Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add a New Order Type That Pegs to the Contra-Side Primary Quote, With the Option of Using a Passive Offset Amount, 50362-50366 [2022-17531]
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50362
Federal Register / Vol. 87, No. 157 / Tuesday, August 16, 2022 / Notices
the prohibitions and limitations in
advisory contracts of subadvisors
relying on the rule constitutes a
collection of information under the
PRA.5
The staff assumes that all existing
funds with subadvisory contracts
amended those contracts to comply with
the adoption of rule 17a–10 in 2003,
which conditioned certain exemptions
upon these contractual alterations, and
therefore there is no continuing burden
for those funds.6 However, the staff
assumes that all newly formed
subadvised funds, and funds that enter
into new contracts with subadvisers,
will incur the one-time burden by
amending their contracts to add the
terms required by the rule.
Based on an analysis of fund filings,
the staff estimates that approximately
314 funds enter into new subadvisory
agreements each year.7 Based on
discussions with industry
representatives, the staff estimates that
it will require approximately 3 attorney
hours to draft and execute additional
clauses in new subadvisory contracts in
order for funds and subadvisers to be
able to rely on the exemptions in rule
17a–10. Because these additional
clauses are identical to the clauses that
a fund would need to insert in their
subadvisory contracts to rely on rules
10f–3 (17 CFR 270.10f–3), 12d3–1 (17
CFR 270.12d3–1), and 17e–1 (17 CFR
270.17e–1), and because we believe that
funds that use one such rule generally
use all of these rules, we apportion this
3 hour time burden equally among all
four rules. Therefore, we estimate that
the burden allocated to rule 17a–10 for
this contract change would be 0.75
hours.8 Assuming that all 314 funds that
enter into new subadvisory contracts
each year make the modification to their
contract required by the rule, we
estimate that the rule’s contract
modification requirement will result in
166 burden hours annually, with an
U.S.C. 3501.
of Investment Companies With
Portfolio and Subadviser Affiliates, Investment
Company Act Release No. 25888 (Jan. 14, 2003) [68
FR 3153, (Jan. 22, 2003)]. We assume that funds
formed after 2003 that intended to rely on rule 17a–
10 would have included the required provision as
a standard element in their initial subadvisory
contracts.
7 Based on data from form N–CEN filings, as of
March 2022, there are 12,468 registered funds
(open-end funds, closed-end funds, and exchangetraded funds), 4,870 funds of which have
subadvisory relationships (approximately 39%).
Based on Form N–1A and Form N–2 filings, there
were 806 new registered funds in 2020. 806 new
funds × 39% = 314 funds.
8 This estimate is based on the following
calculation: 3 hours ÷ 4 rules = 0.75 hours.
associated cost of approximately
$107,380.9
The estimate of average burden hours
is made solely for the purposes of the
PRA. The estimate is not derived from
a comprehensive or even a
representative survey or study of the
costs of Commission rules. Complying
with this collection of information
requirement is necessary to obtain the
benefit of relying on rule 17a–10.
Responses will not be kept confidential.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid control
number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice by September 15, 2022 to (i)
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: August 10, 2022.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–17528 Filed 8–15–22; 8:45 am]
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9 These estimates are based on the following
calculations: (0.75 hours × 314 portfolios = 236
burden hours); ($455 per hour × 236 hours =
$107,380 total cost). The Commission’s estimates
concerning the wage rates for attorney time are
based on salary information for the securities
industry compiled by the Securities Industry and
Financial Markets Association. The estimated wage
figure is based on published rates for in-house
attorneys, modified to account for a 1,800-hour
work-year and inflation, and multiplied by 5.35 to
account for bonuses, firm size, employee benefits,
and overhead, yielding an effective hourly rate of
$415. See Securities Industry and Financial Markets
Association, Report on Management & Professional
Earnings in the Securities Industry 2013.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95463; File No. SR–IEX–
2022–05]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Add a New
Order Type That Pegs to the ContraSide Primary Quote, With the Option of
Using a Passive Offset Amount
August 10, 2022.
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 August 8,
2022, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the 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 the Substance
of the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,3 and Rule 19b–
4 thereunder,4 IEX is filing with the
Commission a proposed rule change to
add a new order type (a ‘‘Market Peg’’
order) that pegs to the contra-side
primary quote, with the option of using
a passive offset amount.5 The Exchange
has designated this rule change as ‘‘noncontroversial’’ under Section 19(b)(3)(A)
of the Act 6 and provided the
Commission with the notice required by
Rule 19b–4(f)(6) thereunder.7
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(1).
4 17 CFR 240.19b–4.
5 The contra-side primary quote is the national
best offer for a buy order or the national best bid
for a sell order, as set forth in Rule 600(b) of
Regulation NMS under the Act, determined as set
forth in IEX Rule 11.410(b). See IEX Rule 1.160(u).
6 15 U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4.
2 17
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and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statement may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend IEX
Rule 11.190 to add a new Market Peg
order type that pegs to the contra-side
primary quote,8 minus (plus) an
optional passive 9 offset amount for buy
(sell) orders, as specified by the User.10
In addition, the Exchange proposes two
conforming amendments to IEX Rules
Rule 11.190(a)(3) and 11.190(h)(3).
