, as set
forth in Rule 600(b) of Regulation NMS under the
Act, determined as set forth in IEX Rule 11.410(b).
11 See IEX Rule 1.160(nn).
12 See IEX Rule 1.160(u).
13 See IEX Rule 1.160(u).
14 See IEX Rule 11.190(b)(9).
15 See IEX Rule 11.190(b)(10).
16 See IEX Rule 11.190(b)(11).
7 The
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the ability of non-professional retail
investors to obtain meaningful price
improvement by incentivizing market
participants to compete to provide such
price improvement.
Background
In 2019 the Commission approved
IEX’s Retail Price Improvement Program
(‘‘Retail Program’’),17 which is designed
to provide retail investors with
meaningful price improvement
opportunities through trading at the
Midpoint Price or better.18 As currently
structured, Members 19 that qualify as
Retail Member Organizations
(‘‘RMOs’’) 20 are eligible to submit Retail
orders to the Exchange. Any Member is
able to provide price improvement to
Retail orders through orders priced to
execute at the Midpoint Price or better,
including RLP orders that are only
eligible to execute against a Retail order
at the Midpoint Price and execute in
price-time priority after other orders
resting on the Order Book priced to
trade at the Midpoint Price.
As IEX noted in its Retail Program
rule filing,21 the Commission has
consistently emphasized the importance
of continued broad, long-term retail
participation in our capital markets. In
its Strategic Plan for fiscal years 2018–
2022, the Commission highlighted its
vision to ‘‘promote capital markets that
inspire public confidence and provide a
diverse array of financial opportunities
to retail and institutional investors,
entrepreneurs, public companies, and
other market participants’’, with its first
goal to focus on the long-term interests
of Main Street (i.e., retail) investors.22
Against this backdrop, the Retail
Program is designed to provide retail
17 See Securities Exchange Act Release No. 86619
(August 9, 2019), 84 FR 41769 (August 15, 2019)
(SR–IEX–2019–05) (SEC order approving IEX’s
Retail Program).
18 On March 1, 2021, IEX filed an immediately
effective rule change proposal to provide that, in
addition to executing at the Midpoint Price, a Retail
order can execute against a displayed unprotected
odd lot order that is resting on the Order Book at
a price more aggressive than the Midpoint Price
(i.e., above the Midpoint Price in the case of an odd
lot buy order and below the Midpoint Price in the
case of an odd lot sell order). Executing against
such an odd lot order thus provides more price
improvement to the Retail order than executing at
the Midpoint Price. See Securities Exchange Act
Release No. 91324 (March 15, 2021), 86 FR 15015
(March 19, 2021) (SR–IEX–2021–03).
19 See IEX Rule 1.160(s).
20 See IEX Rule 11.232(a)(1).
21 See supra note 17. See also Securities Exchange
Act Release No. 86241 (June 28, 2019), 84 FR 32238
(July 5, 2019) (SR–IEX–2019–05) (IEX rule filing
proposing Retail Program).
22 See U.S. Securities and Exchange Commission,
Strategic Plan, Fiscal Years 2018–2022, available at
https://www.sec.gov/files/SEC_Strategic_Plan_
FY18-FY22_FINAL_0.pdf (‘‘Commission Strategic
Plan’’).
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investors with access to the Exchange’s
deep pool of midpoint liquidity,
including RLP orders, thereby providing
enhanced opportunities for meaningful
price improvement at the Midpoint
Price. The Exchange believes the Retail
Program has provided retail investors
with better execution quality than they
are currently able to obtain through
existing exchange and over-the-counter
(‘‘OTC’’) order retail programs, by
attracting counterparty liquidity to the
Exchange from Members and their
clients seeking to interact with retail
liquidity.23 The Retail Program is
therefore consistent with the goals of the
Commission to encourage markets that
are structured to benefit ordinary
investors.24
Under the current Retail Program, the
term ‘‘Retail order’’ is defined as an
agency or riskless principal order that
satisfies the criteria of Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) Rule 5320.03, which is
submitted by a RMO, designated with a
‘‘Retail order’’ modifier, and reflects
trading interest of a natural person, with
no change made to the terms of the
underlying order of the natural person
with respect to price (except in the case
of a market order that is changed to a
marketable limit order) or side of
market, and that does not originate from
a trading algorithm or any other
computerized methodology.25 Retail
orders may either be Discretionary Peg
or midpoint peg orders with a Time-inForce of IOC or FOK, and are only
eligible to trade at the Midpoint Price or
better.26
An RMO is an IEX Member (or
division thereof) that has been approved
by the Exchange to submit Retail
orders.27 Pursuant to IEX Rules
11.232(a)(1) and (b), which describe the
qualification and application process for
becoming an RMO, any Member may
qualify as an RMO if it conducts a retail
business or routes Retail orders on
behalf of another broker-dealer.
An RLP order is currently a
Discretionary Peg order that is only
eligible to execute against Retail orders
23 See discussion infra on the desirability of
interacting with retail liquidity.
24 See supra note 22.
25 See supra note 6. An order from a natural
person can include orders submitted on behalf of
accounts that are held in a corporate legal form—
such as an Individual Retirement Account,
Corporation, or a Limited Liability Company—that
have been established for the benefit of an
individual or group of related family members,
provided that the order is submitted by an
individual.
26 See IEX Rule 11.232(a)(2). As with all pegged
orders, Retail orders may only trade during the
Regular Market Session. See IEX Rule
11.190(a)(3)(E).
27 See IEX Rule 11.232(a)(1).
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through the execution process described
in IEX Rule 11.232(e).28 Any Member
can submit RLP orders.
As discussed in the Retail Program
rule filing,29 IEX’s Retail Program is a
simple approach designed to provide
retail investors with the opportunity for
meaningful price improvement (by
executing at the Midpoint Price or
better), by attracting counterparty
liquidity to the Exchange from Members
and their clients seeking to interact with
retail liquidity.
IEX’s Retail Program leverages IEX’s
market structure to provide enhanced
price improvement opportunities for
retail customers by incentivizing
Members and their clients to provide
liquidity to the orders of retail investors,
while enabling such investors to obtain
materially better price improvement
than may otherwise be available, in a
way that is mutually beneficial for retail
investors and Members providing
liquidity. Based on experience with the
Retail Program, IEX believes that the
four proposed changes, noted above and
described in detail below, would further
enhance the Retail Program.
Proposal
IEX proposes four enhancements to
the Retail Program, as described below.
Retail Order Definition
IEX proposes to revise the definition
of Retail order in IEX Rule 11.190(b)(15)
so that it is limited to retail investors
who do not appear to be engaged in
trading activity akin to that of a
professional. Specifically, the definition
of Retail order would be amended to
apply only to the trading interest of a
natural person that does not place more
than 390 equity orders per day on
average during a calendar month for its
own beneficial account(s). All other
existing criteria specified in IEX Rule
11.190(b)(15) would continue to apply.
IEX Rule 11.190(b)(15) currently
provides that a Retail order means an
order submitted by a Retail Member
Organization (as defined in IEX Rule
11.232) and designated with a ‘‘Retail
order’’ modifier. A Retail order must be
an agency order, or riskless principal
order that satisfies the criteria of FINRA
Rule 5320.03. A Retail order must
reflect trading interest of a natural
person with no change made to the
terms of the underlying order of the
natural person with respect to price
(except in the case of a market order that
is changed to a marketable limit order)
or side of market and that does not
originate from a trading algorithm or
28 See
29 See
PO 00000
IEX Rule 11.232(e).
supra note 21.
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19913
any other computerized methodology,
which will now be defined as a ‘‘retail
customer’’ for clarity. An order from a
retail customer can include orders
submitted on behalf of accounts that are
held in a corporate legal form—such as
an Individual Retirement Account,
Corporation, or a Limited Liability
Company—that have been established
for the benefit of an individual or group
of related family members, provided
that the order is submitted by an
individual. IEX proposes to add new
language to IEX Rule 11.190(b)(15) to
specify that a Retail order may only be
submitted on behalf of a retail customer
that does not place more than 390
equity orders per day on average during
a calendar month for its own beneficial
account(s).
