Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Fee Schedule Concerning Transaction Pricing, 67133-67138 [2024-18472]

Download as PDF ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices will continue to apply only to Priority Customers, the Exchange believes that the application of this rebate program is equitable and not unfairly discriminatory because the Exchange has historically provided more favorable pricing for Priority Customers.21 Furthermore, Priority Customer order flow benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants, to the benefit of all market participants. are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. 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 not necessary or appropriate in furtherance of the purposes of the Act. In terms of intra-market competition, the Exchange does not believe that its proposal will place any category of market participants at a competitive disadvantage. The Exchange believes that all of the changes proposed above will incentivize market participants to direct more order flow to the Exchange, to the benefit of all market participants who may interact with this order flow. While some aspects of the proposal apply directly to Market Makers (through the Market Maker Tier 1 through Tier 4 Maker Fees for SPY, QQQ, and IWM) or Priority Customers (through the Priority Customer Tier 1 through Tier 4 Taker Rebates for SPY, QQQ, and IWM; the $0.00 Taker Fee in Penny and Non-Penny Symbols when trading against another Priority Customer order; and the PIM break-up rebate qualification changes), the Exchange believes that the proposed changes taken together will fortify and encourage activity, especially Market Maker and Priority Customer activity, on the Exchange. As discussed above, all market participants will benefit from any increase in market activity that the proposal effectuates. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other options exchanges. Because competitors C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.22 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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– MRX–2024–30 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–MRX–2024–30. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–MRX–2024–30 and should be submitted on or before September 9, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–18475 Filed 8–16–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100718; File No. SR–IEX– 2024–13] Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Fee Schedule Concerning Transaction Pricing August 13, 2024. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the 23 17 21 See supra note 16. VerDate Sep<11>2014 18:07 Aug 16, 2024 22 15 Jkt 262001 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00077 Fmt 4703 Sfmt 4703 67133 1 15 E:\FR\FM\19AUN1.SGM CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 19AUN1 67134 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on July 31, 2024, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 19b4 thereunder,5 the Exchange is filing with the Commission a proposed rule change to amend the Exchange’s fee schedule applicable to Members 6 (the ‘‘Fee Schedule’’ 7) pursuant to IEX Rule 15.110(a) and (c). Changes to the Fee Schedule pursuant to this proposal are effective upon filing,8 and will be operative on August 1, 2024. The text of the proposed rule change is available at the Exchange’s website at www.iextrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 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 ddrumheller on DSK120RN23PROD with NOTICES1 1. Purpose The Exchange proposes to modify its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c), to introduce two different tier-based volume-based pricing structures designed to improve 2 15 U.S.C. 78a. CFR 240.19b–4. 4 15 U.S.C. 78s(b)(1). 5 17 CFR 240.19b–4. 6 See IEX Rule 1.160(s). 7 See Investors Exchange Fee Schedule, available at https://www.iexexchange.io/resources/trading/ fee-schedule. 8 15 U.S.C. 78s(b)(3)(A)(ii). 3 17 VerDate Sep<11>2014 18:07 Aug 16, 2024 Jkt 262001 market quality on the Exchange by incentivizing Members to send more displayed liquidity adding orders to the Exchange. The first tier-based structure will provide for an enhanced rebate for executions of displayed liquidity adding orders priced at or above $1.00 per share applicable to Members that meet certain liquidity adding requirements specified below. The second tier-based structure will provide for a higher fee for displayed liquidity removing orders priced at or above $1.00 per share applicable to Members that do not trade a minimum amount of displayed liquidity adding volume as specified below. Displayed Liquidity Adding Rebate Tiers The Exchange proposes to introduce a tiered pricing structure applicable to the rebates provided for executions of displayed liquidity adding orders 9 priced at or above $1.00 per share (‘‘Added Displayed Liquidity’’).10 Specifically, the Exchange proposes to revise its Fee Schedule to set forth two volume-based rebate tiers: Tier 1 and Tier 2 (referred to in the Fee Schedule as the ‘‘Displayed Liquidity Adding Rebate Tiers’’). As proposed, Tier 1 will provide the Exchange’s current base rebate of $0.0014 per share to all Added Displayed Liquidity for Members that add less than 10,000,000 ADV 11 of Added Displayed Liquidity. And Tier 2 will provide a rebate of $0.0020 per share to all Added Displayed Liquidity for Members that add at least 10,000,000 ADV of Added Displayed Liquidity (a rebate of $0.0006 more per share than the rebate provided currently and pursuant to Tier 1). IEX notes that this model of offering volume-based rebates is consistent with the rebates offered by competitor exchanges.12 The Exchange also notes that the new proposed rebate for Tier 2 (as well as the current rebate that will be applicable to Tier 1) is 9 This higher rebate would apply to any orders assigned Fee Code Combinations ML, MLB, MLY, and MLYB. 10 Nothing in this rule filing affects trades below $1.00 per share (‘‘sub-dollar trades’’). Sub-dollar trades would not impact the rebate tier calculations and remain ineligible for rebates. 11 As proposed, IEX will introduce the following definition of ADV: ‘‘ADV’’ means average daily volume calculated as the number of shares added or removed that execute at or above $1.00 per share, combined, per day. ADV is calculated on a monthly basis. 12 See, e.g., MEMX Equities Fee Schedule (Effective July 16, 2024), available at https:// info.memxtrading.com/equities-trading-resources/ us-equities-fee-schedule/. However, IEX’s proposed Tier 2 would be based on each Member’s ADV, without a requirement to meet a total consolidated volume threshold. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 lower than the highest rebates offered by competing exchanges.13 Accordingly, IEX proposes to update its Fee Schedule to make several revisions to reflect the proposed rebate tiers. First, the Exchange proposes to amend the Base Rates table to update the description and fees associated with Base Fee Code ML (‘‘Add displayed liquidity’’). As amended, the Base Rates table will list two base rates for Fee Code ML—the $0.0014 rebate applied if ‘‘Member adds less than 10,000,000 ADV of displayed liquidity’’ and the higher $0.0020 rebate applied if ‘‘Member adds at least 10,000,000 ADV of displayed liquidity.’’ IEX also proposes to add Footnote 4 to the Transaction Fees section, which will be applicable to fee code ML in the Base Rates table, and to Fee Code Combinations ML, MLB, MLY, and MLYB in the Fee Code Combination and Associated Fees table. As proposed, Footnote 4 is titled ‘‘Displayed Liquidity Adding Rebate Tiers (Applicable to Executions at or above $1)’’ and followed by a table describing Tier 1 and Tier 2, including the required criteria for each rebate tier and the applicable rebate, as described above. The new rebate tiers are based on each Member’s ADV, which is not currently defined in IEX’s Fee Schedule. Therefore, IEX also proposes to update the list of ‘‘Definitions’’ in the Transaction Fees section of the Fee Schedule by renaming it ‘‘Definitions and Information’’, and adding a definition of ADV and relevant information thereof to the list: • ‘‘ADV’’ means average daily volume calculated as the number of shares added or removed (as applicable) that execute at or above $1.00 per share, combined, per day. ADV is calculated on a monthly basis. Æ The Exchange excludes from its calculations of ADV any trading day that the Exchange’s system experiences a disruption that lasts for more than 60 minutes during regular trading hours and any day with a scheduled early market close. Æ Routed shares executed away from IEX are not included in ADV calculation. Æ Auction and Opening Process executed shares are not included in ADV calculation. Æ With prior notice to the Exchange, a Member may aggregate ADV with 13 See, e.g., MEMX Equities Fee Schedule, supra note 12 (maximum rebate of $0.0037); Nasdaq Equity VII, Section 114 (maximum rebate of $0.0036); New York Stock Exchange Price List 2024 (as of June 3, 2024), https://www.nyse.com/ publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (maximum rebate of $0.0035). E:\FR\FM\19AUN1.SGM 19AUN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices other Members with which the Member is affiliated pursuant to Rule 12b–2 under the Act. In calculating a Member’s ADV, the numerator will be the share volume of applicable transactions (i.e., adding, removing, displayed, non-displayed, as applicable) during the month and the denominator will be the total number of eligible trading days in the month. As noted above, when calculating ADV, the Exchange will exclude days with system disruptions that last for more than 60 minutes and days with scheduled early closes when determining the numerator and the denominator. An Exchange system disruption may occur, for example, where a certain group of securities traded on the Exchange is unavailable for trading due to an Exchange system issue. Similarly, the Exchange may be able to perform certain functions with respect to accepting and processing orders, but may have a failure to another significant process, such as routing to other market centers, that would lead Members that rely on such process to avoid utilizing the Exchange until the Exchange’s entire system was operational. The Exchange believes that these types of Exchange system disruptions could preclude Members from participating on the Exchange to the extent that they might have otherwise participated on such days, and thus, the Exchange believes it is appropriate to exclude such days when determining a Member’s ADV to avoid penalizing Members that might otherwise have met the ADV requirements for the higher rebate provided for in Tier 2. For similar reasons, the Exchange believes it is appropriate to exclude trading days with scheduled early closes, because the shorter trading days are likely to result in a lower monthly average daily trading volume for each Member. The Exchange notes that excluding system disruption days and trading days with scheduled early closes is consistent with the methodologies used by other exchanges when calculating each member’s ADV.14 The Exchange will exclude routed shares that executed away from the Exchange from its ADV calculations because, by definition, these are not trades that added displayed liquidity to the Exchange.15 The Exchange notes that excluding routed shares from the calculation of ADV is also consistent with the practice of other exchanges 14 See, e.g., MEMX Equities Fee Schedule, supra note 12. 15 IEX also notes that it only charges Members a nominal fee of $0.0001 on top of the away market’s transaction fee for each routable share that executes away from the Exchange. VerDate Sep<11>2014 18:07 Aug 16, 2024 Jkt 262001 when calculating ADV.16 And the Exchange will exclude executions in the opening process for non-listed securities from its ADV calculations, because they are not eligible for any rebates and the adding and removing liquidity concepts are not applicable to the opening process.17 The Exchange will allow Members to aggregate their ADV with other Members with which they are affiliated,18 if Members provide prior notice to the Exchange. As proposed, to the extent that two or more affiliated companies maintain separate memberships with the Exchange and can demonstrate their affiliation by showing they control, are controlled by, or are under common control with each other, the Exchange would permit such Members to aggregate their ADV. Members will be responsible for having proper internal documentation in their books and records substantiating that the two or more Members seeking to aggregate their ADV are affiliates of one another. IEX notes that this grouping of Member affiliates is consistent with how IEX allows Member affiliates to apply IEX’s optional anti-internalization functionality across affiliates,19 and is already a common practice for exchanges that offer tiered rebates, in order to not penalize two affiliated members when calculating rebate tiers.20 As noted above, the Exchange is not proposing to change the fees applicable to executions of and with orders with an execution price below $1.00 per share, which would remain free for such orders that provide displayed liquidity and subject to a fee of 0.09% of the total dollar volume of the execution for orders that take displayed liquidity. IEX is also not proposing to make any changes to the fees applicable to the execution of Retail 21 orders that remove displayed liquidity, which will continue to execute for free. The Exchange believes the proposed Displayed Liquidity Adding Rebate Tier structure would provide an incremental incentive for Members to send more orders to the Exchange in an effort to qualify for the proposed enhanced rebate offered by Tier 2 for executions 16 See, e.g., MEMX Equities Fee Schedule, supra note 12. 17 Similarly, in the event that the Exchange were to have auctions, such transactions would also be excluded. 18 As defined in Rule 12b–2 under the Act, 17 CFR 240.12b–2. 19 See IEX Rule 11.190(e)(1)(B). 20 See, e.g., the Nasdaq Stock Market LLC Equity 7, Section 127 (‘‘Aggregation of Activity of Affiliated Members’’). 21 See IEX Rule 11.190(b)(15). PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 67135 of Added Displayed Volume. As such, the proposed Displayed Liquidity Adding Rebate Tiers are designed to encourage Members that provide liquidity on the Exchange to maintain or increase their order flow, thereby contributing to a deeper and more liquid market to the benefit of all market participants and enhancing the attractiveness of the Exchange as a trading venue. Displayed Liquidity Removing Fee Tiers The Exchange also proposes to introduce a tiered pricing structure applicable to the fees charged for executions of displayed liquidity removing orders priced at or above $1.00 per share. Specifically, the Exchange proposes to revise its Fee Schedule to set forth two volume-based fee tiers: Tier 1 and Tier 2 (referred to in the Fee Schedule as the ‘‘Displayed Liquidity Removing Fee Tiers’’). As proposed, Tier 1 will apply a new $0.0030 per share fee to all displayed liquidity removing orders for Members that add less than 25,000 ADV of Added Displayed Liquidity. And Tier 2 will apply the Exchange’s current base displayed liquidity removing fee of $0.0020 per share to all displayed liquidity removing orders for Members that add at least 25,000 ADV of Added Displayed Liquidity.22 Accordingly, IEX proposes to update its Fee Schedule to amend the Base Rates table to update the description and fees associated with Base Fee Code TL (‘‘Remove displayed liquidity’’). As amended, the Base Rates table will list two base rates for Fee Code TL—the current $0.0020 fee applied if a ‘‘Member adds at least 25,000 ADV of displayed liquidity’’, and the new $0.0030 fee applied if a ‘‘Member adds less than 25,000 ADV of displayed liquidity.’’ IEX also proposes to add Footnote 5 to the Transaction Fees section, which will be applicable to fee code TL in the Base Rates table, and to fee code combinations TL, TLB, TLY, TLYB, TLW, and TLWB in the Fee Code Combination and Associated Fees table. As proposed, Footnote 5 is titled ‘‘Displayed Liquidity Removing Fee Tiers (Applicable to Executions at or above $1)’’ and followed by a table describing Tier 1 and Tier 2, including the required criteria for each tier and the applicable fee, as described above. The Exchange believes it is reasonable to charge its members an increased fee 22 For purposes of determining a Member’s Displayed Liquidity Removing Fee Tier, the Exchange will conduct the same ADV calculation described above. E:\FR\FM\19AUN1.SGM 19AUN1 67136 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices for removing displayed liquidity from the Exchange if they do not trade a minimum amount of Added Displayed Liquidity volume on the Exchange. The proposed higher displayed liquidity removing fee in Tier 1 is designed to incentivize Members to maintain a minimum level of displayed adding activity on the Exchange. The Exchange notes this fee is consistent with other ‘‘maker-taker’’ exchanges that charge higher fees of members to remove liquidity if the members do not qualify for any volume tiers.23 Similarly, some ‘‘taker-maker’’ exchanges charge liquidity removal fees of Members that do not maintain a meaningful level of liquidity adding activity. For example, Nasdaq BX charges $0.0007 per share for all liquidity removing orders if the member does not add at least 50,000 ADV (by contrast, members that add at least 50,000 ADV qualify for at least a $0.0005 per share rebate).24 The Exchange periodically assesses its fee structure and based upon a recent assessment, the Exchange believes that these proposed pricing changes would further incentivize Members to submit displayed orders in securities priced at or above $1.00 per share. The proposed fee changes are designed to incentivize posting displayed liquidity on IEX in securities priced at or above $1.00 per share in order to address competitive factors (as discussed more thoroughly in the Statutory Basis section) and facilitate price discovery and price formation, which the Exchange believes benefits all Members and market participants. ddrumheller on DSK120RN23PROD with NOTICES1 2. Statutory Basis IEX believes that the proposed rule change is consistent with the provisions of Section 6(b) 25 of the Act in general, and furthers the objectives of Sections 6(b)(4) 26 of the Act, in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. The Exchange believes that the proposed fee change is reasonable, 23 See, e.g., New York Stock Exchange Price List 2024 (as of June 3, 2024), supra note 13 (charging $0.0030 per share for liquidity removing orders, but charging between $0.00285 and $0.00295 for the same orders if the member adds between 0.05% and 1.05% ADV of the Consolidated Average Daily Volume); see also MEMX Equities Fee Schedule, supra note 12 (charging $0.0030 per share for liquidity removing orders, but charging $0.00295 for the same orders if the member’s ADV qualifies it for MEMX’s Liquidity Removal Tier by having an ADV greater than or equal to 0.70% of the Total Consolidated Volume, including at least .35% of the Total Consolidated Volume remove ADV). 24 See Nasdaq BX Equity VII, Section 118. 25 15 U.S.C. 78f. 26 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 18:07 Aug 16, 2024 Jkt 262001 fair and equitable, and nondiscriminatory. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. IEX has concluded that, in the context of current regulatory requirements governing access fees and rebates, it will be able to more effectively compete with other exchanges for order flow by offering higher rebate incentives. Based upon informal discussions with market participants, IEX believes that Members and other market participants may be more willing to send displayed orders to IEX if the proposed fee structure was adopted. Accordingly, IEX has designed the proposed access fee and rebate tiers to attract and incentivize displayed orders as well as order flow seeking to trade with such displayed orders. Moreover, increases in displayed liquidity would contribute to the public price discovery process which would benefit all market participants and protect investors and the public interest. As it has stated repeatedly, IEX believes that the existing access fee level of $0.0030 per share set by Rule 610 of Regulation NMS 27 heavily affects the way that exchanges compete for order flow and has led to various market distortions and inefficiencies. It has also created a collective action problem that substantially hinders the ability of exchanges to compete by offering better execution quality and without relying on high access fees and correspondingly high rebates. The Commission can resolve this problem and help to promote more displayed liquidity by substantially reducing the access fee cap for all NMS stocks, a step that is consistent with other market-based trading cost measures and one favored by a broad spectrum of market participants and virtually all institutional investors that have commented on this issue.28 IEX hopes to be able to further adjust its transaction prices in the near future to reflect a market-wide adoption of lower access fees as a result of this critically-needed reform. Thus, as discussed in the Purpose section, the Exchange believes that the 27 17 CFR 242.610. IEX comment letters on S7–30–22, Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better-Priced Orders: https://www.sec.gov/comments/s7-30-22/ s73022-20160364-328968.pdf; https://www.sec.gov/ comments/s7-30-22/s73022-276579-672162.pdf; https://www.sec.gov/comments/s7-30-22/s73022434239-1076742.pdf. 28 See PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 proposed adoption of a volume-based rebate tier that provides higher rebates for Members that provide a relatively higher ADV of displayed liquidity is reasonable and consistent with the Act because it is designed to incentivize Members to add additional displayed orders on IEX. Specifically, the Exchange believes that the volumebased rebate tiers are reasonably designed to incentivize Members to add a meaningful volume of displayed liquidity by providing a $0.0006 higher rebate for Members that qualify for Tier 2 than it provides to Members that qualify for Tier 1. As noted in the Purpose section, other exchanges offer rebate tiers, and thus the Exchange does not believe that this aspect of the proposal raises any new or novel issues not already considered by the Commission. The Exchange also believes that adding to the Fee Schedule the notes defining ‘‘ADV’’ and additional notes describing the ADV calculation methodologies and criteria for determining whether a Member satisfies the requirements to qualify for any of the rebate or fee tiers is reasonable, equitable, and non-discriminatory because these notes and definitions are designed to ensure that the Fee Schedule is as clear and easily understandable as possible with respect to the requirements of the proposed rebate or fee tiers. Additionally, the Exchange believes that excluding system disruption days and days with a scheduled early close when calculating ADV is reasonable, equitable, and non-discriminatory because, as explained above, the Exchange believes doing so would avoid penalizing Members that might otherwise have met the requirements to qualify for the proposed Displayed Liquidity Adding Rebate Tier 2 (or to avoid being subject to Displayed Liquidity Removing Fee Tier 1) but for the system disruption or scheduled early close. As discussed in the Purpose section, the exclusion of certain trading days from the ADV calculation is consistent with the methodologies used by other exchanges when calculating certain member trading and other volume metrics for purposes of determining whether members qualify for certain pricing incentives, including calculations of ADV for rebate tiers specifically. And as noted in the Purpose section, these exclusions are consistent with how other exchanges calculate ADV for rebate/fee tier purposes, and thus the Exchange does not believe that this aspect of the proposal raises any new or novel issues E:\FR\FM\19AUN1.SGM 19AUN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices not already considered by the Commission. Further, the Exchange believes that excluding routed shares that execute away from the Exchange, is reasonable, equitable, and non-discriminatory because, as explained above, these orders do not execute on IEX. And, as noted above, excluding routed executions on other exchanges from the ADV calculation is consistent with the practice of other exchanges, and thus the Exchange does not believe that this aspect of the proposal raises any new or novel issues not already considered by the Commission. Similarly, the Exchange believes that excluding shares that execute in an auction or the opening process from the ADV calculation is reasonable, equitable, and non-discriminatory because, as explained above, these executions are not eligible for rebates and the adding and removing liquidity concepts are not applicable to the auction or opening processes. As described above, the proposed additional language in the Fee Schedule permitting