Currently, the Exchange offers four
types of pegged orders—primary peg,
midpoint peg, Discretionary Peg, and
Offset Peg 11—each of which are nondisplayed orders that upon entry into
the System 12 and while resting on the
Order Book 13, are pegged to a reference
price based on the national best bid and
offer (‘‘NBBO’’) 14 and the price of the
order is automatically adjusted by the
System in response to changes in the
NBBO.15
The Exchange now proposes to add a
new type of pegged order—a Market Peg
order—that is a non-displayed pegged
order that upon entry and when posting
to the Order Book, has its price
automatically adjusted by the System to
be equal to and ranked at the less
aggressive of the contra-side primary
quote (i.e., the NBO 16 for buy orders
and NBB 17 for sell orders), minus (plus)
an offset amount for buy (sell) orders, if
the User opts to submit the order with
an offset amount, or the order’s limit
price, if the User opts to submit the
order with a limit price. If a User
submits a Market Peg buy order with a
positive offset amount, or a Market Peg
8 See
supra note 6.
passive offset is a negative number for buy
orders and a positive number for sell orders,
thereby making the order’s price less aggressive
than the contra-side primary quote.
10 See IEX Rule 1.160(qq).
11 IEX has two other order types that are based on
the discretionary peg order type: the Retail
Liquidity Provider order and the Corporate
Discretionary Peg order. See IEX Rule 11.190(b)(14)
and (16).
12 See IEX Rule 1.160(nn).
13 See IEX Rule 1.160(p).
14 See IEX Rule 1.160(u).
15 See IEX Rule 11.190(h)(2).
16 See IEX Rule 1.160(u).
17 See IEX Rule 1.160(u).
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sell order with a negative offset amount,
the offset amount will be disregarded.
While resting on the Order Book, (i) a
buy order is automatically adjusted by
the System in response to changes in the
NBO minus the offset amount up to the
order’s limit price, if any; and (ii) a sell
order is automatically adjusted by the
System in response to changes in the
NBB plus the offset amount down to the
order’s limit price, if any; and (iii) in
locked and crossed markets, are priced
to the less aggressive of the locking or
crossing price (i.e., the lowest Protected
Offer 18 for buy orders and the highest
Protected Bid 19 for sell orders).20
Further, a Market Peg order would not
be eligible to trade when the market is
locked or crossed, either upon order
entry or when resting on the Order
Book.
Until recently, IEX imposed a
‘‘Midpoint Price Constraint’’ on all nondisplayed orders, which prevented
those orders from resting at prices
between the Midpoint Price 21 and the
contra-side primary quote. The
Midpoint Price Constraint meant IEX
could not offer an order type that
pegged to the contra-side primary quote.
IEX recently modified its nondisplayed price sliding rules to allow
non-displayed orders to book and rest at
the contra-side primary quote based on
its understanding that Members 22
would like to be able to post nondisplayed orders at prices more
aggressive than the Midpoint Price.23
With the removal of the Midpoint Price
Constraint, IEX has received informal
feedback from Members that they would
like the option of pegging an order to
the contra-side primary quote—the most
aggressive price at which the order can
execute—to enhance the order’s
execution opportunities. IEX
understands that Members would also
like to have the option of using a
passive price offset for their Market Peg
orders, which would allow the Member
to obtain potential price improvement
over the contra-side primary quote,
while continuing to rest at an aggressive
price with increased execution
opportunities.
Accordingly, IEX proposes to add
subparagraph (b)(18) to IEX Rule 11.190,
to add the Market Peg order. IEX notes
18 See
IEX Rule 1.160(bb).
IEX Rule 1.160(bb).
20 As with all pegged orders, each time the price
of a Market Peg order is adjusted by the System it
receives a new timestamp, as described in IEX Rule
11.220(a)(4).
21 See IEX Rule 1.160(t).
22 See IEX Rule 1.160(s).
23 See Securities Exchange Act Release No. 94884
(May 10, 2022), 87 FR 29768 (May 16, 2022) (SR–
IEX–2022–04).
19 See
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50363
that this Market Peg order is based upon
its Offset Peg order type 24, with two
major differences: the Offset Peg order
pegs to the primary quote (i.e., the NBB
for buy orders and the NBO for sell
orders), while the Market Peg order pegs
to the contra-side primary quote (i.e.,
the NBO for buy orders and the NBB for
sell orders); and the Offset Peg can be
submitted with an aggressive (positive
for buy orders/negative for sell orders)
or passive (negative for buy orders/
positive for sell orders) offset amount,
while the Market Peg order can only be
submitted with a passive offset amount.
Market Peg orders can only have a
passive offset because by default they
rest at the contra-side primary quote,
which is the most aggressive price at
which IEX will allow an order to be
booked 25; therefore, IEX will disregard
any aggressive offset amounts attached
to a Market Peg order.26
As proposed, a Market Peg order:
(A) Must be a pegged order.
(B) May have any TIF described in IEX
Rule 11.190(a)(3).
(C) Is not eligible for routing pursuant to
IEX Rule 11.230(b) and (c)(2).
(D) May not be an inter-market Sweep
Order.27
(E) May be submitted with a limit price or
without a limit price (an ‘‘unpriced pegged
order’’).
(F) Is eligible to trade only during the
Regular Market Session. As provided in IEX
Rule 11.190(a)(3)(E)(iii), any pegged order
marked with a TIF of DAY that is submitted
to the System before the opening of the
Regular Market Session will be queued by the
System until the start of the Regular Market
Session; any pegged order that is marked
with a TIF other than DAY will be rejected
when submitted to the System during the
Pre-Market Session. Any pegged order
submitted into the System after the closing of
the Regular Market Session will be rejected.
(G) May be a minimum quantity order.28
(H) Is not eligible to display. Pegged orders
are always non-displayed.
(I) May be an odd lot, round lot, or mixed
lot.
(J) Is eligible to be invited by the System
to Recheck the Order Book to trade against
eligible resting contra-side interest as
described in IEX Rule 11.230(a)(4)(D).