In addition, IEX proposes to add
Supplementary Material .01 to IEX Rule
11.190(b) specifying how to determine
whether the 390 equity orders per day
on average threshold has been reached.
Specifically, the Supplementary
Material would provide that a ‘‘parent’’
order that is broken into multiple
‘‘child’’ orders by a broker or dealer, or
by an algorithm housed at a broker or
dealer or by an algorithm licensed from
a broker or dealer, but which is housed
with the customer, counts as one order
even if the ‘‘child’’ orders are routed
across multiple exchanges. In addition,
any order that cancels and replaces an
existing order would count as a separate
order; except that an order that cancels
and replaces any ‘‘child’’ order resulting
from a ‘‘parent’’ order that is broken into
multiple ‘‘child’’ orders, does not count
as a new order.
IEX also proposes to add
Supplementary Material .02 to IEX Rule
11.190(b) to address the reasonable
policies and procedures that an RMO
must have in place to ensure that Retail
orders are appropriately represented on
the Exchange. Specifically, such
policies and procedures should provide
for a review of retail customers’ activity
on at least a quarterly basis. Further,
Retail orders for any retail customer that
had an average of more than 390 equity
orders per day during any month of a
calendar quarter are not eligible to be
entered as Retail orders for the next
calendar quarter. Retail Member
Organizations must conduct a quarterly
review and make any appropriate
changes to the way in which they are
representing orders within five business
days after the end of each calendar
quarter. In addition, if during a quarter
the Exchange identifies a retail customer
for which orders are being represented
as Retail orders but that has averaged
more than 390 equity orders per day
during a month, the Exchange will
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notify the RMO, and the RMO will be
required to change the manner in which
it is representing the retail customer’s
orders within five business days.
As noted above, the Exchange
believes that the price improvement
benefits that accrue to Retail orders on
IEX should be limited to retail
customers who do not appear to be
engaged in trading activity akin to that
of a professional. IEX notes that the 390order limitation is a threshold used by
various options exchanges to
distinguish professional customers from
retail customers, so that a customer that
is not a broker-dealer but enters more
than 390 options orders per day (on
average during a calendar month) is
classified as a Professional Customer
and does not receive customer
execution priority.30 The 390-order
threshold is also used by Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) with respect to
its equity market to delineate Retail
Priority Orders, which receive execution
priority, from other retail customers.
EDGX Retail Priority Orders may only
be entered on behalf of a person that
does not place more than 390 equity
orders per day on average during a
calendar month for its own beneficial
account(s).31
EDGX and the options exchanges
apply a comparable methodology and
supervisory requirements to determine
whether the 390-order threshold has
been reached as is proposed by IEX in
this proposal.32 IEX understands that
the impetus for EDGX’s and options
exchanges’ use of the 390-order
threshold is to limit priority benefits
and assist in ensuring that these benefits
flow only to retail investors that are not
engaged in a significant amount of
trading activity akin to that of a
professional.33
IEX believes that similarly restricting
Retail orders to non-professional
customers will expand the pool of
market participants willing to provide
contra-side liquidity to trade with Retail
orders because the limitations will
narrow the pool of Retail orders to those
from customers who are less likely to be
30 See, e.g., Nasdaq Stock Market LLC Options 1,
Section 1(a)(47); NYSE Arca, Inc. (‘‘Arca’’) Rule
6.1A–O(a)(4A).
31 See EDGX Rule 11.9 Interpretations and
Policies .01.
32 See EDGX Rule 11.9 Interpretations and
Policies .02.
33 See Securities Exchange Act Release No. 87200
(October 2, 2019), 84 FR 53788, 53791 (October 8,
2019) (SR–CboeEDGX–2019–012) (order approving
EDGX Retail Priority Orders); see also Securities
Exchange Act Release No. 89991 (September 24,
2020), 85 FR 61782, 61783 (September 30, 2020)
(SR–MIAX–2020–31) (giving priority to orders
submitted on behalf of non-professional customers
who submit less than 390 orders per day).
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professional market participants. By
expanding the pool of market
participants willing to compete for
providing price improvement to Retail
orders, IEX believes that more Retail
orders will be able to obtain meaningful
price improvement for their orders. IEX
also notes that 390 orders per day
represents an order entered each minute
during regular trading hours—from 9:30
a.m. eastern time to 4:00 p.m. eastern
time—which IEX believes is a
reasonable and not overly restrictive
limitation in that it contemplates active
trading but not at the level of a
professional trader.34 IEX believes that
limiting the pool of customers eligible to
enter Retail orders, as proposed, will
incentivize additional resting liquidity
seeking to trade against such Retail
orders (and provide price improvement)
because of their non-professional
characteristics.35 Thus, to the extent the
proposed change is successful in
increasing the pool of RLP and other
contra-side liquidity it will benefit
Retail orders by increasing execution
opportunities and price improvement.
RLP Order Book Priority
IEX proposes to provide Order Book
priority to RLP orders ahead of other
non-displayed orders priced to execute
at the Midpoint Price. Currently, IEX
Rule 11.232(e)(3)(A)(iv) provides that
RLP orders are prioritized after all other
non-displayed orders priced to trade at
the Midpoint Price. This approach was
adopted by IEX originally because RLP
orders were a new order type and are
only eligible to trade against Retail
orders. However, IEX now believes that
RLP orders should have higher priority
than other non-displayed orders priced
to trade at the Midpoint Price in order
to provide additional incentives for the
entry of RLP orders and concomitant
provision of price improvement to
34 For example, an analysis of orders sent to IEX
by Members and customers conducting a
proprietary trading business indicates that many of
such Members and customers typically send
millions of orders per day and even the less active
send thousands of orders per day.
35 This approach was supported by Citadel
Securities in a comment letter on EDGX’s retail
priority proposal. Citadel Securities notes that
‘‘[t]he market’s experience with [retail programs]
evidences the failure of an overly broad definition
of ‘Retail Order’. [Retail programs] have not gained
traction in the market, precisely because the [retail
programs’] definition of ‘Retail Order’ includes
orders from both retail investors as well as active
professional traders. To the extent that the ‘Retail
Order’ flow routed to [retail programs] includes
orders from active professional traders and is thus
not as attractive to other market participants, those
market participants will simply elect not to post
[retail] liquidity and fill-rates for [retail] routes will
be low.’’ See Letter dated April 26, 2019 from
Stephen John Berger, Citadel, to Eduardo A.
Aleman, Commission.
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Retail orders. The Exchange notes that
other exchanges that offer retail
programs enable retail liquidity
providing orders that provide
immaterial sub-penny price
improvement to achieve queue priority
by providing a retail order type that
trades first with retail liquidity
providing orders before trading with
other similarly priced orders.36
Thus, as proposed, IEX Rule
11.232(e)(3)(A) would be amended to
provide that a Retail order to buy (sell)
shall execute upon entry against sell
(buy) orders resting on the Order Book
in the following order:
(i) Displayed sell (buy) orders at the NBO
(NBB) during a locked or crossed market;
(ii) displayed sell (buy) odd lot orders
priced to trade between the NBB (NBO) and
the MidPoint Price;
(iii) Retail Liquidity Provider orders priced
to trade at the Midpoint Price; and
(iv) nondisplayed orders priced to trade at
the Midpoint Price.
Retail Liquidity Identifier
IEX proposes to disseminate a Retail
Liquidity Identifier through the
Exchange’s proprietary market data
feeds, TOPS 37 and DEEP,38 and the
appropriate SIP when RLP order interest
aggregated to form at least one round lot
for a particular security is available in
the System, provided that the RLP order
interest is resting at the Midpoint Price
and is priced at least $0.001 better than
the NBB or NBO (‘‘RLP Interest’’). The
purpose of the Retail Liquidity Identifier
is to provide relevant market
information to RMOs that there is RLP
Interest on IEX, thereby incentivizing
them to send Retail orders to IEX. The
Exchange does not believe that such
market information constitutes a
‘‘quote’’ within the meaning of
Regulation NMS because it would not
include a specific price or size of the
interest.39 The Retail Liquidity
Identifier will reflect the symbol and the
side (buy or sell) of the RLP Interest but
will not include the price or size. While
an explicit price will not be
disseminated, because RLP orders are
only eligible to trade at the Midpoint
Price, dissemination will thus reflect the
36 See, e.g., Arca Rule 7.44–E(k) (Retail orders
trade first with retail price improvement orders
(akin to IEX’s RLP orders), and then with all other
orders to sell (buy) with a working price below
(above) the NBO (NBB)); See also BYX Rule
11.24(f); and Nasdaq BX, Inc. (‘‘Nasdaq BX’’) Rule
4702(b)(6)(A).