aggregation of trades among affiliated Members for purposes of the ADV calculation is intended to avoid disparate treatment of firms that have divided their various business activities between separate corporate entities as compared to firms that operate those business activities within a single corporate entity. Accordingly, the Exchange believes that its proposed policy is fair and equitable, and not unreasonably discriminatory. In addition to ensuring fair and equal treatment of its Members, the Exchange does not want to create incentives for its Members to restructure their business operations or compliance functions simply due to the Exchange’s pricing structure. Moreover, as noted above, this proposed policy is consistent with the practice of the Exchange and other exchanges with respect to the aggregation of affiliated Members’ volumes for purposes of determining ADV with respect to pricing tiers, and therefore, it does not raise any new or novel issues that have not previously been considered by the Commission. As discussed above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. Within that context, the proposed Displayed Liquidity Adding Rebate Tier structure is designed to keep IEX’s displayed trading prices competitive with those of other exchanges. The proposed rebate for the new Displayed Liquidity Adding Rebate Tier 2 (as well as the current VerDate Sep<11>2014 18:07 Aug 16, 2024 Jkt 262001 rebate that will be applicable to Tier 1) are within the range offered by competing exchanges, and thus IEX does not believe that the proposal raises any new or novel issues not already considered by the Commission in the context of other exchanges’ fees. The Exchange further believes that the proposed rebate tiers are consistent with the Act’s requirement that the Exchange provide for an equitable allocation of fees that is also not unfairly discriminatory, because the proposed rebate tiers will apply based on a Member’s average daily volume (with no regard to the percentage of total market volume reflected by their trades) in an equal and nondiscriminatory manner to all Members, and all Members are eligible to qualify for any of the proposed rebate tiers. Furthermore, as discussed in the Purpose section, the Exchange believes it is reasonable to adopt the proposed Displayed Liquidity Removing Fee Tiers, including the proposed higher displayed liquidity removing fee associated with Fee Tier 1 applied to Members that do not trade a minimum amount of Added Displayed Liquidity volume on the Exchange. In particular, the proposed fee tiers are designed to incentivize IEX Members to enter increased displayed liquidity adding orders on the Exchange in order to avoid the proposed higher fee tier. The Exchange believes that the proposed fee tiers are equitable and not unfairly discriminatory because they would apply to all similarly situated Members and because any Member may avoid imposition of the higher fees applied in Fee Tier 1 by adding the requisite level of displayed liquidity to the Exchange during a month. As noted above, the proposed Displayed Liquidity Removing Fee Tiers are within the range charged by competing exchanges, and thus IEX believes they do not raise any new or novel issues not already considered by the Commission in the context of other exchanges’ fees. Additionally, the Exchange believes that the proposed fee tiers are reasonable because they are designed to incentivize Members to maintain a meaningful level of liquidityadding activity on the Exchange. The Exchange also believes that it is reasonable and consistent with the Act not to modify its displayed fees for subdollar executions to synchronize those fees with the proposed fees for executions at or above $1.00 per share. The Exchange believes that the existing fee structure for such executions continues to be reasonably designed to incentivize displayed order flow (and orders seeking to trade with displayed order flow) in such securities. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 67137 Further, IEX believes that it is reasonable and consistent with the Act not to change the fees applicable to the execution of Retail orders that remove liquidity, which will continue to execute for free. In this regard, the Exchange believes that the existing fee structure continues to be reasonably designed to incentivize the entry of Retail orders, and notes that the Commission, in approving IEX’s Retail Price Improvement Program, acknowledged the value of exchanges’ offering incentives to attract both retail investor orders and orders specifically designated to execute only with retail orders.29 Finally, to the extent this proposed fee change is successful in incentivizing the entry and execution of displayed orders on IEX, such greater liquidity will benefit all market participants by increasing price discovery and price formation as well as market quality and execution opportunities. And, as discussed above, IEX does not believe that any aspect of this proposal raises new or novel issues not already considered by the Commission. B. Self-Regulatory Organization’s Statement on Burden on Competition IEX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive market in which market participants can readily favor competing venues if fee schedules at other venues are viewed as more favorable. Consequently, the Exchange believes that the degree to which IEX fees could impose any burden on competition is extremely limited, and does not believe that such fees would burden competition between Members or competing venues. Moreover, as noted in the Statutory Basis section, the Exchange does not believe that the proposed changes raise any new or novel issues not already considered by the Commission. The Exchange 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 because, while different rebates and fees 29 See Securities Exchange Act Release No. 86619 (August 9, 2019), 84 FR 41769, 41771 (August 15, 2019) (SR–IEX–2019–05). E:\FR\FM\19AUN1.SGM 19AUN1 67138 Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices are assessed on Members, these rebate and fee tiers are not based on the type of Member entering the orders that match, but rather on the Member’s own trading activity. Further, the proposed fee changes continue to be intended to encourage market participants to bring increased order flow to the Exchange, which benefits all market participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 30 of the Act. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 31 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–2024–13 on the subject line. ddrumheller on DSK120RN23PROD with NOTICES1 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–2024–13. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–IEX–2024–13 and should be submitted on or before September 9, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–18472 Filed 8–16–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100715; File No. SR– CboeBYX–2024–027] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Replace the Regulatory Transaction Fee With a Sales Value Fee August 13, 2024. 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 July 30, 2024, Cboe BYX Exchange, Inc. (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 30 15 U.S.C. 78s(b)(3)(A)(ii). 31 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:07 Aug 16, 2024 ‘‘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 Cboe BYX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX’’) proposes to amend its Fees Schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/BYX/), 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. 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 its Fees Schedule to add language concerning the application and collection of the Sales Value Fee, as described below. By way of background, Section 31 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 3 requires each self-regulatory organization (‘‘SRO’’) to pay the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) twice annually a fee based on the aggregate dollar amount of certain sales of securities (i.e., ‘‘covered sales’’). A covered sale is a ‘‘sale of a security, other than an exempt sale or a sale of a security future, occurring on a national securities exchange or by or through any member of a national securities association otherwise than on 1 15 Jkt 262001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 3 17 E:\FR\FM\19AUN1.SGM CFR 240.31. 19AUN1