(K) Is not eligible to trade when the market
is locked or crossed.
(L) May be submitted with an offset
amount that is passive compared to the
contra-side primary quote. If the offset
amount would result in the price of a Market
24 See
IEX Rule 11.190(b)(13).
IEX Rule 11.190(h)(2).
26 For the same reason, if an Offset Peg order’s
offset amount would result in the price of the Offset
Peg order being more aggressive than the contraside primary quote, IEX will reduce the offset
amount so that the Offset Peg order is booked and
ranked at the contra-side protected quotation. See
IEX Rule 11.190(b)(13)(L).
27 See IEX Rule 11.190(b)(12).
28 See IEX Rule 11.190(b)(11).
25 See
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Peg order being more aggressive than the
contra-side protected quotation, the offset
amount will be disregarded, so that the order
is booked and ranked on the Order Book nondisplayed at the contra-side protected
quotation. If no offset amount is specified,
the System will consider the offset amount to
be zero.
In addition, the Exchange proposes
two conforming amendments to other
IEX rules. First, IEX Rule 11.190(a)(3)
would be amended to add Market Peg
orders to the list of pegged order types
offered by IEX, describing Market Peg
orders as an order that pegs to ‘‘the NBO
(NBB) for buy (sell) orders minus (plus)
an offset amount.’’ Second, IEX Rule
11.190(h) would be amended to describe
the manner in which Market Peg orders
will operate in locked and crossed
markets. Specifically, when the market
becomes locked, Market Peg orders,
whether resting on or posting to the
Order Book, will be priced at the least
aggressive of the locking price plus (for
sell orders) or minus (for buy orders) an
offset amount, or the order’s limit price,
if any.29 Further, as proposed, Market
Peg orders resting on or posting to the
Order Book while the market is crossed
are priced at the least aggressive of (1)
the crossing price (the lowest Protected
Offer for buy orders and the highest
Protected Bid for sell orders); (2) the
crossing price plus (for sell orders) or
minus (for buy orders) an offset amount,
or (3) the order’s limit price, if any.30
The methodology for pricing Market
Peg orders during locked and crossed
markets is designed to price such orders
at the least aggressive price that is
consistent with the terms of the order so
as to avoid exacerbating the lock or
cross.
In addition, Market Peg orders will
not be eligible to trade when the market
is locked or crossed, and a Market Peg
order that would otherwise be eligible to
trade against an active order will
surrender its precedence on the Order
Book for the duration of the System
processing the current active order,
pursuant to IEX Rule 11.220(a)(5).
The manner in which Market Peg
orders will operate in locked and
crossed markets (as proposed) is
identical to the manner in which IEX’s
Offset Peg orders operate when the
market is locked or crossed.31 IEX’s
other pegged order types are eligible to
trade in locked or crossed markets, but
they are repriced away from the locking
and crossing price (except for Midpoint
29 See proposed changes to IEX Rule
11.190(h)(3)(C)(iii).
30 See proposed changes to IEX Rule
11.190(h)(3)(D)(iii).
31 See IEX Rules 11.190(b)(13),
11.190(h)(3)(C)(iii), and 11.190(h)(3)(D)(iii).
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Peg orders in a locked market which
continue to be priced at the locking
Midpoint Price), which is designed to
prevent trading at the locking or
crossing price. As with Offset Peg
orders, Market Peg orders are designed
to enable market participants to trade at
or with reference to the contra-side NBB
or NBO. When the NBBO is locked or
crossed the market is generally
considered to be in a transition state
with the NBB and/or NBO likely subject
to very near-term change. Consequently,
the Exchange believes that Market Peg
orders should not trade in such
circumstances. Further, if a Market Peg
order does not have an offset, it cannot
be priced away from the locking or
crossing price because the contra-side
primary quote will be the locking or
crossing price. Therefore, IEX proposes
to not allow Market Peg orders to trade
during locked or crossed markets.
Additionally, IEX believes that the
methodology for pricing Market Peg
orders during locked and crossed
markets is consistent with the Act
because it is designed to price such
orders at the least aggressive price that
is consistent with the terms of the order
so as to avoid exacerbating the lock or
cross.
The Exchange notes that for many
years other national securities
exchanges have offered order types that
peg to the NBO (for buys) and/or NBB
(for sells) plus or minus an offset
amount.32 In this regard, the Exchange
notes that this proposed rule change is
either identical or substantially similar
to order types offered by NYSE Arca,
Inc. (‘‘Arca’’), the Nasdaq Stock Market
LLC (‘‘Nasdaq’’), and CBOE BZX
Exchange, Inc. (‘‘BZX’’), each of which
offer a non-displayed market pegged
order type or attribute that pegs to the
primary quotation on the opposite side
of the market (i.e., the NBO for a buy
order and the NBB for a sell order) with
an optional passive offset amount.33 In
particular, this proposed rule change is
identical to Arca’s market peg order
type, which will also will not trade
when the market is locked or crossed.34
The proposed rule change is
substantially similar to Nasdaq’s market
peg order attribute and BZX’s market
peg order type, with the exception that
Nasdaq and BZX allow a market peg
order to trade when the market is locked
or crossed.35
32 See, e.g., Securities Exchange Act Release No.
52449 (September 15, 2005), 70 FR 55647
(September 22, 2005) (SR–NASD–2005–107).
33 See Nasdaq Rule 4703(d), NYSE Arca Rule
7.31–E(h)(1), and Cboe BZX Rule 11.9(c)(8)(B).
34 See Arca Rule 7.31–E(h)(1).
35 See Nasdaq Rule 4703(d) and BZX Rule
11.9(c)(8)(B).
