[Federal Register Volume 83, Number 81 (Thursday, April 26, 2018)]
[Notices]
[Pages 18366-18370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08726]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83075; File No. SR-IEX-2018-08]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 11.350 To Clarify When a New IEX-Listed Security Will Be Eligible 
To Begin Trading With an IPO Auction

April 20, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 17, 2018, the Investors Exchange LLC (``IEX'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ IEX is 
filing with the Commission a proposed rule change to amend Rules 
11.350(e) and (a) to clarify that a new IEX-listed security that is not 
the subject of an initial public offering (``IPO'') \6\ or otherwise 
being priced pursuant to Rule 11.280(h)(9) will be eligible to begin 
trading in the Pre-Market Session \7\ and have an Opening Auction \8\ 
on IEX at the start of Regular Market Hours,\9\ rather than an IPO 
Auction,\10\ and to make corresponding changes to certain definitions 
governing IPO and Opening Auctions. The Exchange has designated this 
rule change as ``non-controversial'' under Section 19(b)(3)(A) of the 
Act \11\ and provided the Commission with the notice required by Rule 
19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ The term IPO refers to the initial public offering of 
securities registered under Section 6 of the Securities Act of 1933.
    \7\ See Rule 1.160(z).
    \8\ See Rule 11.350(c).
    \9\ See Rule 1.160(gg).
    \10\ See Rule 11.350(e).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, 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
Overview
    On August 4, 2017, the Commission approved a proposed rule change 
filed by the Exchange to adopt rules governing auctions in IEX-listed 
securities (``IEX Auctions''), including provisions governing the 
initial public offering (``IPO'') of IEX-listed securities.\13\ The 
Exchange intends to launch a listings program for corporate issuers in 
2018. The purpose of this proposed rule change is to amend paragraphs 
(e) and (a) of Rule 11.350, and adopt new Supplemental Material .01 and 
.02 to Rule 11.350(e) to clarify that a new IEX-listed security that is 
not the subject of an initial public offering or otherwise being priced 
pursuant to Rule 11.280(h)(9) will be eligible to begin trading in the 
Pre-Market Session and have an Opening Auction on IEX at the start of 
Regular Market Hours, rather than an IPO Auction, and to make 
corresponding changes to certain definitions governing IPO and Opening 
Auctions.
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 81316 (August 4, 
2017), 82 FR 37474 (August 10, 2017). See also Rule 11.350(e).
---------------------------------------------------------------------------

    Pursuant to Rule 11.350(e), the Exchange will conduct an IPO 
Auction for securities that are the subject of an initial public 
offering on the first day of listing.\14\ In addition, as proposed, the 
Exchange will also conduct an IPO Auction on the first day of listing 
for a new issue that is not an initial public offering, provided that a 
broker-dealer serving in the role of financial advisor to the issuer of 
the securities being listed is willing to perform the functions that 
are performed by an underwriter with respect to an initial public 
offering as specified in Rule 11.280(h)(9) (``specified underwriter 
functions'').\15\ For securities that are not the subject of an initial 
public offering or other new issues where a broker-dealer is unwilling 
to perform the specified underwriter functions, the security will be 
eligible to begin trading in the Pre-Market Session and have an Opening 
Auction on IEX at the start of Regular Market Hours, instead of 
conducting an IPO Auction on the first day of listing.\16\ As an 
example, if an issuer with a class of common stock listed on IEX offers 
and lists a class of preferred stock on IEX, the offering of the 
preferred stock would not constitute an initial public offering and if 
there is no broker-dealer serving in the role of financial advisor to 
the issuer of the preferred stock that is willing to perform the 
specified underwriter functions, the security will be eligible to begin 
trading in the Pre-Market Session and have an Opening Auction on IEX at 
the start of Regular

[[Page 18367]]

Market Hours, instead of conducting an IPO Auction on the first day of 
listing.
---------------------------------------------------------------------------