37 See IEX Rule 11.330(a)(1).
38 See IEX Rule 11.330(a)(3).
39 The Exchange plans to submit a letter
requesting that the staff of the Division of Trading
and Markets not recommend any enforcement
action under Rule 602 of Regulation NMS (‘‘Quote
Rule’’) based on the Exchange’s and its Members’
participation in the Retail Program.
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availability of price improvement at the
Midpoint Price. A number of other
exchanges that offer retail programs also
disseminate a Retail Liquidity Identifier
on their proprietary market data feeds
and the appropriate SIP if such interest
would provide at least $0.001 of price
improvement.40 IEX’s proposal is
comparable, but (as discussed below)
because the RLP orders will be resting
at the Midpoint Price, IEX’s Retail
Liquidity Indicator will reflect at least
$0.005 of price improvement for any
orders priced at or above $1.00 per share
unless the NBBO is locked or crossed.
The Exchange believes that it is
appropriate to limit dissemination of the
Retail Liquidity Identifier to those cases
when at least one round lot of RLP order
interest is available in order to limit
dissemination to cases in which there is
a material amount of RLP trading
interest available on the IEX Order
Book.
As proposed, IEX would only
disseminate the Retail Liquidity
Identifier when the RLP order interest is
resting at the Midpoint Price and is
priced at least $0.001 better than the
NBB or NBO, consistent with the rules
of the other exchanges that disseminate
Retail Liquidity Identifiers 41 as well as
the SIP Plans’ requirements.42 Because
RLP orders are proposed to be only
midpoint peg orders, they will always
represent at least $0.001 price
improvement over the NBB or NBO,
with two exceptions: (i) Locked or
crossed markets and (ii) sub-dollar
quotes when the security’s spread is less
than $0.002.43 When the market is
locked, under IEX Rule 11.190(h)(3)(C)
the Exchange considers the Midpoint
Price to be equal to the locking price
and when the market is crossed, under
IEX Rule 11.190(h)(3)(D) the Exchange
considers the Midpoint Price to be
indeterminable. In these situations, RLP
orders are repriced as specified in the
applicable rule provision and would not
provide any price improvement to an
incoming Retail order, and therefore
will not comprise RLP Interest for
purposes of the Retail Liquidity
Indicator. Similarly, when a particular
security is priced less than $1.00 per
40 See, e.g., BYX Rule 11.24(e); Nasdaq BX Rule
4780(e).
41 See supra note 40.
42 See January 26, 2021 CQS Participant Input
Binary Specification Version 2.6a, available at
https://www.ctaplan.com/publicdocs/ctaplan/CQS_
Pillar_Input_Specification.pdf and May 2020 UTP
Data Feed Services Specification Version 1.5,
available at https://www.utpplan.com/DOC/
UtpBinaryOutputSpec.pdf.
43 The minimum price variant (‘‘MPV’’) for bids,
offers, or indications of interest priced less than
$1.00 per share is $0.0001. See IEX Rule
11.210(a)(2).
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share, its MPV is $0.0001, so the
Midpoint Price will not always
represent at least $0.001 in price
improvement.44 Therefore, IEX will
only disseminate RLP Interest for subdollar securities if the spread in the
security is greater than or equal to
$0.002, meaning the Midpoint Price
represents at least $0.001 price
improvement over the NBB or NBO.
With respect to the requirement that an
RLP order must be resting at the
Midpoint Price in order to be included
in the RLP Interest to be disseminated,
the Exchange notes that an RLP order
could have a limit price less aggressive
than the Midpoint Price in which case
it would not be eligible to trade with an
incoming Retail order and therefore
should not be included in the Retail
Liquidity Identifier dissemination since
it would not reflect interest available to
trade with Retail orders.
RLP Order Type Definition
IEX proposes to amend the definition
of RLP orders so such orders can only
be midpoint peg orders, instead of
Discretionary Peg orders, and cannot
include a minimum quantity condition.
Currently an RLP order is a
Discretionary Peg order that is only
eligible to execute against Retail orders
through the execution process described
in IEX Rule 11.232(e).
In connection with the proposed
changes, described above, to
disseminate a Retail Liquidity Identifier
and provide enhanced priority to RLP
orders, IEX believes that it is
appropriate that RLP orders be midpoint
peg orders. Specifically, IEX notes that
midpoint peg orders post on the Order
Book at the Midpoint Price while
Discretionary Peg orders post on the
Order Book at the less aggressive of the
order’s limit price or a price one
minimum price variation less aggressive
than the NBB or NBO (as applicable)
and exercise price discretion to the
Midpoint Price except during periods of
quote instability when Discretionary Peg
orders are not permitted to trade at a
price more aggressive than their resting
price.45 Thus, disseminating a Retail
Liquidity Identifier of RLP Interest at
the Midpoint Price would be
unnecessarily complicated if RLP orders
were to continue to be Discretionary Peg
orders since they do not explicitly post
to the Order Book at the Midpoint Price.
44 For example, if a security’s NBB is $0.505 and
NBO is $0.506, the Midpoint Price would be
$0.5055, which is $0.0005 more than the NBB and
less than NBO, so it would not represent at least
$0.001 price improvement over the NBB or NBO,
and therefore will not comprise RLP Interest for
purposes of the Retail Liquidity Indicator.
45 See IEX Rule 11.190(g).
PO 00000
Frm 00047
Fmt 4703
Sfmt 4703
19915
Additionally, IEX’s rules provide that
Discretionary Peg orders are prioritized
behind any non-displayed interest at the
discretionary price (in this case the
Midpoint Price),46 so it would be
inconsistent with the priority rules for
RLP Discretionary Peg orders to have
priority over non-RLP midpoint peg
orders that do rest at the Midpoint Price.
Similarly, permitting an RLP order to
include a minimum quantity condition
would reduce the determinism of the
order’s availability to trade at the
Midpoint Price. IEX also believes that
the protections that Discretionary Peg
orders receive because they do not
exercise price discretion to the
Midpoint Price during periods of quote
instability, or by utilizing a minimum
quantity condition to avoid potential
information leakage, are less necessary
when trading against Retail orders.
Moreover, IEX believes that the
proposed changes will increase
execution rates for Retail orders because
RLP orders will not be subject to
contingencies based on quote instability
or minimum quantity requirements.
Implementation
If the Commission approves this
proposed rule change, the Exchange will
implement it within 90 days of approval
and provide at least ten (10) days’ notice
to Members and market participants of
the implementation timeline.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,47 in general, and furthers the
objectives of Section 6(b)(5),48 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.
The Commission has consistently
emphasized that the U.S. capital
markets should be structured with the
interests of retail investors in mind 49
and the enhancements to the Retail
Program proposed in this rule change
proposal are explicitly designed with
that goal in mind. The four proposed
enhancements to the Retail Program are
individually and collectively designed
46 See
IEX Rule 11.220(a)(1)(C)(vii).
U.S.C. 78f(b).
48 15 U.S.C. 78f(b)(5).
49 See supra note 22.
47 15
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Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
to benefit retail investors by providing
enhanced opportunities for such
investors to obtain meaningful price
improvement. The four enhancements
are designed to work in tandem to
narrow the pool of market participants
eligible to enter Retail orders to those
who are less likely to be professional
traders and thereby attract increased
contra-side liquidity seeking to trade
against and provide meaningful price
improvement to such Retail orders, as
well as to publicize when there is nontrivial contra-side price improving
interest available, and fine tune the
requirements applicable to such interest
so that it is more deterministic.