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,36 in general, and
furthers the objectives of Section
6(b)(5),37 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Specifically, the Exchange believes that
the proposed rule change is consistent
with the protection of investors and the
public interest because it is designed to
increase competition among execution
venues by providing an additional
pegged order type that market
participants can use to trade at the
contra-side primary quote, with an
optional passive offset, as described in
the Purpose section and thereby enable
the Exchange to better compete with
order types on other national securities
exchanges that offer similar features to
market participants.
Further, IEX believes that the
proposal is consistent with the
protection of investors and the public
interest in that the Market Peg order
type would provide additional
flexibility to market participants in their
use of pegging orders. As described in
the Purpose section, IEX already offers
several different types of pegging orders
that trade with reference to the primary
quote (Offset Peg and Primary Peg), at
the Midpoint Price (Midpoint Peg and
Discretionary Peg), and in some cases
with the ability to also exercise price
discretion in specified circumstances
(Discretionary Peg and Primary Peg). As
proposed, the Market Peg order would
function in a similar manner but
provide flexibility to market
participants to peg their orders to the
most aggressive possible resting price,
with an optional passive offset. Such
functionality could be used to price the
order aggressively to enhance its
execution opportunities. IEX believes
that implementing this functionality
through an exchange order type will
make it more widely available to market
participants on a fair and nondiscriminatory basis.
At the same time, the offset
instruction would be offered on a purely
voluntary basis, and with flexibility for
36 15
37 15
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U.S.C. 78f(b)(5).
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Users to choose the amount of any
offset, thereby providing flexibility to
continue using current pegged order
types without a User specified offset
and to choose different offsets based on
a User’s specific needs. The Exchange
does not believe that providing
flexibility to Users to select the amount
of any offset raises any significant or
novel concerns, since similar offset
functionality is already available on
other national securities exchanges, as
discussed in the Purpose section.38
Further, IEX believes that it is
consistent with the Act to not permit a
Market Peg order to trade when the
market is locked or crossed. First, as
noted in the Purpose section, this
functionality is identical to that of IEX’s
Offset Peg orders.39 While IEX’s
remaining pegged order types are
eligible to trade in locked or crossed
markets, they are repriced away from
the locking and crossing price (except
for Midpoint Peg orders in a locked
market which continue to be priced at
the locking Midpoint Price), which is
designed to prevent trading at the
locking or crossing price.
As noted in the Purpose section, a
Market Peg order cannot be priced away
from the locking or crossing price
because the contra-side primary quote
will be the locking or crossing price.
Therefore, to prevent a Market Peg order
from trading at the locking or crossing
price, IEX proposes to not allow them to
trade during locked or crossed markets.
As noted in the Purpose section Arca
applies the same limitations to their
market peg orders.40 Additionally, IEX
believes that the methodology for
pricing Market Peg orders during locked
and crossed markets is consistent with
the Act because it is designed to price
such orders at the least aggressive price
that is consistent with the terms of the
order so as to avoid exacerbating the
lock or cross.
Thus, IEX does not believe that the
proposed changes raise any new or
novel material issues that have not
already been considered by the
Commission in connection with existing
order types offered by the IEX and other
national securities exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, the proposal is a competitive
38 See
supra note 34
supra note 32.
40 See supra note 35.
39 See
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response to similar order types available
on other exchanges.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
Competing exchanges have and can
continue to adopt similar order types,
subject to the SEC rule change process,
as discussed in the Purpose and
Statutory Basis sections.41
The Exchange also does not believe
that the proposed rule change will
impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. All Members would
be eligible to use a Market Peg order
type on the same terms.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 42 of the Act and
Rule 19b–4(f)(6) 43 thereunder. Because
the proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder. In addition, the
Exchange provided the Commission
with written notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of
filing.44
The Exchange believes that the
proposed rule change meets the criteria
of subparagraph (f)(6) of Rule 19b–4 45
because it is substantially similar to
order types previously approved or
considered by the Commission and as
discussed in the Statutory Basis and
Burden on Competition sections.46
Thus, IEX does not believe that the
41 See
supra note 34.
U.S.C. 78s(b)(3)(A).
43 17 CFR 240.19b–4(f)(6).
44 17 CFR 240.19b–4(f)(6)(iii).
45 17 CFR 240.19b–4(f)(6).
46 See supra notes 34 and 39.
42 15
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
50365
proposed changes raise any new or
novel material issues that have not
already been considered by the
Commission.
Accordingly, the Exchange has
designated this rule filing as noncontroversial under Section 19(b)(3)(A)
of the Act 47 and paragraph (f)(6) of Rule
19b–4 thereunder.48
The Exchange will implement the
proposed rule change within 90 days of
filing, subject to the 30-day operative
delay, and provide at least ten (10) days’
notice to Members and market
participants of the implementation
timeline.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 49 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2022–05 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–2022–05. 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
47 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
49 15 U.S.C. 78s(b)(2)(B).
48 17
E:\FR\FM\16AUN1.SGM
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50366
Federal Register / Vol. 87, No. 157 / Tuesday, August 16, 2022 / Notices
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
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–2022–05, and should
be submitted on or before September 6,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–17531 Filed 8–15–22; 8:45 am]
BILLING CODE 8011–01–P
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend and
update Rule 35 (Floor Employees To Be
Registered) to remove certain provisions
that are obsolete and no longer
necessary. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95466; File No. SR–NYSE–
2022–34]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend and
Update Rule 35
lotter on DSK11XQN23PROD with NOTICES1
August 10, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 28,
2022, New York Stock Exchange LLC
(‘‘NYSE’’ 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
50 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:35 Aug 15, 2022
Jkt 256001
The purpose of this filing is to amend
and update Rule 35, which governs the
requirements for admittance to the Floor
of the Exchange, to remove certain
provisions that are obsolete and no
longer necessary.4 In addition, the
Exchange proposes to re-number the
remaining paragraphs of Rule 35 to
conform with the proposed deletions,
which are described below.