Agencies

[Federal Register Volume 89, Number 160 (Monday, August 19, 2024)]
[Notices]
[Pages 67133-67138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18472]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100718; File No. SR-IEX-2024-13]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Fee Schedule Concerning Transaction Pricing

August 13, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the

[[Page 67134]]

``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, 
on July 31, 2024, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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\ the Exchange is filing with the 
Commission a proposed rule change to amend the Exchange's fee schedule 
applicable to Members \6\ (the ``Fee Schedule'' \7\) pursuant to IEX 
Rule 15.110(a) and (c). Changes to the Fee Schedule pursuant to this 
proposal are effective upon filing,\8\ and will be operative on August 
1, 2024.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ See IEX Rule 1.160(s).
    \7\ See Investors Exchange Fee Schedule, available at https://www.iexexchange.io/resources/trading/fee-schedule.
    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these 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 Exchange proposes to modify its Fee Schedule, pursuant to IEX 
Rule 15.110(a) and (c), to introduce two different tier-based volume-
based pricing structures designed to improve market quality on the 
Exchange by incentivizing Members to send more displayed liquidity 
adding orders to the Exchange. The first tier-based structure will 
provide for an enhanced rebate for executions of displayed liquidity 
adding orders priced at or above $1.00 per share applicable to Members 
that meet certain liquidity adding requirements specified below. The 
second tier-based structure will provide for a higher fee for displayed 
liquidity removing orders priced at or above $1.00 per share applicable 
to Members that do not trade a minimum amount of displayed liquidity 
adding volume as specified below.
Displayed Liquidity Adding Rebate Tiers
    The Exchange proposes to introduce a tiered pricing structure 
applicable to the rebates provided for executions of displayed 
liquidity adding orders \9\ priced at or above $1.00 per share (``Added 
Displayed Liquidity'').\10\ Specifically, the Exchange proposes to 
revise its Fee Schedule to set forth two volume-based rebate tiers: 
Tier 1 and Tier 2 (referred to in the Fee Schedule as the ``Displayed 
Liquidity Adding Rebate Tiers'').
---------------------------------------------------------------------------

    \9\ This higher rebate would apply to any orders assigned Fee 
Code Combinations ML, MLB, MLY, and MLYB.
    \10\ Nothing in this rule filing affects trades below $1.00 per 
share (``sub-dollar trades''). Sub-dollar trades would not impact 
the rebate tier calculations and remain ineligible for rebates.
---------------------------------------------------------------------------

    As proposed, Tier 1 will provide the Exchange's current base rebate 
of $0.0014 per share to all Added Displayed Liquidity for Members that 
add less than 10,000,000 ADV \11\ of Added Displayed Liquidity. And 
Tier 2 will provide a rebate of $0.0020 per share to all Added 
Displayed Liquidity for Members that add at least 10,000,000 ADV of 
Added Displayed Liquidity (a rebate of $0.0006 more per share than the 
rebate provided currently and pursuant to Tier 1). IEX notes that this 
model of offering volume-based rebates is consistent with the rebates 
offered by competitor exchanges.\12\ The Exchange also notes that the 
new proposed rebate for Tier 2 (as well as the current rebate that will 
be applicable to Tier 1) is lower than the highest rebates offered by 
competing exchanges.\13\
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    \11\ As proposed, IEX will introduce the following definition of 
ADV: ``ADV'' means average daily volume calculated as the number of 
shares added or removed that execute at or above $1.00 per share, 
combined, per day. ADV is calculated on a monthly basis.
    \12\ See, e.g., MEMX Equities Fee Schedule (Effective July 16, 
2024), available at https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/. However, IEX's proposed Tier 2 
would be based on each Member's ADV, without a requirement to meet a 
total consolidated volume threshold.
    \13\ See, e.g., MEMX Equities Fee Schedule, supra note 12 
(maximum rebate of $0.0037); Nasdaq Equity VII, Section 114 (maximum 
rebate of $0.0036); New York Stock Exchange Price List 2024 (as of 
June 3, 2024), https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (maximum rebate of $0.0035).
---------------------------------------------------------------------------

    Accordingly, IEX proposes to update its Fee Schedule to make 
several revisions to reflect the proposed rebate tiers. First, the 
Exchange proposes to amend the Base Rates table to update the 
description and fees associated with Base Fee Code ML (``Add displayed 
liquidity''). As amended, the Base Rates table will list two base rates 
for Fee Code ML--the $0.0014 rebate applied if ``Member adds less than 
10,000,000 ADV of displayed liquidity'' and the higher $0.0020 rebate 
applied if ``Member adds at least 10,000,000 ADV of displayed 
liquidity.''
    IEX also proposes to add Footnote 4 to the Transaction Fees 
section, which will be applicable to fee code ML in the Base Rates 
table, and to Fee Code Combinations ML, MLB, MLY, and MLYB in the Fee 
Code Combination and Associated Fees table. As proposed, Footnote 4 is 
titled ``Displayed Liquidity Adding Rebate Tiers (Applicable to 
Executions at or above $1)'' and followed by a table describing Tier 1 
and Tier 2, including the required criteria for each rebate tier and 
the applicable rebate, as described above.
    The new rebate tiers are based on each Member's ADV, which is not 
currently defined in IEX's Fee Schedule. Therefore, IEX also proposes 
to update the list of ``Definitions'' in the Transaction Fees section 
of the Fee Schedule by renaming it ``Definitions and Information'', and 
adding a definition of ADV and relevant information thereof to the 
list:
     ``ADV'' means average daily volume calculated as the 
number of shares added or removed (as applicable) that execute at or 
above $1.00 per share, combined, per day. ADV is calculated on a 
monthly basis.
    [cir] The Exchange excludes from its calculations of ADV any 
trading day that the Exchange's system experiences a disruption that 
lasts for more than 60 minutes during regular trading hours and any day 
with a scheduled early market close.
    [cir] Routed shares executed away from IEX are not included in ADV 
calculation.
    [cir] Auction and Opening Process executed shares are not included 
in ADV calculation.
    [cir] With prior notice to the Exchange, a Member may aggregate ADV 
with

