[Federal Register Volume 81, Number 147 (Monday, August 1, 2016)]
[Notices]
[Pages 50573-50576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18054]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78416; File No. SR-IEX-2016-01]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Collection of Exchange Fees and Other Claims and Billing Policy

July 26, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on July 12, 2016, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change
    The Exchange proposes to adopt Rule 15.120 and entitle it 
``Collection of Exchange Fees and Other Claims and Billing Policy'' 
that (a) requires each IEX Member, and all applications for membership, 
to provide a clearing account number for an account at the National 
Securities Clearing Corporation (``NSCC'') for purposes of permitting 
the Exchange to debit certain fees, fines, charges and/or other 
monetary sanctions or other monies due and owing to the Exchange; and 
(b) require [sic] IEX Members to submit billing disputes within a 
certain time period.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.iextrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change
    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statement [sic] may be examined 
at the places specified in Item IV below. The self-regulatory 
organization has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change
1. Purpose
    The purpose of the proposed rule change is to adopt Rule 15.120 to 
(a) require each IEX Member, and all applications for membership, to 
provide a clearing account number for an account at the National 
Securities Clearing Corporation (``NSCC'') for purposes of permitting 
the Exchange to debit certain fees, fines, charges and/or other 
monetary sanctions or other monies due and owing to the Exchange; and 
(b) require IEX Members to submit billing disputes within a certain 
time period.
Direct Debit Process
    As proposed, paragraph (a) of Rule 15.120 requires IEX Members, and 
all applicants for membership, to provide a

[[Page 50574]]

clearing account number for an account at NSCC for purposes of 
permitting the Exchange to debit any undisputed or final fees, fines, 
charges and/or other monetary sanctions or other monies due and owing 
to the Exchange or other charges pursuant to Rule 15.110, including the 
Exchange Fee Schedule thereto; Regulatory Transaction Fees pursuant to 
Rule 15.110(b); dues, assessments and other charges pursuant to Rule 
2.200 to the extent the Exchange were to determine to charge such fees; 
and fines, sanctions and other charges pursuant to Chapters 8 and 9 of 
the IEX Rulebook \5\ which are due and owing to IEX (collectively 
``Debit Amount''). The Exchange Fee Schedule specifies charges for 
transactions, routing and other services provided by the Exchange and 
certain fees that are collected by the Financial Industry Regulatory 
Authority (``FINRA''). Only the charges which require payment to the 
Exchange would be subject to direct debit. The Exchange does not 
currently charge fees for certain of the services listed on the 
Exchange Fee Schedule. The Exchange would entitle Rule 15.120 
``Collection of Exchange Fees and Other Claims and Billing Policy.''
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    \5\ This includes, among other things, fines and sanctions which 
result from disciplinary proceedings or actions taken pursuant to 
Chapters 8 and 9 of the IEX Rules, as specified in Rule 8.310. In 
addition, the IEX notes that it also has authority under Rules 8.350 
and 9.553 to suspend, cancel or bar a Member that fails to pay final 
fees, fines, charges and/or other monetary sanctions or other monies 
due and owing to the Exchange or other charges pursuant to Rule 
15.110, including the Exchange Fee Schedule thereto. While this 
direct debit process should minimize failures to pay, those rules 
nevertheless will act as a backstop to the direct debit process. 
With respect to disciplinary proceedings, the Exchange would not 
debit any monies until such action is final. The Exchange would not 
consider an action final until all appeal periods have run and/or 
all appeal timeframes are exhausted. With respect to non-
disciplinary actions, the Exchange would similarly not take action 
to debit a Member account until all appeal periods have run and/or 
all appeal timeframes are exhausted. Any uncontested disciplinary or 
non-disciplinary actions will be debited, and the amount due will 
appear on the IEX Member's invoice prior to the actual NSCC debit.
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    As proposed, the Exchange will send a monthly electronic invoice by 
email to each Member, generally by the 12th day of each month for the 
Debit Amount due to IEX for the prior month. IEX will also send files 
to NSCC each month by the 28th day of each month to initiate the debit 
of the Debit Amount due to IEX as stated on the Member's invoice for 
the prior month. If the 28th day of the month is not a business day, 
IEX will send the files to NSCC by the preceding business day. IEX 
anticipates that NSCC will process the debits on the day it receives 
the file or the following business day. Because Members will receive an 
invoice approximately two weeks before the debit date, Members will 
have adequate time to contact IEX staff with any questions concerning 
their invoice. If an IEX Member disagrees with the invoice in whole or 
in part, the Exchange would not commence the debit for the disputed 
amount until the dispute is resolved. Specifically, the Exchange will 
not include the disputed amount (or the entire invoice if it is not 
feasible to identify the disputed amounts) in the NSCC Debit Amount if 
the Member has provided written notification of the dispute to the IEX 
accounting department at [email protected] by the later of the 
25th of the month (or the following business day if the 25th is not a 
business day) or ten days after the date the electronic invoice was 
sent to the Member, and the amount in dispute is at least $10,000 or 
greater.
    Once NSCC receives the file from the Exchange, NSCC would proceed 
to debit the amounts indicated from the clearing Members' account and 
disburse such amounts to the Exchange. In the instance where the Member 
clears through an IEX clearing member, the Exchange understands that 
the estimated transaction fees owed to the Exchange are typically 
debited by the IEX clearing Member on a daily basis using daily 
transaction detail reports provided by the Exchange to the IEX clearing 
Member in order to ensure adequate funds have been escrowed.
    The Exchange believes that the proposed debiting process for IEX 
members would create an efficient method of collecting undisputed or 
final fees, fines, charges and/or other monetary sanctions or monies 
due and owing to the Exchange. Collection matters could divert staff 
resources away from the Exchange's regulatory and business purposes. 
Moreover, the Exchange believes that it is reasonable to provide for a 
$10,000 limitation on pre-debit billing disputes since it would be 
inefficient to delay a direct debit for a de minimis amount. Members 
will still be able to dispute billing amounts that are less than 
$10,000 pursuant to paragraph (b) of Rule 15.120, as described below. 
The Exchange notes that a comparable debiting process is used by the 
NASDAQ Stock Market, NASDAQ OMX BX and NASDAQ OMX Phlx.\6\
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    \6\ See, NASDAQ Stock Market Rule 7007, NASDAQ OMX BX Rule 7011 
and NASDAQ OMX Phlx Rule 909.
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Billing Dispute Process
    In addition to, and separate from, the pre-debit dispute process 
described above, the Exchange also proposes to adopt a billing policy, 
pursuant to paragraph (b) of Rule 15.120 to require all pricing 
disputes, with respect to fees payable to the Exchange,\7\ to be 
submitted to the Exchange in writing \8\ and accompanied by supporting 
documentation within sixty days of receipt of an invoice. The Exchange 
believes that this policy will conserve Exchange resources, which are 
expended when untimely billing disputes require staff to research 
applicable fees and order information beyond two months after the 
invoice was issued. The sixty-day limitation would be applicable to all 
fees specified in paragraph (a) of Rule 15.120.
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    \7\ Fees that are collected by FINRA would not be subject to the 
billing policy, and any disputes would need to be raised by the 
Member directly with FINRA.
    \8\ The Exchange invoice will specify that billing disputes must 
be submitted to [email protected].
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    The Exchange expects that the proposed policy will provide a 
potential cost savings to the Exchange in that it would alleviate 
administrative burdens related to belated billing disputes, which could 
divert staff resources away from the Exchange's regulatory and business 
purposes. A similar policy is in place today at the NASDAQ Stock 
Market.\9\
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    \9\ See, NASDAQ Stock Market Rule 7007.
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with 
Section 6(b) \10\ of the Act in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\11\ 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, 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 direct debit process will provide IEX Members with an 
efficient process to pay undisputed or final fees, fines, charges and/
or monetary sanctions or monies due and owing to the Exchange. 
Similarly, the billing policy will set an objective process and will be 
fair to Members. Further, both aspects of the proposal are