Rule 35.10 and 35.30 govern the
issuance of ‘‘Floor tickets’’ and
‘‘Employee Floor Tickets’’—each of
which may be ‘‘Regular’’ or ‘‘Special’’—
to Floor employees as a prerequisite to
enter the trading Floor. A Regular ticket
would ‘‘admit holders to the telephone
booths around the perimeter of the stock
trading Floor, and the area behind the
stock trading posts’’ and ‘‘are issued
only to employees of members or
member organizations that are assigned
4 Rule
35 provides, in relevant part that ‘‘[n]o
employee of a member or member organization
shall be admitted to the Floor unless he is registered
with, qualified by and approved by the Exchange,
and upon compliance of both the employer and
employee with such requirements as the Exchange
may determine.’’
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
telephone or post spaces.’’ 5 Special
tickets are issued ‘‘only for the purpose
of assisting or relieving a Floor
employee of the same member or
member organization.’’ 6 The Exchange
no longer issues Floor tickets but
instead requires Trading Floor Badges
for admittance to the Floor, which
requirement was codified in Exchange
rules earlier this year. Specifically,
paragraph (d) to Rule 37 (Admission
and Conduct on the Trading Floor),
provides that:
Admission to the Floor will be by
Exchange-issued badge only. Exchangeissued badges must be appropriately
displayed, with the photo visible, at all times
while on the Floor. Use of an Exchangeissued badge belonging to another member or
Floor employee to enter or exit the Floor is
prohibited. Authorized persons seeking
admission to the Floor without a badge must
show proper identification and obtain a
temporary badge from the Security Office.
Visitor’s badges are not acceptable
identification cards for Floor employees.7
Further, Rule 303(a) provides that
members who execute orders on the
Floor must be provided with an
identification badge and must wear the
same while on the Floor, and that every
member’s badge must contain his or her
name and a number and the name of his
or her member organization.8
Rule 35.10 and 35.30
In light of the Trading Floor badge
requirements set forth in Rule 37(d) and
Rule 303(a), and the fact that the
Exchange no longer issues nor relies
upon Floor tickets for admission to the
Floor, the Exchange proposes to delete
Rule 35.10 and 35.30 as obsolete.
Rule 35.20 sets forth ‘‘Regulations
pertaining to Floor employees.’’ The
regulations set forth include
requirements that:
• all Floor employees be at their
booths or posts on the Floor one-half
hour prior to the opening of business or
such earlier time as directed by the
Exchange;
• all members or member
organizations with a telephone space on
the Floor, have at least one Floor
employee at such space for fifteen
minutes (or as determined by the
Exchange) following the later of the
close of the market each day or until all
reports due said member or member
organization have been received;
5 See Rule 37(d). See also Securities Exchange Act
Release No. 94217 (February 10, 2022), 87 FR 8901
(February 10, 2022) (SR–NYSE–2021–73) (‘‘Rule 37
Approval Order’’). The Exchange notes that Rule 37
is administered by the Exchange’s regulatory staff.
6 See Rule 35.10.
7 See Rule 35.30.
8 See Rule 303(a).
E:\FR\FM\16AUN1.SGM
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]]>Agencies
[Federal Register Volume 87, Number 157 (Tuesday, August 16, 2022)]
[Notices]
[Pages 50362-50366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17531]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95463; File No. SR-IEX-2022-05]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Add a New
Order Type That Pegs to the Contra-Side Primary Quote, With the Option
of Using a Passive Offset Amount
August 10, 2022.
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 August 8, 2022, the Investors Exchange LLC (``IEX'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) under the Act,\3\
and Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a
proposed rule change to add a new order type (a ``Market Peg'' order)
that pegs to the contra-side primary quote, with the option of using a
passive offset amount.\5\ The Exchange has designated this rule change
as ``non-controversial'' under Section 19(b)(3)(A) of the Act \6\ and
provided the Commission with the notice required by Rule 19b-4(f)(6)
thereunder.\7\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ The contra-side primary quote is the national best offer for
a buy order or the national best bid for a sell order, as set forth
in Rule 600(b) of Regulation NMS under the Act, determined as set
forth in IEX Rule 11.410(b). See IEX Rule 1.160(u).
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of
[[Page 50363]]
and basis for the proposed rule change and discussed any comments it
received on the proposed rule change. The text of these statement may
be examined at the places specified in Item IV below. The self-
regulatory organization has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend IEX Rule 11.190 to add a new Market
Peg order type that pegs to the contra-side primary quote,\8\ minus
(plus) an optional passive \9\ offset amount for buy (sell) orders, as
specified by the User.\10\ In addition, the Exchange proposes two
conforming amendments to IEX Rules Rule 11.190(a)(3) and 11.190(h)(3).
---------------------------------------------------------------------------
\8\ See supra note 6.
\9\ A passive offset is a negative number for buy orders and a
positive number for sell orders, thereby making the order's price
less aggressive than the contra-side primary quote.
\10\ See IEX Rule 1.160(qq).