    \14\ Pursuant to section 12(f)(1)(G)(i)-(ii) of the Securities 
and Exchange Act, a security is the subject of an initial public 
offering if the offering of the subject security is registered under 
the Securities Act of 1933, the issuer of the security, immediately 
prior to filing the registration statement with respect to the 
offering, was not subject to the reporting requirements of the Act, 
and the initial public offering of such security commences at the 
opening of trading on the day on which such security commences 
trading on the national securities exchange with which such security 
is registered. See 15 U.S.C. 78l(f)(1)(G). See also proposed 
Supplemental Material .01 to Rule 11.350(e).
    \15\ Pursuant to Rule 11.280(h)(9), the process for halting and 
initial pricing of a security that is the subject of an IPO shall 
also be available for the initial pricing of any other security that 
has not been listed on a national securities exchange or traded in 
the over-the-counter market pursuant to FINRA Form 211 immediately 
prior to the initial pricing, provided that a broker-dealer serving 
in the role of financial advisor to the issuer of the securities 
being listed is willing to perform the functions under IEX Rule 
11.280(h)(8) that are performed by an underwriter with respect to an 
initial public offering. See also proposed Supplemental Material .01 
to Rule 11.350(e).
    \16\ See proposed Supplemental Material .02 to Rule 11.350(e) 
and Rule 11.350(c).
---------------------------------------------------------------------------

    The Exchange notes that the proposed rule changes do not alter the 
substantive functionality governing the IPO or Opening Auction 
processes. Instead, the proposed changes are designed to simply clarify 
which of the existing IEX Auction processes will be utilized to begin 
trading in a new IEX-listed security that is not the subject of an IPO 
or otherwise being priced pursuant to Rule 11.280(h)(9), and to make 
corresponding changes to certain definitions governing IPO and Opening 
Auctions.
IEX IPO Auction
    For trading in an IEX-listed security that is the subject of an 
IPO, or for the launch of a new issue,\17\ the Exchange will conduct an 
IPO Auction pursuant to Rule 11.350(e). Specifically, Users may submit 
Auction Eligible Orders\18\ for execution in the IPO Auction at the 
start of the Order Acceptance Period,\19\ which begins at 8:00 a.m.\20\ 
All Auction Eligible Orders designated for participation in the IPO 
Auction will be queued on the IPO Auction Book \21\ until the scheduled 
auction match, at which time they will be eligible for execution in the 
IPO Auction. Pursuant to Rule 11.350(e)(2)(A), the Exchange will begin 
to disseminate IEX Auction Information via electronic means at the 
start of the Display Only Period,\22\ which begins thirty (30) minutes 
prior to the scheduled IPO Auction match, and will be updated every one 
second thereafter.\23\ The Exchange will attempt to conduct an IPO 
Auction for all IEX-listed securities at the scheduled auction match 
time in accordance with the clearing price determination process set 
forth in Rule 11.350(e)(2)(C). Auction Eligible Orders will be ranked 
and maintained in accordance with IEX auction priority, pursuant to 
Rule 11.350(b).
---------------------------------------------------------------------------

    \17\ The Exchange notes that new issues are registered 
securities that are being listed on the Exchange and sold publicly 
for the first time but are not necessarily the subject of an IPO.
    \18\ See Rule 11.350(a)(2).
    \19\ See Rule 11.350(a)(29).
    \20\ All times are in Eastern Time.
    \21\ See Rule 11.350(a)(1)(C). For an IPO Auction, the IPO 
Auction Book would include Market-On-Open, Limit-On-Open, and market 
orders with a time-in-force of DAY, as well as limit orders with a 
time in-force of DAY, GTX, GTT, SYS, FOK, or IOC.
    \22\ See Rule 11.350(a)(5).
    \23\ See Rule 11.350(a)(9).
---------------------------------------------------------------------------

