[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54140-54141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19314]



[[Page 54140]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78509; File No. SR-IEX-2016-08]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 11.190(f) To Make Correcting and Clarifying Changes

August 9, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 1, 2016, the Investors Exchange LLC (``IEX'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Exchange has designated this proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \4\ and Rule 19b-4(f)(6)(iii) thereunder,\5\ 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\6\ and Rule 19b-4 thereunder,\7\ 
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change to amend Rule 11.190(f) to (i) eliminate obsolete references to 
route to rest functionality, (ii) replace the phrase ``displayed 
interest'' with ``displayable interest'' to more clearly describe how 
the IEX System handles such interest in a One-Sided Market, and (iii) 
describe how orders are handled in a Zero Market when a contra-side 
Protected Quotation returns. The Exchange has designated this rule 
change as non-controversial under Section 19(b)(3)(A) of the Act \8\ 
and provided the Commission with the notice required by Rule 19b-
4(b)(6)(iii) thereunder.\9\
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    \6\ 15 U.S.C. 78s(b)(1).
    \7\ 17 CRF 240.19b-4.
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 11.190(f) to (i) eliminate 
obsolete references to route to rest functionality in subparagraphs 
(4)(B)(i)(b) and 5(B), (ii) replace the phrase ``displayed interest'' 
with ``displayable interest'' in subparagraphs (4)(B), (4)(B)(i)(a) and 
(4)(B)(ii)(a) to more clearly describe how the IEX System handles such 
interest in a One-Sided Market, and (iii) describe, in subparagraphs 
5(A) and 5(B), how orders are handled in a Zero Market when a contra-
side Protected Quotation returns.
    With respect to references to route to rest functionality, 
subparagraphs (4)(B)(i)(b) and (5)(B) reference Rule 11.230(c)(6). 
However, Rule 11.230(c)(6) was deleted in connection with Amendment No. 
3 to IEX's Form 1 application under the Act, seeking registration as a 
national securities exchange pursuant to Section 6 of the Act.\10\ In 
Amendment No. 3,\11\ IEX proposed changes to redesign its outbound 
routing functionality, which changes included eliminating route to rest 
routing functionality previously described in Rule 11.230(c)(6). 
However, IEX inadvertently failed to delete references to such 
functionality in subparagraphs (4)(B)(i)(b) and (5)(B) of Rule 
11.190(f).
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    \10\ 15 U.S.C. 78f.
    \11\ See, Securities Exchange Act Release No. 77406 (March 18, 
2016).
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    Currently, subparagraph (4)(B)(i)(b) of Rule 11.190(f) provides 
that in a One-Sided Market (which lacks either a Protected Bid or 
Protected Offer) routable displayable orders on the same side as the 
Protected Quotation can route passively to rest on away trading 
centers. Similarly, subparagraph (5)(B) of Rule 11.190(f) provides that 
in a Zero Market (in which neither a Protected Bid nor Protected Offer 
exists) routable displayable orders can route passively to rest on away 
trading centers. As proposed, such orders will not be eligible to route 
passively to rest on away trading centers, while the One-Sided Market 
or Zero Market, as applicable, exists. Accordingly, IEX proposes to 
update its rules to delete those provisions.
    IEX also proposes to replace the phrase ``displayed interest'' with 
``displayable interest'' in subparagraphs (4)(B), (4)(B)(i)(a) and 
(4)(B)(ii)(a) to more clearly describe how the IEX System handles such 
interest in a One-Sided Market. Specifically, the subparagraphs noted 
above use the term ``displayed interest'' when describing trading 
interest that is eligible for display but may not have been displayed. 
Accordingly, the Exchange proposes to change such references to 
``displayable interest'' since the applicable rule provisions describe 
the handling of orders that are displayable even if not displayed.
    Finally, the Exchange proposes to describe, in subparagraphs 5(A) 
and 5(B) of Rule 11.190, how orders are handled in a Zero Market when a 
contra-side Protected Quotation returns. Currently, those provisions 
describe how non-displayed and displayable interest is handled in a 
Zero Market (i.e., in which neither a Protected Bid nor Protected Offer 
exists), but do not describe how orders are handled when a Protected 
Quotation returns on one side of the market. As proposed, Rule 
11.190(5)(A) and (B) provide that when a contra-side Protected 
Quotation returns, the system will route routable orders consistent 
with Rule 11.230(b)(2), if eligible for re-sweep. This change thus 
addresses when a Two-Sided or One-Sided Market returns.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act, in general and with Sections 6(b) 
\12\ of the Act in general, and furthers the objectives of Section 
6(b)(5) \13\ of the Act, in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove

[[Page 54141]]

impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Exchange believes it is appropriate to make the 
specified corrections so that its rules clearly describe the manner in 
which its systems operate by removing obsolete text and clarifying the 
operation of the rule when a protected quotation returns. The proposed 
changes do not introduce new functionality but merely make the rule 
more complete and precise. Further, the Exchange believes that the 
proposed rule change is consistent with the protection of investors and 
the public interest because it will provide for accuracy and 
consistency in the Exchange's rules and alleviate any confusion among 
market participants.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
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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 because IEX is amending its 
rules to provide for accuracy and consistency. The Exchange is merely 
removing obsolete language and clarifying the operation of the rule, 
therefore no new burdens are being proposed.

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

    Written comments were neither solicited nor received.

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

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) \15\ 
thereunder. Because the proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\16\ The Exchange notes that its proposal merely 
amends the Exchange's rules to provide for accuracy and consistency. 
The Exchange has asked the Commission to waive the 30-day operative 
delay, making the proposal operative upon filing. The Commission 
believes that waiver of the operative delay is consistent with the 
protection of investors and the public interest because it will allow 
the Exchange to implement the proposal immediately to remove some 
obsolete rule text and separately add helpful additional clarifying 
detail to its one-sided and zero markets provision, which may alleviate 
potential confusion among market participants before IEX begins 
operations as an exchange. Further, the proposal adds clarifying detail 
to the rule without materially amending the operation of the rule or 
raising any new or novel issues. For these reasons, the Commission 
hereby waives the operative delay and designates the proposed rule 
change operative upon filing.\17\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
The Exchange has satisfied this requirement.
    \17\ 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 under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File SR-IEX-2016-08 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-2016-08. 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 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-2016-08 and should be 
submitted on or before September 6, 2016.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19314 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P