---------------------------------------------------------------------------
Currently, the Exchange offers four types of pegged orders--primary
peg, midpoint peg, Discretionary Peg, and Offset Peg \11\--each of
which are non-displayed orders that upon entry into the System \12\ and
while resting on the Order Book \13\, are pegged to a reference price
based on the national best bid and offer (``NBBO'') \14\ and the price
of the order is automatically adjusted by the System in response to
changes in the NBBO.\15\
---------------------------------------------------------------------------
\11\ IEX has two other order types that are based on the
discretionary peg order type: the Retail Liquidity Provider order
and the Corporate Discretionary Peg order. See IEX Rule
11.190(b)(14) and (16).
\12\ See IEX Rule 1.160(nn).
\13\ See IEX Rule 1.160(p).
\14\ See IEX Rule 1.160(u).
\15\ See IEX Rule 11.190(h)(2).
---------------------------------------------------------------------------
The Exchange now proposes to add a new type of pegged order--a
Market Peg order--that is a non-displayed pegged order that upon entry
and when posting to the Order Book, has its price automatically
adjusted by the System to be equal to and ranked at the less aggressive
of the contra-side primary quote (i.e., the NBO \16\ for buy orders and
NBB \17\ for sell orders), minus (plus) an offset amount for buy (sell)
orders, if the User opts to submit the order with an offset amount, or
the order's limit price, if the User opts to submit the order with a
limit price. If a User submits a Market Peg buy order with a positive
offset amount, or a Market Peg sell order with a negative offset
amount, the offset amount will be disregarded. While resting on the
Order Book, (i) a buy order is automatically adjusted by the System in
response to changes in the NBO minus the offset amount up to the
order's limit price, if any; and (ii) a sell order is automatically
adjusted by the System in response to changes in the NBB plus the
offset amount down to the order's limit price, if any; and (iii) in
locked and crossed markets, are priced to the less aggressive of the
locking or crossing price (i.e., the lowest Protected Offer \18\ for
buy orders and the highest Protected Bid \19\ for sell orders).\20\
Further, a Market Peg order would not be eligible to trade when the
market is locked or crossed, either upon order entry or when resting on
the Order Book.
---------------------------------------------------------------------------
\16\ See IEX Rule 1.160(u).
\17\ See IEX Rule 1.160(u).
\18\ See IEX Rule 1.160(bb).
\19\ See IEX Rule 1.160(bb).
\20\ As with all pegged orders, each time the price of a Market
Peg order is adjusted by the System it receives a new timestamp, as
described in IEX Rule 11.220(a)(4).
---------------------------------------------------------------------------
Until recently, IEX imposed a ``Midpoint Price Constraint'' on all
non-displayed orders, which prevented those orders from resting at
prices between the Midpoint Price \21\ and the contra-side primary
quote. The Midpoint Price Constraint meant IEX could not offer an order
type that pegged to the contra-side primary quote.
---------------------------------------------------------------------------
\21\ See IEX Rule 1.160(t).
---------------------------------------------------------------------------
IEX recently modified its non-displayed price sliding rules to
allow non-displayed orders to book and rest at the contra-side primary
quote based on its understanding that Members \22\ would like to be
able to post non-displayed orders at prices more aggressive than the
Midpoint Price.\23\ With the removal of the Midpoint Price Constraint,
IEX has received informal feedback from Members that they would like
the option of pegging an order to the contra-side primary quote--the
most aggressive price at which the order can execute--to enhance the
order's execution opportunities. IEX understands that Members would
also like to have the option of using a passive price offset for their
Market Peg orders, which would allow the Member to obtain potential
price improvement over the contra-side primary quote, while continuing
to rest at an aggressive price with increased execution opportunities.
---------------------------------------------------------------------------
\22\ See IEX Rule 1.160(s).
\23\ See Securities Exchange Act Release No. 94884 (May 10,
2022), 87 FR 29768 (May 16, 2022) (SR-IEX-2022-04).
---------------------------------------------------------------------------
Accordingly, IEX proposes to add subparagraph (b)(18) to IEX Rule
11.190, to add the Market Peg order. IEX notes that this Market Peg
order is based upon its Offset Peg order type \24\, with two major
differences: the Offset Peg order pegs to the primary quote (i.e., the
NBB for buy orders and the NBO for sell orders), while the Market Peg
order pegs to the contra-side primary quote (i.e., the NBO for buy
orders and the NBB for sell orders); and the Offset Peg can be
submitted with an aggressive (positive for buy orders/negative for sell
orders) or passive (negative for buy orders/positive for sell orders)
offset amount, while the Market Peg order can only be submitted with a
passive offset amount. Market Peg orders can only have a passive offset
because by default they rest at the contra-side primary quote, which is
the most aggressive price at which IEX will allow an order to be booked
\25\; therefore, IEX will disregard any aggressive offset amounts
attached to a Market Peg order.\26\
---------------------------------------------------------------------------
\24\ See IEX Rule 11.190(b)(13).
\25\ See IEX Rule 11.190(h)(2).
\26\ For the same reason, if an Offset Peg order's offset amount
would result in the price of the Offset Peg order being more
aggressive than the contra-side primary quote, IEX will reduce the
offset amount so that the Offset Peg order is booked and ranked at
the contra-side protected quotation. See IEX Rule 11.190(b)(13)(L).
---------------------------------------------------------------------------
As proposed, a Market Peg order:
(A) Must be a pegged order.
(B) May have any TIF described in IEX Rule 11.190(a)(3).
(C) Is not eligible for routing pursuant to IEX Rule 11.230(b)
and (c)(2).
(D) May not be an inter-market Sweep Order.\27\
---------------------------------------------------------------------------
\27\ See IEX Rule 11.190(b)(12).
---------------------------------------------------------------------------
(E) May be submitted with a limit price or without a limit price
(an ``unpriced pegged order'').
(F) Is eligible to trade only during the Regular Market Session.