    The Exchange will generally attempt to conduct an IPO Auction 
beginning at 10:15 a.m. Pursuant to Rule 11.280(g)(7), IEX will declare 
a regulatory halt before the start of the Pre-Market Session for a 
security that is the subject of an IPO on IEX, and therefore there will 
be no Continuous Book for such security. The Order Acceptance Period 
for an IPO Auction may be extended at the time of the auction match 
pursuant to Rules 11.350(e)(2)(B)(i)-(iv):
     Automatically for five (5) minutes when there are 
unmatched shares from market orders on the IPO Auction Book;
     Automatically for five (5) minutes when the Indicative 
Clearing Price \24\ at the time of the IPO Auction match differs by the 
greater of five percent (5%) or fifty cents ($0.50) from any of the 
previous fifteen (15) Indicative Clearing Price disseminations;
---------------------------------------------------------------------------

    \24\ See Rule 11.350(a)(9)(E).
---------------------------------------------------------------------------

     Automatically during the Pre-Launch Period \25\ when the 
IPO Auction match price is above (below) the upper (lower) price band 
selected by the underwriter pursuant to proposed Rule 11.280(h)(8), 
until the clearing price is within such bands; or
---------------------------------------------------------------------------

    \25\ See Rule 11.280(h)(8).
---------------------------------------------------------------------------

     Manually upon request from the underwriter at any time 
prior to the auction match.
    Furthermore, Rule 11.280(h)(8) governs the process for resuming 
from a trading halt initiated under Rule 11.280(g)(7) for a security 
that is the subject of an IPO. Thus, in addition to the systemic 
processes described above that govern the IPO Auction match, there is a 
series of procedural steps to complete an IPO Auction, which include 
input from and coordination with the IPO underwriter. Specifically, 
pursuant to Rule 11.280(h), thirty (30) minutes after the start of the 
Display Only Period, unless extended by the underwriter, the security 
will enter a Pre-Launch Period of indeterminate duration. The Pre-
Launch Period will end immediately after the transition to the Regular 
Market Session following the IPO Auction match,\26\ pending:
---------------------------------------------------------------------------

    \26\ See Rule 11.350(e)(3).
---------------------------------------------------------------------------

     Notification from the underwriter that the security is 
ready to trade;
     Subsequent approval of the Indicative Clearing Price at 
the time of such notification; and
     Validation that each of the conditions for the extension 
of the Order Acceptance Period set forth in Rules 11.350(e)(2)(B)(i)-
(iv) are not satisfied.
    Lastly, pursuant to Rule 11.280(h)(9), the process for halting and 
initial pricing of a security that is the subject of an IPO shall also 
be available for the initial pricing of any other security that has not 
been listed on a national securities exchange or traded in the over-
the-counter market pursuant to FINRA Form 211 immediately prior to the 
initial pricing, provided that a broker-dealer serving in the role of 
financial advisor to the issuer of the securities being listed is 
willing to perform the functions under IEX Rule 11.280(h)(8) that are 
performed by an underwriter with respect to an IPO.
IEX Opening Auction
    Pursuant to Rule 11.350(c)(1), Users may submit orders eligible for 
execution in the Opening Auction \27\ at the beginning of the Pre-
Market Session, which begins at 8:00 a.m. Any orders designated for the 
Opening Auction Book \28\ will be queued until 9:30 a.m. at which time 
they will be eligible to be executed in the Opening Auction. In 
addition to orders on the Opening Auction Book, limit orders on the 
Continuous Book with a time-in-force of SYS or GTT are eligible to 
execute in the Opening Auction (``Pre-market Continuous Book'').\29\ 
The Exchange does not place any restrictions on the entry of orders to 
the Pre-market Continuous Book to avoid unnecessary disruptions to 
continuous trading.
---------------------------------------------------------------------------

    \27\ See Rule 11.350(c).
    \28\ Pursuant to Rule 11.350(a)(1)(A), orders on the Opening 
Auction Book would include MOO orders, LOO orders, market orders 
with a time-in-force of DAY, and limit orders with a time-in-force 
of DAY or GTX.
    \29\ See Rule 11.190(a)(1)(E)(iv) and (vi).
---------------------------------------------------------------------------