[[Page 67135]]

other Members with which the Member is affiliated pursuant to Rule 12b-
2 under the Act.
    In calculating a Member's ADV, the numerator will be the share 
volume of applicable transactions (i.e., adding, removing, displayed, 
non-displayed, as applicable) during the month and the denominator will 
be the total number of eligible trading days in the month.
    As noted above, when calculating ADV, the Exchange will exclude 
days with system disruptions that last for more than 60 minutes and 
days with scheduled early closes when determining the numerator and the 
denominator. An Exchange system disruption may occur, for example, 
where a certain group of securities traded on the Exchange is 
unavailable for trading due to an Exchange system issue. Similarly, the 
Exchange may be able to perform certain functions with respect to 
accepting and processing orders, but may have a failure to another 
significant process, such as routing to other market centers, that 
would lead Members that rely on such process to avoid utilizing the 
Exchange until the Exchange's entire system was operational. The 
Exchange believes that these types of Exchange system disruptions could 
preclude Members from participating on the Exchange to the extent that 
they might have otherwise participated on such days, and thus, the 
Exchange believes it is appropriate to exclude such days when 
determining a Member's ADV to avoid penalizing Members that might 
otherwise have met the ADV requirements for the higher rebate provided 
for in Tier 2. For similar reasons, the Exchange believes it is 
appropriate to exclude trading days with scheduled early closes, 
because the shorter trading days are likely to result in a lower 
monthly average daily trading volume for each Member. The Exchange 
notes that excluding system disruption days and trading days with 
scheduled early closes is consistent with the methodologies used by 
other exchanges when calculating each member's ADV.\14\
---------------------------------------------------------------------------

    \14\ See, e.g., MEMX Equities Fee Schedule, supra note 12.
---------------------------------------------------------------------------

    The Exchange will exclude routed shares that executed away from the 
Exchange from its ADV calculations because, by definition, these are 
not trades that added displayed liquidity to the Exchange.\15\ The 
Exchange notes that excluding routed shares from the calculation of ADV 
is also consistent with the practice of other exchanges when 
calculating ADV.\16\ And the Exchange will exclude executions in the 
opening process for non-listed securities from its ADV calculations, 
because they are not eligible for any rebates and the adding and 
removing liquidity concepts are not applicable to the opening 
process.\17\
---------------------------------------------------------------------------

    \15\ IEX also notes that it only charges Members a nominal fee 
of $0.0001 on top of the away market's transaction fee for each 
routable share that executes away from the Exchange.
    \16\ See, e.g., MEMX Equities Fee Schedule, supra note 12.
    \17\ Similarly, in the event that the Exchange were to have 
auctions, such transactions would also be excluded.
---------------------------------------------------------------------------

    The Exchange will allow Members to aggregate their ADV with other 
Members with which they are affiliated,\18\ if Members provide prior 
notice to the Exchange. As proposed, to the extent that two or more 
affiliated companies maintain separate memberships with the Exchange 
and can demonstrate their affiliation by showing they control, are 
controlled by, or are under common control with each other, the 
Exchange would permit such Members to aggregate their ADV. Members will 
be responsible for having proper internal documentation in their books 
and records substantiating that the two or more Members seeking to 
aggregate their ADV are affiliates of one another. IEX notes that this 
grouping of Member affiliates is consistent with how IEX allows Member 
affiliates to apply IEX's optional anti-internalization functionality 
across affiliates,\19\ and is already a common practice for exchanges 
that offer tiered rebates, in order to not penalize two affiliated 
members when calculating rebate tiers.\20\
---------------------------------------------------------------------------

    \18\ As defined in Rule 12b-2 under the Act, 17 CFR 240.12b-2.
    \19\ See IEX Rule 11.190(e)(1)(B).
    \20\ See, e.g., the Nasdaq Stock Market LLC Equity 7, Section 
127 (``Aggregation of Activity of Affiliated Members'').
---------------------------------------------------------------------------

    As noted above, the Exchange is not proposing to change the fees 
applicable to executions of and with orders with an execution price 
below $1.00 per share, which would remain free for such orders that 
provide displayed liquidity and subject to a fee of 0.09% of the total 
dollar volume of the execution for orders that take displayed 
liquidity. IEX is also not proposing to make any changes to the fees 
applicable to the execution of Retail \21\ orders that remove displayed 
liquidity, which will continue to execute for free.
---------------------------------------------------------------------------

    \21\ See IEX Rule 11.190(b)(15).
---------------------------------------------------------------------------

    The Exchange believes the proposed Displayed Liquidity Adding 
Rebate Tier structure would provide an incremental incentive for 
Members to send more orders to the Exchange in an effort to qualify for 
the proposed enhanced rebate offered by Tier 2 for executions of Added 
Displayed Volume. As such, the proposed Displayed Liquidity Adding 
Rebate Tiers are designed to encourage Members that provide liquidity 
on the Exchange to maintain or increase their order flow, thereby 
contributing to a deeper and more liquid market to the benefit of all 
market participants and enhancing the attractiveness of the Exchange as 
a trading venue.
Displayed Liquidity Removing Fee Tiers
    The Exchange also proposes to introduce a tiered pricing structure 
applicable to the fees charged for executions of displayed liquidity 
removing orders priced at or above $1.00 per share. Specifically, the 
Exchange proposes to revise its Fee Schedule to set forth two volume-
based fee tiers: Tier 1 and Tier 2 (referred to in the Fee Schedule as 
the ``Displayed Liquidity Removing Fee Tiers'').
    As proposed, Tier 1 will apply a new $0.0030 per share fee to all 
displayed liquidity removing orders for Members that add less than 
25,000 ADV of Added Displayed Liquidity. And Tier 2 will apply the 
Exchange's current base displayed liquidity removing fee of $0.0020 per 
share to all displayed liquidity removing orders for Members that add 
at least 25,000 ADV of Added Displayed Liquidity.\22\
---------------------------------------------------------------------------

    \22\ For purposes of determining a Member's Displayed Liquidity 
Removing Fee Tier, the Exchange will conduct the same ADV 
calculation described above.
---------------------------------------------------------------------------

    Accordingly, IEX proposes to update its Fee Schedule to amend the 
Base Rates table to update the description and fees associated with 
Base Fee Code TL (``Remove displayed liquidity''). As amended, the Base 
Rates table will list two base rates for Fee Code TL--the current 
$0.0020 fee applied if a ``Member adds at least 25,000 ADV of displayed 
liquidity'', and the new $0.0030 fee applied if a ``Member adds less 
than 25,000 ADV of displayed liquidity.''
    IEX also proposes to add Footnote 5 to the Transaction Fees 
section, which will be applicable to fee code TL in the Base Rates 
table, and to fee code combinations TL, TLB, TLY, TLYB, TLW, and TLWB 
in the Fee Code Combination and Associated Fees table. As proposed, 
Footnote 5 is titled ``Displayed Liquidity Removing Fee Tiers 
(Applicable to Executions at or above $1)'' and followed by a table 
describing Tier 1 and Tier 2, including the required criteria for each 
tier and the applicable fee, as described above.
    The Exchange believes it is reasonable to charge its members an 
increased fee