The Exchange also believes that the
proposed rule change is consistent with
the protection of investors because it is
designed to increase competition among
execution venues by enhancing IEX’s
Retail Program which offers the
potential for meaningful price
improvement to orders of retail
investors, including through
incentivizing market participants to
provide additional liquidity to execute
against the orders of retail investors.
Specifically, the Exchange believes
that limiting the use of Retail orders to
only those retail investors who do not
appear to be engaged in trading activity
akin to that of a professional is
consistent with the protection of
investors and the public interest
because it is designed to enable the
benefits of the Retail Program to accrue
to less sophisticated market participants
that may be underserved by existing
trading alternatives. Moreover, as
discussed in the Purpose section and
above, limiting the use of Retail orders
in this manner is designed to
incentivize additional resting liquidity
seeking to trade against and provide
price improvement to Retail orders.
Further, the Exchange believes that
using a threshold of 390 orders per day
on average during a calendar month
(which is equivalent to one order per
minute during the trading day) is a
reasonable way to differentiate between
less active retail investors and those that
are more akin to market professionals.
IEX believes that it is consistent with
the protection of investors and the
public interest to treat an investor that
enters more than one order per minute
as a professional trader, and notes that
this threshold is used to differentiate
between priority and professional
customers in the options industry and
by EDGX for its retail priority program.
Thus, identifying Retail orders based on
the average number of orders entered for
a beneficial account is a familiar and
objective approach to distinguish
VerDate Sep<11>2014
17:35 Apr 14, 2021
Jkt 253001
ordinary retail investors from active
traders akin to professionals.50
The Exchange also believes that the
counting methodology and additional
policies and procedures that RMOs
must comply with to reasonably ensure
that Retail orders are appropriately
represented on the Exchange are
consistent with the Act. In this regard
IEX notes that such methodology and
policies and procedures are
substantially identical to those in place
at EDGX. The Exchange has a robust
regulatory program, including an exam
process implemented by FINRA, in
place to monitor for compliance with
existing RMO requirements, which will
be enhanced for this proposal.
The Exchange believes that its
proposal to narrow the definition of
Retail order is not unfairly
discriminatory but rather is designed to
promote a competitive process for retail
executions while providing retail
investors with the potential to receive
meaningful price improvement. All
retail programs, including IEX’s,
provide for differentiation of retail
orders from other orders. The proposed
changes are merely incremental,
designed to enhance IEX’s ability to
compete for retail order flow and retail
liquidity and thereby provide benefits to
retail investors from the better price that
liquidity providers are willing to give
their orders.
The Exchange also believes that
providing Order Book priority to RLP
orders ahead of other non-displayed
orders priced to execute at the Midpoint
Price is consistent with the protection of
investors and the public interest
because it is designed to provide
additional incentives for the entry of
RLP orders and concomitant provision
of price improvement to Retail orders,
as discussed in the Purpose section. The
Exchange also notes that Retail orders
will still be able to execute against other
orders priced to execute at the Midpoint
Price so the proposed changes is not
creating a segmented liquidity pool.
Additionally, the Exchange believes that
providing Order Book priority to RLP
50 This approach was suggested by Citadel
Securities in a comment letter on the EDGX retail
priority proposal which did not initially include the
390 orders per day on average limitation. In its
comment letter, Citadel Securities noted that the
definition of ‘‘Retail Order’’ used by various
equities exchanges does not adequately distinguish
retail investors’ orders from those of active
professional traders. Citadel went on to suggest that
EDGX leverage the definition of ‘‘professional
customer’’ used by various options exchanges that
is defined as a trader who places ore than 390
orders in listed options per day on average during
a calendar month for their own beneficial account.
See Letter dated April 26, 2019 from Stephen John
Berger, Citadel, to Eduardo A. Aleman,
Commission.
PO 00000
Frm 00048
Fmt 4703
Sfmt 4703
orders is not unfairly discriminatory
since any Member can enter an RLP
order. Further, as discussed in the
Purpose section, this proposed change is
consistent with the approach of several
other exchanges that provide immaterial
sub-penny price improvement to
achieve queue priority by providing a
retail order type that trades first with
retail liquidity providing orders before
trading with other similarly priced
orders.51
Additionally, the Exchange believes
that it is consistent with the Act to
disseminate a Retail Liquidity Identifier,
as described in the Purpose section. The
purpose of the Retail Liquidity Identifier
is to provide relevant market
information to RMOs that there is RLP
Interest on IEX. The dissemination is
thus designed to augment the total mix
of information available to RMOs that
may benefit Retail orders they represent.
The Exchange notes that other
exchanges disseminate comparable
information regarding available contraside liquidity available to execute
against retail orders, as noted in the
Purpose section.
Further, the Exchange believes it is
consistent with the Act to amend the
definition of RLP orders to make them
midpoint peg orders instead of
Discretionary Peg orders, so that the
availability of such orders to trade at the
Midpoint Price is more deterministic, as
described in the Purpose section. IEX
also believes that the proposed changes
will benefit Retail orders to the extent
that their execution rates, and resulting
price improvement, increase.
The Commission consistently
highlights the need to ensure that the
U.S. capital markets are structured with
the interests of retail investors in mind,
and recently highlighted its focus on the
‘‘long-term interest of Main Street
Investors’’ as its number one strategic
goal for fiscal years 2018 to 2022.52 The
Exchange believes the proposed
enhancements to its Retail Program will
better serve the retail investing public
by providing them with expanded
opportunities for meaningful price
improvement on eligible trades.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, IEX believes that the proposed
enhancements to our Retail Program
would continue to enhance competition
51 See
52 See
E:\FR\FM\15APN1.SGM
supra note 36.
supra note 22.
15APN1
Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
and execution quality for retail
customers.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
since competing venues have and can
continue to adopt similar retail
programs, subject to the SEC rule
change process. The Exchange operates
in a highly competitive market in which
market participants can easily direct
their orders to competing venues,
including off-exchange venues.
The Exchange also does not believe
that the proposed rule change will
impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. While orders
submitted by some Members will be
treated differently, as described in the
Purpose section, those differences are
not based on the type of Member
entering orders but on whether the order
is for a retail customer, and there is no
restriction on whether a Member can
handle retail customer orders. Further,
any Member can enter an RLP order.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will: (a) By order approve or disapprove
such proposed rule change, or (b)
institute proceedings to determine
whether the proposed rule change
should be disapproved.
jbell on DSKJLSW7X2PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2021–06 on the subject line.
VerDate Sep<11>2014
17:35 Apr 14, 2021
Jkt 253001
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–2021–06. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–IEX–2021–06 and should
be submitted on or before May 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07676 Filed 4–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91521; File No. SR–
CboeBZX–2021–024]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change to List and
Trade Shares of the WisdomTree
Bitcoin Trust Under BZX Rule
14.11(e)(4), Commodity-Based Trust
Shares
April 9, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 26,
2021, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange rule change to list and
trade shares of the WisdomTree Bitcoin
Trust (the ‘‘Trust’’),3 under BZX Rule
14.11(e)(4), Commodity-Based Trust
Shares. The shares of the Trust are
referred to herein as the ‘‘Shares.’’
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Trust was formed as a Delaware statutory
trust on March 8, 2021 and is operated as a grantor
trust for U.S. federal tax purposes. The Trust has
no fixed termination date.