    Pursuant to proposed Rule 11.350(c)(2), beginning at the Opening 
Auction Lock-in Time \30\ and updated every one second thereafter, the 
Exchange will disseminate IEX Auction Information via electronic means. 
The Exchange will attempt to conduct an Opening Auction for all IEX-
listed securities at the start of Regular Market Hours (i.e., 9:30 
a.m.) in accordance with the clearing price determination process set 
forth in Rule 11.350(c)(2)(B). All orders eligible for execution in the 
Opening Auction (i.e., orders on the Opening Auction Book and orders on 
the Pre-Market Continuous Book that are not Auction Ineligible Orders) 
\31\ are Auction Eligible Orders. Auction Eligible Orders will be 
ranked and maintained in accordance with IEX auction priority, pursuant 
to Rule 11.350(b). Moreover, pursuant to Rule 11.350(a)(2), non-
displayed buy (sell) orders on the Pre-Market Continuous Book with a 
resting price (as defined in Rule 11.350(b)(1)(A)(i)) within the 
Reference Price Range \32\ will be priced at the lower (upper) 
threshold of the Reference Price Range for the purpose of

[[Page 18368]]

determining the clearing price,\33\ but will be ranked and eligible for 
execution in the Opening Auction match at the order's resting 
price.\34\
---------------------------------------------------------------------------

    \30\ See Rule 11.350(a)(22).
    \31\ See Rule 11.350(a)(3).
    \32\ See Rule 11.350(a)(30).
    \33\ Note, non-displayed buy (sell) orders on the Continuous 
Book with a resting price (as defined in Rule 11.350(b)(1)(A)(i)) 
within the Reference Price Range will be priced at the at the lower 
(upper) threshold of the Reference Price Range for the purpose of 
determining the clearing price and the Indicative Clearing Price 
disseminated in IEX Auction Information as set forth in Rule 
11.350(a)(9)(E).
    \34\ The Exchange notes that in the case of an IPO, Halt, or 
Volatility Auction, there is no continuous trading and therefore no 
Continuous Book. Accordingly, there would be no non-displayed 
interest on the Continuous Book to which this functionality would 
apply.
---------------------------------------------------------------------------

Proposed Changes
    The Exchange proposes to clarify that a new IEX-listed security 
that is not the subject of an IPO or otherwise being priced pursuant to 
Rule 11.280(h)(9) (i.e., a financial advisor to the issuer is willing 
to perform the specified underwriter functions for a security that was 
not listed on a national securities exchange or traded pursuant to 
FINRA form 211 immediately prior to the initial pricing) will be 
eligible to begin trading in the Pre-Market Session and have an Opening 
Auction on IEX at the start of Regular Market Hours, rather than an IPO 
Auction. As described above, current Exchange Rule 11.350(e) states in 
relevant part that an IPO Auction will be utilized for the launch of a 
new issue. However, pursuant to Rule 11.280(g)(7), IEX may only issue a 
regulatory halt before the start of the Pre-Market Session for a 
security that is the subject of an IPO on IEX, or pursuant to Rule 
11.280(h)(9).
    Therefore, the IPO Auction process, which pre-supposes there is no 
trading in the security prior to the IPO Auction match, would be 
suboptimal for the launch of a new issue that is not an IPO or 
otherwise being priced pursuant to Rule 11.280(h)(9), because the 
Exchange does not have authority to initiate a regulatory trading halt, 
and thus such securities would be eligible for trading during the Pre-
Market Session. The IPO Auction process is designed to aggregate all 
existing liquidity in a security and execute the maximum number of 
shares at a price that accurately reflects supply and demand. The IPO 
Auction is not designed to account for continuous trading, and thus 
running an IPO Auction alongside continuous trading could result in 
auction pricing that does not account for all available interest in, or 
reflect the current market for, the security. Accordingly, the Exchange 
is proposing to clarify that an IEX-listed security that is not the 
subject of an IPO or otherwise being priced pursuant to Rule 
11.280(h)(9) will be eligible to begin trading in the Pre-Market 
Session and have an Opening Auction on IEX at the start of Regular 
Market Hours, rather than an IPO Auction.
    Lastly, the Exchange proposes to make corresponding changes to 
Rules 11.350(a)(6) and (7), which define the terms ``Final Consolidated 
Last Sale Eligible Trade'',\35\ and ``Final Last Sale Eligible 
Trade'',\36\ respectively. Specifically, the Exchange proposes to add a 
new subparagraph (i) to paragraph (A) of Rules 11.350(a)(6) and (7) to 
specify that if there is no qualifying previous official closing price 
for a security that is not the subject of an IPO or otherwise being 
priced pursuant to Rule 11.280(h)(9), the Final Consolidated Last Sale 
Eligible Trade and the Final Last Sale Eligible Trade will be equal to 
issue price. Furthermore, the Exchange proposes to amend subparagraph 
(B) of Rules 11.350(a)(6) and (7) to replace the broad language 
referencing ``the launch of a new issue'' with a more specific cross 
reference to the initial pricing of any other security pursuant to Rule 
11.280(h)(9). Thus, as proposed:
---------------------------------------------------------------------------