[[Page 50575]]

expected to result in lower administrative costs for the Exchange.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to debit NSCC accounts is 
reasonable because it would ease the IEX Member's administrative burden 
in paying monthly invoices, avoid overdue balances and provide 
efficient collection from all IEX members who owe monies to the 
Exchange. Moreover, the Exchange believes that the 10-day minimum time 
frame that will be provided to Members to dispute invoices is 
reasonable and adequate to enable Members to identify potentially 
erroneous charges. In addition, the Exchange believes that the $10,000 
limitation on pre-debit billing disputes is reasonable because it would 
be inefficient to delay a direct debit for a de minimis amount. Members 
will still be able to dispute billing amounts that are less than 
$10,000 pursuant to paragraph (b) of Rule 15.120.
    Further, the Exchange believes that the requirement that billing 
disputes for specified fees be submitted to the Exchange within sixty 
days from receipt of the invoice will set objective standards, will be 
fair to Members, and that sixty days is ample time to review an invoice 
and dispute any pricing related to the transactions for that time 
period. It is also expected to lower the Exchange's administrative 
costs. An identical provision is applicable to NASDAQ Stock Market, 
NASDAQ OMX BX and NASDAQ OMX Phlx.\12\
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    \12\ See, NASDAQ Stock Market Rule 7007, NASDAQ OMX BX Rule 7011 
and NASDAQ OMX Phlx Rule 909.
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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. With this proposal, the 
proposed debit process and billing policy would apply uniformly to all 
IEX members.
    Further, this proposal is expected to provide a cost savings to the 
Exchange in that it would alleviate administrative processes related to 
the collection of monies owed to the Exchange by Members. Collection 
matters divert staff resources away from the Exchange's regulatory and 
business purposes. In addition, the debiting process would mitigate 
against IEX Member accounts becoming overdue.
    The Exchange does not believe that the proposal will create an 
intermarket burden on competition since the Exchange will only debit 
fees (other than de minimis fees below $10,000) that are undisputed by 
the Member and Members will have a reasonable opportunity to dispute 
fees both before and after the direct debit process. The Exchange also 
does not believe that the proposal will create an intramarket burden on 
competition, since the proposed direct debit process and billing policy 
will be applied equally to all Members. Moreover, other exchanges use a 
comparable process which IEX believes is generally familiar to Members. 
Consequently, IEX does not believe that the proposal raises any new or 
novel issues that have not been previously considered by the Commission 
in connection with direct debit and billing policies of other 
exchanges.\13\
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    \13\ See note 7 [sic].
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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
    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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative at the time of the launch of its operation as a 
national securities exchange. The Exchange stated that such waiver will 
allow the Exchange to implement a consistent process for its members to 
pay undisputed or final fees, fines, charges and/or monetary sanctions 
or monies due and owing to the Exchange. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest, as it will allow IEX to implement a 
rule that provides a process similar to that used by other exchanges 
for the direct debit of certain fees, fines, and charges, and also 
provides a mechanism to protect IEX members if they choose to contest 
an invoice. Therefore, the Commission hereby waives the operative delay 
and designates the proposed rule change operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-IEX-2016-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-IEX-2016-01. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will

[[Page 50576]]

post all comments on the Commission's Internet Web site (http://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 Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-IEX-2016-01, and should be submitted on or before August 
22, 2016.
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    \19\ 17 CFR 200.30-3(a)(12) and (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18054 Filed 7-29-16; 8:45 am]
 BILLING CODE 8011-01-P