2 17
53 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00049
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19917
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15APN1
]]>Agencies
[Federal Register Volume 86, Number 71 (Thursday, April 15, 2021)]
[Notices]
[Pages 19912-19917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07676]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91523; File No. SR-IEX-2021-06]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing of Proposed Rule Change To Enhance the IEX Retail Price
Improvement Program for the Benefit of Retail Investors
April 9, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on April 1, 2021, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\4\
and Rule 19b-4 thereunder,\5\ IEX is filing with the Commission a
proposed rule change to enhance its Retail Price Improvement Program
for the benefit of retail investors.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to enhance the
Exchange's Retail Price Improvement Program for the benefit of retail
investors. Specifically, the Exchange proposes to make the following
four changes: (i) Revise the definition of Retail order \6\ in IEX Rule
11.190(b)(15) to apply only to the trading interest of a natural person
that does not place more than 390 equity orders per day on average
during a calendar month for its own beneficial account(s); \7\ (ii)
provide Order Book \8\ priority to Retail Liquidity Provider (``RLP'')
orders \9\ at the Midpoint Price \10\ ahead of other non-displayed
orders priced to execute at the Midpoint Price; (iii) disseminate a
``Retail Liquidity Identifier'' through the Exchange's proprietary
market data feeds and the appropriate securities information processor
(``SIP'') when RLP order interest aggregated to form at least one round
lot for a particular security is available in the System,\11\ provided
that the RLP order interest is resting at the Midpoint Price and is
priced at least $0.001 better than the NBB \12\ or NBO; \13\ and (iv)
amend the definition of RLP orders so such orders can only be midpoint
peg orders,\14\ cannot be Discretionary Peg orders,\15\ and cannot
include a minimum quantity restriction.\16\ The proposed changes are
designed to further support and enhance the ability of non-professional
retail investors to obtain meaningful price improvement by
incentivizing market participants to compete to provide such price
improvement.
---------------------------------------------------------------------------
\6\ See IEX Rules 11.190(b)(15) and 11.232(a)(2).
\7\ The existing restrictions applicable to a Retail order, that
it must reflect trading interest of a natural person with no change
made to the terms of the underlying order of the natural person with
respect to price (except in the case of a market order that is
changed to a marketable limit order) or side of market and that does
not originate from a trading algorithm or any other computerized
methodology, will continue to apply.
\8\ See IEX Rule 1.160(p).
\9\ See IEX Rules 11.190(b)(14) and 11.232(a)(3).
\10\ The term ``Midpoint Price'' means the midpoint of the NBBO.
See IEX Rule 1.160(t). The term ``NBBO'' means the national best bid
or offer, as set forth in Rule 600(b) of Regulation NMS under the
Act, determined as set forth in IEX Rule 11.410(b).
\11\ See IEX Rule 1.160(nn).
\12\ See IEX Rule 1.160(u).
\13\ See IEX Rule 1.160(u).
\14\ See IEX Rule 11.190(b)(9).
\15\ See IEX Rule 11.190(b)(10).
\16\ See IEX Rule 11.190(b)(11).
---------------------------------------------------------------------------
Background
In 2019 the Commission approved IEX's Retail Price Improvement
Program (``Retail Program''),\17\ which is designed to provide retail
investors with meaningful price improvement opportunities through
trading at the Midpoint Price or better.\18\ As currently structured,
Members \19\ that qualify as Retail Member Organizations (``RMOs'')
\20\ are eligible to submit Retail orders to the Exchange. Any Member
is able to provide price improvement to Retail orders through orders
priced to execute at the Midpoint Price or better, including RLP orders
that are only eligible to execute against a Retail order at the
Midpoint Price and execute in price-time priority after other orders
resting on the Order Book priced to trade at the Midpoint Price.
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 86619 (August 9,
2019), 84 FR 41769 (August 15, 2019) (SR-IEX-2019-05) (SEC order
approving IEX's Retail Program).
\18\ On March 1, 2021, IEX filed an immediately effective rule
change proposal to provide that, in addition to executing at the
Midpoint Price, a Retail order can execute against a displayed
unprotected odd lot order that is resting on the Order Book at a
price more aggressive than the Midpoint Price (i.e., above the
Midpoint Price in the case of an odd lot buy order and below the
Midpoint Price in the case of an odd lot sell order). Executing
against such an odd lot order thus provides more price improvement
to the Retail order than executing at the Midpoint Price. See
Securities Exchange Act Release No. 91324 (March 15, 2021), 86 FR
15015 (March 19, 2021) (SR-IEX-2021-03).
\19\ See IEX Rule 1.160(s).
\20\ See IEX Rule 11.232(a)(1).
---------------------------------------------------------------------------
As IEX noted in its Retail Program rule filing,\21\ the Commission
has consistently emphasized the importance of continued broad, long-
term retail participation in our capital markets. In its Strategic Plan
for fiscal years 2018-2022, the Commission highlighted its vision to
``promote capital markets that inspire public confidence and provide a
diverse array of financial opportunities to retail and institutional
investors, entrepreneurs, public companies, and other market
participants'', with its first goal to focus on the long-term interests
of Main Street (i.e., retail) investors.\22\ Against this backdrop, the
Retail Program is designed to provide retail
[[Page 19913]]
investors with access to the Exchange's deep pool of midpoint
liquidity, including RLP orders, thereby providing enhanced
opportunities for meaningful price improvement at the Midpoint Price.
The Exchange believes the Retail Program has provided retail investors
with better execution quality than they are currently able to obtain
through existing exchange and over-the-counter (``OTC'') order retail
programs, by attracting counterparty liquidity to the Exchange from
Members and their clients seeking to interact with retail
liquidity.\23\ The Retail Program is therefore consistent with the
goals of the Commission to encourage markets that are structured to
benefit ordinary investors.\24\
---------------------------------------------------------------------------
\21\ See supra note 17. See also Securities Exchange Act Release
No. 86241 (June 28, 2019), 84 FR 32238 (July 5, 2019) (SR-IEX-2019-
05) (IEX rule filing proposing Retail Program).
\22\ See U.S. Securities and Exchange Commission, Strategic
Plan, Fiscal Years 2018-2022, available at https://www.sec.gov/files/SEC_Strategic_Plan_FY18-FY22_FINAL_0.pdf (``Commission
Strategic Plan'').
\23\ See discussion infra on the desirability of interacting
with retail liquidity.
\24\ See supra note 22.
---------------------------------------------------------------------------
Under the current Retail Program, the term ``Retail order'' is
defined as an agency or riskless principal order that satisfies the
criteria of Financial Industry Regulatory Authority, Inc. (``FINRA'')
Rule 5320.03, which is submitted by a RMO, designated with a ``Retail
order'' modifier, and reflects trading interest of a natural person,
with no change made to the terms of the underlying order of the natural
person with respect to price (except in the case of a market order that
is changed to a marketable limit order) or side of market, and that
does not originate from a trading algorithm or any other computerized
methodology.\25\ Retail orders may either be Discretionary Peg or
midpoint peg orders with a Time-in-Force of IOC or FOK, and are only
eligible to trade at the Midpoint Price or better.\26\
---------------------------------------------------------------------------
\25\ See supra note 6. An order from a natural person can
include orders submitted on behalf of accounts that are held in a
corporate legal form--such as an Individual Retirement Account,
Corporation, or a Limited Liability Company--that have been
established for the benefit of an individual or group of related
family members, provided that the order is submitted by an
individual.
\26\ See IEX Rule 11.232(a)(2). As with all pegged orders,
Retail orders may only trade during the Regular Market Session. See
IEX Rule 11.190(a)(3)(E).
---------------------------------------------------------------------------
An RMO is an IEX Member (or division thereof) that has been
approved by the Exchange to submit Retail orders.\27\ Pursuant to IEX
Rules 11.232(a)(1) and (b), which describe the qualification and
application process for becoming an RMO, any Member may qualify as an
RMO if it conducts a retail business or routes Retail orders on behalf
of another broker-dealer.
---------------------------------------------------------------------------
\27\ See IEX Rule 11.232(a)(1).
---------------------------------------------------------------------------
An RLP order is currently a Discretionary Peg order that is only
eligible to execute against Retail orders through the execution process
described in IEX Rule 11.232(e).\28\ Any Member can submit RLP orders.
---------------------------------------------------------------------------
\28\ See IEX Rule 11.232(e).
---------------------------------------------------------------------------
As discussed in the Retail Program rule filing,\29\ IEX's Retail
Program is a simple approach designed to provide retail investors with
the opportunity for meaningful price improvement (by executing at the
Midpoint Price or better), by attracting counterparty liquidity to the
Exchange from Members and their clients seeking to interact with retail
liquidity.
---------------------------------------------------------------------------
\29\ See supra note 21.