    \35\ Pursuant to Rule 11.350(a)(6), the Final Consolidated Last 
Sale Eligible Trade is the last trade prior to the end of Regular 
Market Hours, or where applicable, prior to trading in the security 
being halted or paused, that is last sale eligible and reported to 
the Consolidated Tape System (``Consolidated Tape''), rounded to the 
nearest MPV or Midpoint Price calculated by the System, whichever is 
closer. If there is no qualifying Final Consolidated Last Sale 
Eligible Trade for the current day, the previous official closing 
price; and in the case of an IPO or the initial pricing of any other 
security pursuant to Rule 11.280(h)(9), the issue price. See also 
Rules 11.350(a)(30) and (33), as well as Rules 11.350(d)(4)(B)(i) 
and (ii), which utilize the defined term in a variety of contexts, 
none of which are significantly impacted by the proposed changes.
    \36\ Pursuant to Rule 11.350(a)(7), the Final Last Sale Eligible 
Trade is the last trade on IEX prior to the end of Regular Market 
Hours, or where applicable, prior to trading in the security being 
halted or paused, that is last sale eligible and reported to the 
Consolidated Tape. If there is no qualifying Final Last Sale 
Eligible Trade for the current day, the previous official closing 
price; and in the case of an IPO or launch of a new issue, the issue 
price. See also Rules 11.350(d)(2)(B) and (D); as well as Rule 
11.350(f)(3)(B)(ii), which each utilize the defined term in a 
variety of contexts, none of which are significantly impacted by the 
proposed changes.
---------------------------------------------------------------------------

     For a security that is not the subject of an IPO or 
otherwise being priced pursuant to Rule 11.280(h)(9):
    [cir] The security will be eligible to begin trading in the Pre-
Market Session and have an Opening Auction on IEX at the start of 
Regular Market Hours, rather than an IPO Auction; and

    [cir] The Final Consolidated Last Sale Eligible Trade will be equal 
to the last trade prior to the end of Regular Market Hours, rounded to 
the nearest Minimum Price Variant (``MPV'') or Midpoint Price 
calculated by the System, whichever is closer: \37\
---------------------------------------------------------------------------

    \37\ However, where applicable, it will be the last trade prior 
to trading in the security being halted or paused, that is last sale 
eligible and reported to the Consolidated Tape, rounded to the 
nearest MPV or Midpoint Price calculated by the System, whichever is 
closer. See Rule 11.210 specifying the MPV and Rule 1.160(t) 
defining Midpoint Price.
---------------------------------------------------------------------------

    [ssquf] If there is no qualifying Final Consolidated Last Sale 
Eligible Trade for the current day, the previous official closing 
price; or
    [ssquf] If there is no qualifying previous official closing price 
for a security that is not the subject of an IPO or otherwise being 
priced pursuant to Rule 11.280(h)(9), the issue price.
    o The Final Last Sale Eligible Trade will be equal to the last 
trade on IEX prior to the end of Regular Market Hours,\38\ or if there 
is no qualifying Final Last Sale Eligible Trade for the current day, 
the issue price.
---------------------------------------------------------------------------