As provided in IEX Rule 11.190(a)(3)(E)(iii), any pegged order
marked with a TIF of DAY that is submitted to the System before the
opening of the Regular Market Session will be queued by the System
until the start of the Regular Market Session; any pegged order that
is marked with a TIF other than DAY will be rejected when submitted
to the System during the Pre-Market Session. Any pegged order
submitted into the System after the closing of the Regular Market
Session will be rejected.
(G) May be a minimum quantity order.\28\
---------------------------------------------------------------------------
\28\ See IEX Rule 11.190(b)(11).
---------------------------------------------------------------------------
(H) Is not eligible to display. Pegged orders are always non-
displayed.
(I) May be an odd lot, round lot, or mixed lot.
(J) Is eligible to be invited by the System to Recheck the Order
Book to trade against eligible resting contra-side interest as
described in IEX Rule 11.230(a)(4)(D).
(K) Is not eligible to trade when the market is locked or
crossed.
(L) May be submitted with an offset amount that is passive
compared to the contra-side primary quote. If the offset amount
would result in the price of a Market
[[Page 50364]]
Peg order being more aggressive than the contra-side protected
quotation, the offset amount will be disregarded, so that the order
is booked and ranked on the Order Book non-displayed at the contra-
side protected quotation. If no offset amount is specified, the
System will consider the offset amount to be zero.
In addition, the Exchange proposes two conforming amendments to
other IEX rules. First, IEX Rule 11.190(a)(3) would be amended to add
Market Peg orders to the list of pegged order types offered by IEX,
describing Market Peg orders as an order that pegs to ``the NBO (NBB)
for buy (sell) orders minus (plus) an offset amount.'' Second, IEX Rule
11.190(h) would be amended to describe the manner in which Market Peg
orders will operate in locked and crossed markets. Specifically, when
the market becomes locked, Market Peg orders, whether resting on or
posting to the Order Book, will be priced at the least aggressive of
the locking price plus (for sell orders) or minus (for buy orders) an
offset amount, or the order's limit price, if any.\29\ Further, as
proposed, Market Peg orders resting on or posting to the Order Book
while the market is crossed are priced at the least aggressive of (1)
the crossing price (the lowest Protected Offer for buy orders and the
highest Protected Bid for sell orders); (2) the crossing price plus
(for sell orders) or minus (for buy orders) an offset amount, or (3)
the order's limit price, if any.\30\
---------------------------------------------------------------------------
\29\ See proposed changes to IEX Rule 11.190(h)(3)(C)(iii).
\30\ See proposed changes to IEX Rule 11.190(h)(3)(D)(iii).
---------------------------------------------------------------------------
The methodology for pricing Market Peg orders during locked and
crossed markets is designed to price such orders at the least
aggressive price that is consistent with the terms of the order so as
to avoid exacerbating the lock or cross.
In addition, Market Peg orders will not be eligible to trade when
the market is locked or crossed, and a Market Peg order that would
otherwise be eligible to trade against an active order will surrender
its precedence on the Order Book for the duration of the System
processing the current active order, pursuant to IEX Rule 11.220(a)(5).
The manner in which Market Peg orders will operate in locked and
crossed markets (as proposed) is identical to the manner in which IEX's
Offset Peg orders operate when the market is locked or crossed.\31\
IEX's other pegged order types are eligible to trade in locked or
crossed markets, but they are repriced away from the locking and
crossing price (except for Midpoint Peg orders in a locked market which
continue to be priced at the locking Midpoint Price), which is designed
to prevent trading at the locking or crossing price. As with Offset Peg
orders, Market Peg orders are designed to enable market participants to
trade at or with reference to the contra-side NBB or NBO. When the NBBO
is locked or crossed the market is generally considered to be in a
transition state with the NBB and/or NBO likely subject to very near-
term change. Consequently, the Exchange believes that Market Peg orders
should not trade in such circumstances. Further, if a Market Peg order
does not have an offset, it cannot be priced away from the locking or
crossing price because the contra-side primary quote will be the
locking or crossing price. Therefore, IEX proposes to not allow Market
Peg orders to trade during locked or crossed markets. Additionally, IEX
believes that the methodology for pricing Market Peg orders during
locked and crossed markets is consistent with the Act because it is
designed to price such orders at the least aggressive price that is
consistent with the terms of the order so as to avoid exacerbating the
lock or cross.
---------------------------------------------------------------------------
\31\ See IEX Rules 11.190(b)(13), 11.190(h)(3)(C)(iii), and
11.190(h)(3)(D)(iii).
---------------------------------------------------------------------------
The Exchange notes that for many years other national securities
exchanges have offered order types that peg to the NBO (for buys) and/
or NBB (for sells) plus or minus an offset amount.\32\ In this regard,
the Exchange notes that this proposed rule change is either identical
or substantially similar to order types offered by NYSE Arca, Inc.
(``Arca''), the Nasdaq Stock Market LLC (``Nasdaq''), and CBOE BZX
Exchange, Inc. (``BZX''), each of which offer a non-displayed market
pegged order type or attribute that pegs to the primary quotation on
the opposite side of the market (i.e., the NBO for a buy order and the
NBB for a sell order) with an optional passive offset amount.\33\ In
particular, this proposed rule change is identical to Arca's market peg
order type, which will also will not trade when the market is locked or
crossed.\34\ The proposed rule change is substantially similar to
Nasdaq's market peg order attribute and BZX's market peg order type,
with the exception that Nasdaq and BZX allow a market peg order to
trade when the market is locked or crossed.\35\
---------------------------------------------------------------------------
\32\ See, e.g., Securities Exchange Act Release No. 52449
(September 15, 2005), 70 FR 55647 (September 22, 2005) (SR-NASD-
2005-107).