---------------------------------------------------------------------------
IEX's Retail Program leverages IEX's market structure to provide
enhanced price improvement opportunities for retail customers by
incentivizing Members and their clients to provide liquidity to the
orders of retail investors, while enabling such investors to obtain
materially better price improvement than may otherwise be available, in
a way that is mutually beneficial for retail investors and Members
providing liquidity. Based on experience with the Retail Program, IEX
believes that the four proposed changes, noted above and described in
detail below, would further enhance the Retail Program.
Proposal
IEX proposes four enhancements to the Retail Program, as described
below.
Retail Order Definition
IEX proposes to revise the definition of Retail order in IEX Rule
11.190(b)(15) so that it is limited to retail investors who do not
appear to be engaged in trading activity akin to that of a
professional. Specifically, the definition of Retail order would be
amended to apply only to the trading interest of a natural person that
does not place more than 390 equity orders per day on average during a
calendar month for its own beneficial account(s). All other existing
criteria specified in IEX Rule 11.190(b)(15) would continue to apply.
IEX Rule 11.190(b)(15) currently provides that a Retail order means
an order submitted by a Retail Member Organization (as defined in IEX
Rule 11.232) and designated with a ``Retail order'' modifier. A Retail
order must be an agency order, or riskless principal order that
satisfies the criteria of FINRA Rule 5320.03. A Retail order must
reflect trading interest of a natural person with no change made to the
terms of the underlying order of the natural person with respect to
price (except in the case of a market order that is changed to a
marketable limit order) or side of market and that does not originate
from a trading algorithm or any other computerized methodology, which
will now be defined as a ``retail customer'' for clarity. An order from
a retail customer can include orders submitted on behalf of accounts
that are held in a corporate legal form--such as an Individual
Retirement Account, Corporation, or a Limited Liability Company--that
have been established for the benefit of an individual or group of
related family members, provided that the order is submitted by an
individual. IEX proposes to add new language to IEX Rule 11.190(b)(15)
to specify that a Retail order may only be submitted on behalf of a
retail customer that does not place more than 390 equity orders per day
on average during a calendar month for its own beneficial account(s).
In addition, IEX proposes to add Supplementary Material .01 to IEX
Rule 11.190(b) specifying how to determine whether the 390 equity
orders per day on average threshold has been reached. Specifically, the
Supplementary Material would provide that a ``parent'' order that is
broken into multiple ``child'' orders by a broker or dealer, or by an
algorithm housed at a broker or dealer or by an algorithm licensed from
a broker or dealer, but which is housed with the customer, counts as
one order even if the ``child'' orders are routed across multiple
exchanges. In addition, any order that cancels and replaces an existing
order would count as a separate order; except that an order that
cancels and replaces any ``child'' order resulting from a ``parent''
order that is broken into multiple ``child'' orders, does not count as
a new order.
IEX also proposes to add Supplementary Material .02 to IEX Rule
11.190(b) to address the reasonable policies and procedures that an RMO
must have in place to ensure that Retail orders are appropriately
represented on the Exchange. Specifically, such policies and procedures
should provide for a review of retail customers' activity on at least a
quarterly basis. Further, Retail orders for any retail customer that
had an average of more than 390 equity orders per day during any month
of a calendar quarter are not eligible to be entered as Retail orders
for the next calendar quarter. Retail Member Organizations must conduct
a quarterly review and make any appropriate changes to the way in which
they are representing orders within five business days after the end of
each calendar quarter. In addition, if during a quarter the Exchange
identifies a retail customer for which orders are being represented as
Retail orders but that has averaged more than 390 equity orders per day
during a month, the Exchange will
[[Page 19914]]
notify the RMO, and the RMO will be required to change the manner in
which it is representing the retail customer's orders within five
business days.
As noted above, the Exchange believes that the price improvement
benefits that accrue to Retail orders on IEX should be limited to
retail customers who do not appear to be engaged in trading activity
akin to that of a professional. IEX notes that the 390-order limitation
is a threshold used by various options exchanges to distinguish
professional customers from retail customers, so that a customer that
is not a broker-dealer but enters more than 390 options orders per day
(on average during a calendar month) is classified as a Professional
Customer and does not receive customer execution priority.\30\ The 390-
order threshold is also used by Cboe EDGX Exchange, Inc. (``EDGX'')
with respect to its equity market to delineate Retail Priority Orders,
which receive execution priority, from other retail customers. EDGX
Retail Priority Orders may only be entered on behalf of a person that
does not place more than 390 equity orders per day on average during a
calendar month for its own beneficial account(s).\31\
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\30\ See, e.g., Nasdaq Stock Market LLC Options 1, Section
1(a)(47); NYSE Arca, Inc. (``Arca'') Rule 6.1A-O(a)(4A).
\31\ See EDGX Rule 11.9 Interpretations and Policies .01.
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EDGX and the options exchanges apply a comparable methodology and
supervisory requirements to determine whether the 390-order threshold
has been reached as is proposed by IEX in this proposal.\32\ IEX
understands that the impetus for EDGX's and options exchanges' use of
the 390-order threshold is to limit priority benefits and assist in
ensuring that these benefits flow only to retail investors that are not
engaged in a significant amount of trading activity akin to that of a
professional.\33\
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\32\ See EDGX Rule 11.9 Interpretations and Policies .02.
\33\ See Securities Exchange Act Release No. 87200 (October 2,
2019), 84 FR 53788, 53791 (October 8, 2019) (SR-CboeEDGX-2019-012)
(order approving EDGX Retail Priority Orders); see also Securities
Exchange Act Release No. 89991 (September 24, 2020), 85 FR 61782,
61783 (September 30, 2020) (SR-MIAX-2020-31) (giving priority to
orders submitted on behalf of non-professional customers who submit
less than 390 orders per day).
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IEX believes that similarly restricting Retail orders to non-
professional customers will expand the pool of market participants
willing to provide contra-side liquidity to trade with Retail orders
because the limitations will narrow the pool of Retail orders to those
from customers who are less likely to be professional market
participants. By expanding the pool of market participants willing to
compete for providing price improvement to Retail orders, IEX believes
that more Retail orders will be able to obtain meaningful price
improvement for their orders. IEX also notes that 390 orders per day
represents an order entered each minute during regular trading hours--
from 9:30 a.m. eastern time to 4:00 p.m. eastern time--which IEX
believes is a reasonable and not overly restrictive limitation in that
it contemplates active trading but not at the level of a professional
trader.\34\ IEX believes that limiting the pool of customers eligible
to enter Retail orders, as proposed, will incentivize additional
resting liquidity seeking to trade against such Retail orders (and
provide price improvement) because of their non-professional
characteristics.\35\ Thus, to the extent the proposed change is
successful in increasing the pool of RLP and other contra-side
liquidity it will benefit Retail orders by increasing execution
opportunities and price improvement.
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\34\ For example, an analysis of orders sent to IEX by Members
and customers conducting a proprietary trading business indicates
that many of such Members and customers typically send millions of
orders per day and even the less active send thousands of orders per
day.
\35\ This approach was supported by Citadel Securities in a
comment letter on EDGX's retail priority proposal. Citadel
Securities notes that ``[t]he market's experience with [retail
programs] evidences the failure of an overly broad definition of
`Retail Order'. [Retail programs] have not gained traction in the
market, precisely because the [retail programs'] definition of
`Retail Order' includes orders from both retail investors as well as
active professional traders. To the extent that the `Retail Order'
flow routed to [retail programs] includes orders from active
professional traders and is thus not as attractive to other market
participants, those market participants will simply elect not to
post [retail] liquidity and fill-rates for [retail] routes will be
low.'' See Letter dated April 26, 2019 from Stephen John Berger,
Citadel, to Eduardo A. Aleman, Commission.
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RLP Order Book Priority
IEX proposes to provide Order Book priority to RLP orders ahead of
other non-displayed orders priced to execute at the Midpoint Price.