[[Page 67136]]

for removing displayed liquidity from the Exchange if they do not trade 
a minimum amount of Added Displayed Liquidity volume on the Exchange. 
The proposed higher displayed liquidity removing fee in Tier 1 is 
designed to incentivize Members to maintain a minimum level of 
displayed adding activity on the Exchange. The Exchange notes this fee 
is consistent with other ``maker-taker'' exchanges that charge higher 
fees of members to remove liquidity if the members do not qualify for 
any volume tiers.\23\ Similarly, some ``taker-maker'' exchanges charge 
liquidity removal fees of Members that do not maintain a meaningful 
level of liquidity adding activity. For example, Nasdaq BX charges 
$0.0007 per share for all liquidity removing orders if the member does 
not add at least 50,000 ADV (by contrast, members that add at least 
50,000 ADV qualify for at least a $0.0005 per share rebate).\24\ The 
Exchange periodically assesses its fee structure and based upon a 
recent assessment, the Exchange believes that these proposed pricing 
changes would further incentivize Members to submit displayed orders in 
securities priced at or above $1.00 per share. The proposed fee changes 
are designed to incentivize posting displayed liquidity on IEX in 
securities priced at or above $1.00 per share in order to address 
competitive factors (as discussed more thoroughly in the Statutory 
Basis section) and facilitate price discovery and price formation, 
which the Exchange believes benefits all Members and market 
participants.
---------------------------------------------------------------------------

    \23\ See, e.g., New York Stock Exchange Price List 2024 (as of 
June 3, 2024), supra note 13 (charging $0.0030 per share for 
liquidity removing orders, but charging between $0.00285 and 
$0.00295 for the same orders if the member adds between 0.05% and 
1.05% ADV of the Consolidated Average Daily Volume); see also MEMX 
Equities Fee Schedule, supra note 12 (charging $0.0030 per share for 
liquidity removing orders, but charging $0.00295 for the same orders 
if the member's ADV qualifies it for MEMX's Liquidity Removal Tier 
by having an ADV greater than or equal to 0.70% of the Total 
Consolidated Volume, including at least .35% of the Total 
Consolidated Volume remove ADV).
    \24\ See Nasdaq BX Equity VII, Section 118.
---------------------------------------------------------------------------

2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \25\ of the Act in general, and furthers the 
objectives of Sections 6(b)(4) \26\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities. The Exchange believes that the proposed fee change is 
reasonable, fair and equitable, and non-discriminatory.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f.
    \26\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive. IEX has 
concluded that, in the context of current regulatory requirements 
governing access fees and rebates, it will be able to more effectively 
compete with other exchanges for order flow by offering higher rebate 
incentives. Based upon informal discussions with market participants, 
IEX believes that Members and other market participants may be more 
willing to send displayed orders to IEX if the proposed fee structure 
was adopted.
    Accordingly, IEX has designed the proposed access fee and rebate 
tiers to attract and incentivize displayed orders as well as order flow 
seeking to trade with such displayed orders. Moreover, increases in 
displayed liquidity would contribute to the public price discovery 
process which would benefit all market participants and protect 
investors and the public interest.
    As it has stated repeatedly, IEX believes that the existing access 
fee level of $0.0030 per share set by Rule 610 of Regulation NMS \27\ 
heavily affects the way that exchanges compete for order flow and has 
led to various market distortions and inefficiencies. It has also 
created a collective action problem that substantially hinders the 
ability of exchanges to compete by offering better execution quality 
and without relying on high access fees and correspondingly high 
rebates. The Commission can resolve this problem and help to promote 
more displayed liquidity by substantially reducing the access fee cap 
for all NMS stocks, a step that is consistent with other market-based 
trading cost measures and one favored by a broad spectrum of market 
participants and virtually all institutional investors that have 
commented on this issue.\28\ IEX hopes to be able to further adjust its 
transaction prices in the near future to reflect a market-wide adoption 
of lower access fees as a result of this critically-needed reform.
---------------------------------------------------------------------------

    \27\ 17 CFR 242.610.
    \28\ See IEX comment letters on S7-30-22, Regulation NMS: 
Minimum Pricing Increments, Access Fees, and Transparency of Better-
Priced Orders: https://www.sec.gov/comments/s7-30-22/s73022-20160364-328968.pdf; https://www.sec.gov/comments/s7-30-22/s73022-276579-672162.pdf; https://www.sec.gov/comments/s7-30-22/s73022-434239-1076742.pdf.
---------------------------------------------------------------------------

    Thus, as discussed in the Purpose section, the Exchange believes 
that the proposed adoption of a volume-based rebate tier that provides 
higher rebates for Members that provide a relatively higher ADV of 
displayed liquidity is reasonable and consistent with the Act because 
it is designed to incentivize Members to add additional displayed 
orders on IEX. Specifically, the Exchange believes that the volume-
based rebate tiers are reasonably designed to incentivize Members to 
add a meaningful volume of displayed liquidity by providing a $0.0006 
higher rebate for Members that qualify for Tier 2 than it provides to 
Members that qualify for Tier 1. As noted in the Purpose section, other 
exchanges offer rebate tiers, and thus the Exchange does not believe 
that this aspect of the proposal raises any new or novel issues not 
already considered by the Commission.
    The Exchange also believes that adding to the Fee Schedule the 
notes defining ``ADV'' and additional notes describing the ADV 
calculation methodologies and criteria for determining whether a Member 
satisfies the requirements to qualify for any of the rebate or fee 
tiers is reasonable, equitable, and non-discriminatory because these 
notes and definitions are designed to ensure that the Fee Schedule is 
as clear and easily understandable as possible with respect to the 
requirements of the proposed rebate or fee tiers.
    Additionally, the Exchange believes that excluding system 
disruption days and days with a scheduled early close when calculating 
ADV is reasonable, equitable, and non-discriminatory because, as 
explained above, the Exchange believes doing so would avoid penalizing 
Members that might otherwise have met the requirements to qualify for 
the proposed Displayed Liquidity Adding Rebate Tier 2 (or to avoid 
being subject to Displayed Liquidity Removing Fee Tier 1) but for the 
system disruption or scheduled early close. As discussed in the Purpose 
section, the exclusion of certain trading days from the ADV calculation 
is consistent with the methodologies used by other exchanges when 
calculating certain member trading and other volume metrics for 
purposes of determining whether members qualify for certain pricing 
incentives, including calculations of ADV for rebate tiers 
specifically. And as noted in the Purpose section, these exclusions are 
consistent with how other exchanges calculate ADV for rebate/fee tier 
purposes, and thus the Exchange does not believe that this aspect of 
the proposal raises any new or novel issues