\33\ See Nasdaq Rule 4703(d), NYSE Arca Rule 7.31-E(h)(1), and
Cboe BZX Rule 11.9(c)(8)(B).
\34\ See Arca Rule 7.31-E(h)(1).
\35\ See Nasdaq Rule 4703(d) and BZX Rule 11.9(c)(8)(B).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\36\ in general, and furthers the
objectives of Section 6(b)(5),\37\ in particular, in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Specifically, the Exchange
believes that the proposed rule change is consistent with the
protection of investors and the public interest because it is designed
to increase competition among execution venues by providing an
additional pegged order type that market participants can use to trade
at the contra-side primary quote, with an optional passive offset, as
described in the Purpose section and thereby enable the Exchange to
better compete with order types on other national securities exchanges
that offer similar features to market participants.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78f(b).
\37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Further, IEX believes that the proposal is consistent with the
protection of investors and the public interest in that the Market Peg
order type would provide additional flexibility to market participants
in their use of pegging orders. As described in the Purpose section,
IEX already offers several different types of pegging orders that trade
with reference to the primary quote (Offset Peg and Primary Peg), at
the Midpoint Price (Midpoint Peg and Discretionary Peg), and in some
cases with the ability to also exercise price discretion in specified
circumstances (Discretionary Peg and Primary Peg). As proposed, the
Market Peg order would function in a similar manner but provide
flexibility to market participants to peg their orders to the most
aggressive possible resting price, with an optional passive offset.
Such functionality could be used to price the order aggressively to
enhance its execution opportunities. IEX believes that implementing
this functionality through an exchange order type will make it more
widely available to market participants on a fair and non-
discriminatory basis.
At the same time, the offset instruction would be offered on a
purely voluntary basis, and with flexibility for
[[Page 50365]]
Users to choose the amount of any offset, thereby providing flexibility
to continue using current pegged order types without a User specified
offset and to choose different offsets based on a User's specific
needs. The Exchange does not believe that providing flexibility to
Users to select the amount of any offset raises any significant or
novel concerns, since similar offset functionality is already available
on other national securities exchanges, as discussed in the Purpose
section.\38\
---------------------------------------------------------------------------
\38\ See supra note 34
---------------------------------------------------------------------------
Further, IEX believes that it is consistent with the Act to not
permit a Market Peg order to trade when the market is locked or
crossed. First, as noted in the Purpose section, this functionality is
identical to that of IEX's Offset Peg orders.\39\ While IEX's remaining
pegged order types are eligible to trade in locked or crossed markets,
they are repriced away from the locking and crossing price (except for
Midpoint Peg orders in a locked market which continue to be priced at
the locking Midpoint Price), which is designed to prevent trading at
the locking or crossing price.
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\39\ See supra note 32.
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As noted in the Purpose section, a Market Peg order cannot be
priced away from the locking or crossing price because the contra-side
primary quote will be the locking or crossing price. Therefore, to
prevent a Market Peg order from trading at the locking or crossing
price, IEX proposes to not allow them to trade during locked or crossed
markets. As noted in the Purpose section Arca applies the same
limitations to their market peg orders.\40\ Additionally, IEX believes
that the methodology for pricing Market Peg orders during locked and
crossed markets is consistent with the Act because it is designed to
price such orders at the least aggressive price that is consistent with
the terms of the order so as to avoid exacerbating the lock or cross.
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\40\ See supra note 35.
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Thus, IEX does not believe that the proposed changes raise any new
or novel material issues that have not already been considered by the
Commission in connection with existing order types offered by the IEX
and other national securities exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. To the contrary, the
proposal is a competitive response to similar order types available on
other exchanges.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Competing
exchanges have and can continue to adopt similar order types, subject
to the SEC rule change process, as discussed in the Purpose and
Statutory Basis sections.\41\
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\41\ See supra note 34.
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The Exchange also does not believe that the proposed rule change
will impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act. All Members
would be eligible to use a Market Peg order type on the same terms.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \42\ of the Act and Rule 19b-4(f)(6) \43\
thereunder. Because the proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder. In addition, the Exchange provided the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing.\44\
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\42\ 15 U.S.C. 78s(b)(3)(A).
\43\ 17 CFR 240.19b-4(f)(6).
\44\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange believes that the proposed rule change meets the
criteria of subparagraph (f)(6) of Rule 19b-4 \45\ because it is
substantially similar to order types previously approved or considered
by the Commission and as discussed in the Statutory Basis and Burden on
Competition sections.\46\ Thus, IEX does not believe that the proposed
changes raise any new or novel material issues that have not already
been considered by the Commission.
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\45\ 17 CFR 240.19b-4(f)(6).
\46\ See supra notes 34 and 39.
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Accordingly, the Exchange has designated this rule filing as non-
controversial under Section 19(b)(3)(A) of the Act \47\ and paragraph
(f)(6) of Rule 19b-4 thereunder.\48\
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\47\ 15 U.S.C. 78s(b)(3)(A).
\48\ 17 CFR 240.19b-4.
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The Exchange will implement the proposed rule change within 90 days
of filing, subject to the 30-day operative delay, and provide at least
ten (10) days' notice to Members and market participants of the
implementation timeline.
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \49\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\49\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-IEX-2022-05 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-2022-05. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent
[[Page 50366]]
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
such 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-
2022-05, and should be submitted on or before September 6, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
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\50\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17531 Filed 8-15-22; 8:45 am]
BILLING CODE 8011-01-P