Currently, IEX Rule 11.232(e)(3)(A)(iv) provides that RLP orders are
prioritized after all other non-displayed orders priced to trade at the
Midpoint Price. This approach was adopted by IEX originally because RLP
orders were a new order type and are only eligible to trade against
Retail orders. However, IEX now believes that RLP orders should have
higher priority than other non-displayed orders priced to trade at the
Midpoint Price in order to provide additional incentives for the entry
of RLP orders and concomitant provision of price improvement to Retail
orders. The Exchange notes that other exchanges that offer retail
programs enable retail liquidity providing orders that provide
immaterial sub-penny price improvement to achieve queue priority by
providing a retail order type that trades first with retail liquidity
providing orders before trading with other similarly priced orders.\36\
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\36\ See, e.g., Arca Rule 7.44-E(k) (Retail orders trade first
with retail price improvement orders (akin to IEX's RLP orders), and
then with all other orders to sell (buy) with a working price below
(above) the NBO (NBB)); See also BYX Rule 11.24(f); and Nasdaq BX,
Inc. (``Nasdaq BX'') Rule 4702(b)(6)(A).
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Thus, as proposed, IEX Rule 11.232(e)(3)(A) would be amended to
provide that a Retail order to buy (sell) shall execute upon entry
against sell (buy) orders resting on the Order Book in the following
order:
(i) Displayed sell (buy) orders at the NBO (NBB) during a locked
or crossed market;
(ii) displayed sell (buy) odd lot orders priced to trade between
the NBB (NBO) and the MidPoint Price;
(iii) Retail Liquidity Provider orders priced to trade at the
Midpoint Price; and
(iv) nondisplayed orders priced to trade at the Midpoint Price.
Retail Liquidity Identifier
IEX proposes to disseminate a Retail Liquidity Identifier through
the Exchange's proprietary market data feeds, TOPS \37\ and DEEP,\38\
and the appropriate SIP when RLP order interest aggregated to form at
least one round lot for a particular security is available in the
System, provided that the RLP order interest is resting at the Midpoint
Price and is priced at least $0.001 better than the NBB or NBO (``RLP
Interest''). The purpose of the Retail Liquidity Identifier is to
provide relevant market information to RMOs that there is RLP Interest
on IEX, thereby incentivizing them to send Retail orders to IEX. The
Exchange does not believe that such market information constitutes a
``quote'' within the meaning of Regulation NMS because it would not
include a specific price or size of the interest.\39\ The Retail
Liquidity Identifier will reflect the symbol and the side (buy or sell)
of the RLP Interest but will not include the price or size. While an
explicit price will not be disseminated, because RLP orders are only
eligible to trade at the Midpoint Price, dissemination will thus
reflect the
[[Page 19915]]
availability of price improvement at the Midpoint Price. A number of
other exchanges that offer retail programs also disseminate a Retail
Liquidity Identifier on their proprietary market data feeds and the
appropriate SIP if such interest would provide at least $0.001 of price
improvement.\40\ IEX's proposal is comparable, but (as discussed below)
because the RLP orders will be resting at the Midpoint Price, IEX's
Retail Liquidity Indicator will reflect at least $0.005 of price
improvement for any orders priced at or above $1.00 per share unless
the NBBO is locked or crossed. The Exchange believes that it is
appropriate to limit dissemination of the Retail Liquidity Identifier
to those cases when at least one round lot of RLP order interest is
available in order to limit dissemination to cases in which there is a
material amount of RLP trading interest available on the IEX Order
Book.
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\37\ See IEX Rule 11.330(a)(1).
\38\ See IEX Rule 11.330(a)(3).
\39\ The Exchange plans to submit a letter requesting that the
staff of the Division of Trading and Markets not recommend any
enforcement action under Rule 602 of Regulation NMS (``Quote Rule'')
based on the Exchange's and its Members' participation in the Retail
Program.
\40\ See, e.g., BYX Rule 11.24(e); Nasdaq BX Rule 4780(e).
---------------------------------------------------------------------------
As proposed, IEX would only disseminate the Retail Liquidity
Identifier when the RLP order interest is resting at the Midpoint Price
and is priced at least $0.001 better than the NBB or NBO, consistent
with the rules of the other exchanges that disseminate Retail Liquidity
Identifiers \41\ as well as the SIP Plans' requirements.\42\ Because
RLP orders are proposed to be only midpoint peg orders, they will
always represent at least $0.001 price improvement over the NBB or NBO,
with two exceptions: (i) Locked or crossed markets and (ii) sub-dollar
quotes when the security's spread is less than $0.002.\43\ When the
market is locked, under IEX Rule 11.190(h)(3)(C) the Exchange considers
the Midpoint Price to be equal to the locking price and when the market
is crossed, under IEX Rule 11.190(h)(3)(D) the Exchange considers the
Midpoint Price to be indeterminable. In these situations, RLP orders
are repriced as specified in the applicable rule provision and would
not provide any price improvement to an incoming Retail order, and
therefore will not comprise RLP Interest for purposes of the Retail
Liquidity Indicator. Similarly, when a particular security is priced
less than $1.00 per share, its MPV is $0.0001, so the Midpoint Price
will not always represent at least $0.001 in price improvement.\44\
Therefore, IEX will only disseminate RLP Interest for sub-dollar
securities if the spread in the security is greater than or equal to
$0.002, meaning the Midpoint Price represents at least $0.001 price
improvement over the NBB or NBO. With respect to the requirement that
an RLP order must be resting at the Midpoint Price in order to be
included in the RLP Interest to be disseminated, the Exchange notes
that an RLP order could have a limit price less aggressive than the
Midpoint Price in which case it would not be eligible to trade with an
incoming Retail order and therefore should not be included in the
Retail Liquidity Identifier dissemination since it would not reflect
interest available to trade with Retail orders.
---------------------------------------------------------------------------
\41\ See supra note 40.
\42\ See January 26, 2021 CQS Participant Input Binary
Specification Version 2.6a, available at https://www.ctaplan.com/publicdocs/ctaplan/CQS_Pillar_Input_Specification.pdf and May 2020
UTP Data Feed Services Specification Version 1.5, available at
https://www.utpplan.com/DOC/UtpBinaryOutputSpec.pdf.
\43\ The minimum price variant (``MPV'') for bids, offers, or
indications of interest priced less than $1.00 per share is $0.0001.
See IEX Rule 11.210(a)(2).
\44\ For example, if a security's NBB is $0.505 and NBO is
$0.506, the Midpoint Price would be $0.5055, which is $0.0005 more
than the NBB and less than NBO, so it would not represent at least
$0.001 price improvement over the NBB or NBO, and therefore will not
comprise RLP Interest for purposes of the Retail Liquidity
Indicator.
---------------------------------------------------------------------------
RLP Order Type Definition
IEX proposes to amend the definition of RLP orders so such orders
can only be midpoint peg orders, instead of Discretionary Peg orders,
and cannot include a minimum quantity condition. Currently an RLP order
is a Discretionary Peg order that is only eligible to execute against
Retail orders through the execution process described in IEX Rule
11.232(e).
In connection with the proposed changes, described above, to
disseminate a Retail Liquidity Identifier and provide enhanced priority
to RLP orders, IEX believes that it is appropriate that RLP orders be
midpoint peg orders. Specifically, IEX notes that midpoint peg orders
post on the Order Book at the Midpoint Price while Discretionary Peg
orders post on the Order Book at the less aggressive of the order's
limit price or a price one minimum price variation less aggressive than
the NBB or NBO (as applicable) and exercise price discretion to the
Midpoint Price except during periods of quote instability when
Discretionary Peg orders are not permitted to trade at a price more
aggressive than their resting price.\45\ Thus, disseminating a Retail
Liquidity Identifier of RLP Interest at the Midpoint Price would be
unnecessarily complicated if RLP orders were to continue to be
Discretionary Peg orders since they do not explicitly post to the Order
Book at the Midpoint Price. Additionally, IEX's rules provide that
Discretionary Peg orders are prioritized behind any non-displayed
interest at the discretionary price (in this case the Midpoint
Price),\46\ so it would be inconsistent with the priority rules for RLP
Discretionary Peg orders to have priority over non-RLP midpoint peg
orders that do rest at the Midpoint Price.
---------------------------------------------------------------------------
\45\ See IEX Rule 11.190(g).