[[Page 67137]]

not already considered by the Commission.
    Further, the Exchange believes that excluding routed shares that 
execute away from the Exchange, is reasonable, equitable, and non-
discriminatory because, as explained above, these orders do not execute 
on IEX. And, as noted above, excluding routed executions on other 
exchanges from the ADV calculation is consistent with the practice of 
other exchanges, and thus the Exchange does not believe that this 
aspect of the proposal raises any new or novel issues not already 
considered by the Commission.
    Similarly, the Exchange believes that excluding shares that execute 
in an auction or the opening process from the ADV calculation is 
reasonable, equitable, and non-discriminatory because, as explained 
above, these executions are not eligible for rebates and the adding and 
removing liquidity concepts are not applicable to the auction or 
opening processes.
    As described above, the proposed additional language in the Fee 
Schedule permitting aggregation of trades among affiliated Members for 
purposes of the ADV calculation is intended to avoid disparate 
treatment of firms that have divided their various business activities 
between separate corporate entities as compared to firms that operate 
those business activities within a single corporate entity. 
Accordingly, the Exchange believes that its proposed policy is fair and 
equitable, and not unreasonably discriminatory. In addition to ensuring 
fair and equal treatment of its Members, the Exchange does not want to 
create incentives for its Members to restructure their business 
operations or compliance functions simply due to the Exchange's pricing 
structure. Moreover, as noted above, this proposed policy is consistent 
with the practice of the Exchange and other exchanges with respect to 
the aggregation of affiliated Members' volumes for purposes of 
determining ADV with respect to pricing tiers, and therefore, it does 
not raise any new or novel issues that have not previously been 
considered by the Commission.
    As discussed above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive. Within that context, the proposed Displayed Liquidity Adding 
Rebate Tier structure is designed to keep IEX's displayed trading 
prices competitive with those of other exchanges. The proposed rebate 
for the new Displayed Liquidity Adding Rebate Tier 2 (as well as the 
current rebate that will be applicable to Tier 1) are within the range 
offered by competing exchanges, and thus IEX does not believe that the 
proposal raises any new or novel issues not already considered by the 
Commission in the context of other exchanges' fees.
    The Exchange further believes that the proposed rebate tiers are 
consistent with the Act's requirement that the Exchange provide for an 
equitable allocation of fees that is also not unfairly discriminatory, 
because the proposed rebate tiers will apply based on a Member's 
average daily volume (with no regard to the percentage of total market 
volume reflected by their trades) in an equal and nondiscriminatory 
manner to all Members, and all Members are eligible to qualify for any 
of the proposed rebate tiers.
    Furthermore, as discussed in the Purpose section, the Exchange 
believes it is reasonable to adopt the proposed Displayed Liquidity 
Removing Fee Tiers, including the proposed higher displayed liquidity 
removing fee associated with Fee Tier 1 applied to Members that do not 
trade a minimum amount of Added Displayed Liquidity volume on the 
Exchange. In particular, the proposed fee tiers are designed to 
incentivize IEX Members to enter increased displayed liquidity adding 
orders on the Exchange in order to avoid the proposed higher fee tier. 
The Exchange believes that the proposed fee tiers are equitable and not 
unfairly discriminatory because they would apply to all similarly 
situated Members and because any Member may avoid imposition of the 
higher fees applied in Fee Tier 1 by adding the requisite level of 
displayed liquidity to the Exchange during a month. As noted above, the 
proposed Displayed Liquidity Removing Fee Tiers are within the range 
charged by competing exchanges, and thus IEX believes they do not raise 
any new or novel issues not already considered by the Commission in the 
context of other exchanges' fees. Additionally, the Exchange believes 
that the proposed fee tiers are reasonable because they are designed to 
incentivize Members to maintain a meaningful level of liquidity-adding 
activity on the Exchange.
    The Exchange also believes that it is reasonable and consistent 
with the Act not to modify its displayed fees for sub-dollar executions 
to synchronize those fees with the proposed fees for executions at or 
above $1.00 per share. The Exchange believes that the existing fee 
structure for such executions continues to be reasonably designed to 
incentivize displayed order flow (and orders seeking to trade with 
displayed order flow) in such securities.
    Further, IEX believes that it is reasonable and consistent with the 
Act not to change the fees applicable to the execution of Retail orders 
that remove liquidity, which will continue to execute for free. In this 
regard, the Exchange believes that the existing fee structure continues 
to be reasonably designed to incentivize the entry of Retail orders, 
and notes that the Commission, in approving IEX's Retail Price 
Improvement Program, acknowledged the value of exchanges' offering 
incentives to attract both retail investor orders and orders 
specifically designated to execute only with retail orders.\29\
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    \29\ See Securities Exchange Act Release No. 86619 (August 9, 
2019), 84 FR 41769, 41771 (August 15, 2019) (SR-IEX-2019-05).
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    Finally, to the extent this proposed fee change is successful in 
incentivizing the entry and execution of displayed orders on IEX, such 
greater liquidity will benefit all market participants by increasing 
price discovery and price formation as well as market quality and 
execution opportunities. And, as discussed above, IEX does not believe 
that any aspect of this proposal raises new or novel issues not already 
considered by the Commission.

B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange operates in a highly competitive 
market in which market participants can readily favor competing venues 
if fee schedules at other venues are viewed as more favorable. 
Consequently, the Exchange believes that the degree to which IEX fees 
could impose any burden on competition is extremely limited, and does 
not believe that such fees would burden competition between Members or 
competing venues. Moreover, as noted in the Statutory Basis section, 
the Exchange does not believe that the proposed changes raise any new 
or novel issues not already considered by the Commission.
    The Exchange 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 because, while 
different rebates and fees

[[Page 67138]]

are assessed on Members, these rebate and fee tiers are not based on 
the type of Member entering the orders that match, but rather on the 
Member's own trading activity. Further, the proposed fee changes 
continue to be intended to encourage market participants to bring 
increased order flow to the Exchange, which benefits all market 
participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \30\ of the Act.
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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \31\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \31\ 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-2024-13 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-2024-13. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-IEX-2024-13 and should be 
submitted on or before September 9, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18472 Filed 8-16-24; 8:45 am]
BILLING CODE 8011-01-P
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