\46\ See IEX Rule 11.220(a)(1)(C)(vii).
---------------------------------------------------------------------------
Similarly, permitting an RLP order to include a minimum quantity
condition would reduce the determinism of the order's availability to
trade at the Midpoint Price. IEX also believes that the protections
that Discretionary Peg orders receive because they do not exercise
price discretion to the Midpoint Price during periods of quote
instability, or by utilizing a minimum quantity condition to avoid
potential information leakage, are less necessary when trading against
Retail orders. Moreover, IEX believes that the proposed changes will
increase execution rates for Retail orders because RLP orders will not
be subject to contingencies based on quote instability or minimum
quantity requirements.
Implementation
If the Commission approves this proposed rule change, the Exchange
will implement it within 90 days of approval and provide at least ten
(10) days' notice to Members and market participants of the
implementation timeline.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\47\ in general, and furthers the objectives of Section
6(b)(5),\48\ 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.
---------------------------------------------------------------------------
\47\ 15 U.S.C. 78f(b).
\48\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission has consistently emphasized that the U.S. capital
markets should be structured with the interests of retail investors in
mind \49\ and the enhancements to the Retail Program proposed in this
rule change proposal are explicitly designed with that goal in mind.
The four proposed enhancements to the Retail Program are individually
and collectively designed
[[Page 19916]]
to benefit retail investors by providing enhanced opportunities for
such investors to obtain meaningful price improvement. The four
enhancements are designed to work in tandem to narrow the pool of
market participants eligible to enter Retail orders to those who are
less likely to be professional traders and thereby attract increased
contra-side liquidity seeking to trade against and provide meaningful
price improvement to such Retail orders, as well as to publicize when
there is non-trivial contra-side price improving interest available,
and fine tune the requirements applicable to such interest so that it
is more deterministic.
---------------------------------------------------------------------------
\49\ See supra note 22.
---------------------------------------------------------------------------
The Exchange also believes that the proposed rule change is
consistent with the protection of investors because it is designed to
increase competition among execution venues by enhancing IEX's Retail
Program which offers the potential for meaningful price improvement to
orders of retail investors, including through incentivizing market
participants to provide additional liquidity to execute against the
orders of retail investors.
Specifically, the Exchange believes that limiting the use of Retail
orders to only those retail investors who do not appear to be engaged
in trading activity akin to that of a professional is consistent with
the protection of investors and the public interest because it is
designed to enable the benefits of the Retail Program to accrue to less
sophisticated market participants that may be underserved by existing
trading alternatives. Moreover, as discussed in the Purpose section and
above, limiting the use of Retail orders in this manner is designed to
incentivize additional resting liquidity seeking to trade against and
provide price improvement to Retail orders.
Further, the Exchange believes that using a threshold of 390 orders
per day on average during a calendar month (which is equivalent to one
order per minute during the trading day) is a reasonable way to
differentiate between less active retail investors and those that are
more akin to market professionals. IEX believes that it is consistent
with the protection of investors and the public interest to treat an
investor that enters more than one order per minute as a professional
trader, and notes that this threshold is used to differentiate between
priority and professional customers in the options industry and by EDGX
for its retail priority program. Thus, identifying Retail orders based
on the average number of orders entered for a beneficial account is a
familiar and objective approach to distinguish ordinary retail
investors from active traders akin to professionals.\50\
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\50\ This approach was suggested by Citadel Securities in a
comment letter on the EDGX retail priority proposal which did not
initially include the 390 orders per day on average limitation. In
its comment letter, Citadel Securities noted that the definition of
``Retail Order'' used by various equities exchanges does not
adequately distinguish retail investors' orders from those of active
professional traders. Citadel went on to suggest that EDGX leverage
the definition of ``professional customer'' used by various options
exchanges that is defined as a trader who places ore than 390 orders
in listed options per day on average during a calendar month for
their own beneficial account. See Letter dated April 26, 2019 from
Stephen John Berger, Citadel, to Eduardo A. Aleman, Commission.
---------------------------------------------------------------------------
The Exchange also believes that the counting methodology and
additional policies and procedures that RMOs must comply with to
reasonably ensure that Retail orders are appropriately represented on
the Exchange are consistent with the Act. In this regard IEX notes that
such methodology and policies and procedures are substantially
identical to those in place at EDGX. The Exchange has a robust
regulatory program, including an exam process implemented by FINRA, in
place to monitor for compliance with existing RMO requirements, which
will be enhanced for this proposal.
The Exchange believes that its proposal to narrow the definition of
Retail order is not unfairly discriminatory but rather is designed to
promote a competitive process for retail executions while providing
retail investors with the potential to receive meaningful price
improvement. All retail programs, including IEX's, provide for
differentiation of retail orders from other orders. The proposed
changes are merely incremental, designed to enhance IEX's ability to
compete for retail order flow and retail liquidity and thereby provide
benefits to retail investors from the better price that liquidity
providers are willing to give their orders.
The Exchange also believes that providing Order Book priority to
RLP orders ahead of other non-displayed orders priced to execute at the
Midpoint Price is consistent with the protection of investors and the
public interest because it is designed to provide additional incentives
for the entry of RLP orders and concomitant provision of price
improvement to Retail orders, as discussed in the Purpose section. The
Exchange also notes that Retail orders will still be able to execute
against other orders priced to execute at the Midpoint Price so the
proposed changes is not creating a segmented liquidity pool.
Additionally, the Exchange believes that providing Order Book priority
to RLP orders is not unfairly discriminatory since any Member can enter
an RLP order. Further, as discussed in the Purpose section, this
proposed change is consistent with the approach of several other
exchanges that provide immaterial sub-penny price improvement to
achieve queue priority by providing a retail order type that trades
first with retail liquidity providing orders before trading with other
similarly priced orders.\51\
---------------------------------------------------------------------------
\51\ See supra note 36.
---------------------------------------------------------------------------
Additionally, the Exchange believes that it is consistent with the
Act to disseminate a Retail Liquidity Identifier, as described in the
Purpose section. The purpose of the Retail Liquidity Identifier is to
provide relevant market information to RMOs that there is RLP Interest
on IEX. The dissemination is thus designed to augment the total mix of
information available to RMOs that may benefit Retail orders they
represent. The Exchange notes that other exchanges disseminate
comparable information regarding available contra-side liquidity
available to execute against retail orders, as noted in the Purpose
section.
Further, the Exchange believes it is consistent with the Act to
amend the definition of RLP orders to make them midpoint peg orders
instead of Discretionary Peg orders, so that the availability of such
orders to trade at the Midpoint Price is more deterministic, as
described in the Purpose section. IEX also believes that the proposed
changes will benefit Retail orders to the extent that their execution
rates, and resulting price improvement, increase.
The Commission consistently highlights the need to ensure that the
U.S. capital markets are structured with the interests of retail
investors in mind, and recently highlighted its focus on the ``long-
term interest of Main Street Investors'' as its number one strategic
goal for fiscal years 2018 to 2022.\52\ The Exchange believes the
proposed enhancements to its Retail Program will better serve the
retail investing public by providing them with expanded opportunities
for meaningful price improvement on eligible trades.
---------------------------------------------------------------------------
\52\ See supra note 22.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. To the contrary, IEX
believes that the proposed enhancements to our Retail Program would
continue to enhance competition
[[Page 19917]]
and execution quality for retail customers.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition since competing venues
have and can continue to adopt similar retail programs, subject to the
SEC rule change process. The Exchange operates in a highly competitive
market in which market participants can easily direct their orders to
competing venues, including off-exchange venues.
The Exchange also does not believe that the proposed rule change
will impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act. While orders
submitted by some Members will be treated differently, as described in
the Purpose section, those differences are not based on the type of
Member entering orders but on whether the order is for a retail
customer, and there is no restriction on whether a Member can handle
retail customer orders. Further, any Member can enter an RLP order.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-IEX-2021-06 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-2021-06. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-IEX-2021-06 and should be submitted on
or before May 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
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\53\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07676 Filed 4-14-21; 8:45 am]
BILLING CODE 8011-01-P