    \38\ However, where applicable, it will be the last trade prior 
to trading in the security being halted or paused, that is last sale 
eligible and reported to the Consolidated Tape.
---------------------------------------------------------------------------

     For a security that is the subject of an IPO or otherwise 
being priced pursuant to Rule 11.280(h)(9):
    [cir] The Exchange will conduct an IPO Auction;

    [cir] The Final Consolidated Last Sale Eligible Trade will be equal 
to the last trade prior to the end of Regular Market Hours, rounded to 
the nearest MPV or Midpoint Price calculated by the System, whichever 
is closer: \39\
---------------------------------------------------------------------------

    \39\ See supra note 37.
---------------------------------------------------------------------------

    [ssquf] If there is no qualifying Final Consolidated Last Sale 
Eligible Trade for the current day, the issue price.
    [cir] The Final Last Sale Eligible Trade will be equal to the last 
trade on IEX prior to the end of Regular Market Hours: \40\
---------------------------------------------------------------------------

    \40\ See supra note 38.
---------------------------------------------------------------------------

    [ssquf] If there is no qualifying Final Last Sale Eligible Trade 
for the current day, the issue price.
    The Exchange believes the proposed modifications to paragraphs (e) 
and (a) of Rule 11.350 and the addition of Supplemental Material .01 
and .02 to Rule 11.350(e) are designed to avoid any potential confusion 
regarding which of the IEX Auctions will be utilized to process an IEX-
listed security that is not the subject of an IPO or otherwise being 
priced pursuant to Rule 11.280(h)(9), and therefore further clarifies 
the Exchange's auction processing. In addition, as announced in IEX 
Trading Alerts #2017-015 and #2017-046, the Exchange intends to become 
a primary listing exchange and support its first

[[Page 18369]]

IEX-listed security in 2018.\41\ As part of the listings initiative, 
the Exchange is providing a series of industry wide weekend tests for 
the Exchange and its Members to exercise the various technology changes 
required to support IEX Auctions and listings functionality.\42\ 
Accordingly, the Exchange is proposing to clarify paragraphs (e) and 
(a) of Rule 11.350 and add Supplemental Material .01 and .02 to Rule 
11.350(e) as described above in advance of the industry wide testing 
period in 2018 in order to avoid potential confusion, and allow Members 
and other market participants time to develop, test, and deploy any 
necessary changes to support IEX Auctions.
---------------------------------------------------------------------------

    \41\ See IEX Trading Alert #2017-015 (Listings Specifications, 
Testing Opportunities, and Timelines), May 31, 2017. See also IEX 
Trading Alert #2017-046 (IEX Listings Timeline Update), originally 
published on Monday, October 30, 2017, and re-published on Tuesday, 
October 31, 2017.
    \42\ See, e.g., IEX Trading Alert #2017-028 (First Listings 
Functionality Industry Test on Saturday, August 26), August 17, 
2017; IEX Trading Alert #2017-037 (Second Listings Functionality 
Industry Test on Saturday, September 9), September 7, 2017; IEX 
Trading Alert #2017-039 (Third Listings Functionality Industry Test 
on Saturday, September 23), September 18, 2017; IEX Trading Alert 
#2017-040 (Rescheduled 4th Listing Functionality Industry Test), 
September 29, 2017; IEX Trading Alert #2017-046 (IEX Listings 
Timeline Update), originally published on Monday, October 30, 2017, 
and re-published on Tuesday, October 31, 2017; and IEX Trading Alert 
#2017-047 (Fourth Listings Functionality Industry Test on Saturday, 
November 4), October 31, 2017.
---------------------------------------------------------------------------

2. Statutory Basis
    IEX believes that the proposed rule changes are consistent with the 
provisions of Section 6(b) \43\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) of the Act \44\ in particular, in that 
they are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f.
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to paragraphs (e) 
and (a) of Rule 11.350 and the addition of Supplemental Material .01 
and .02 to Rule 11.350(e) are consistent with the protection of 
investors and the public interest in that they do not alter the 
substantive functionality governing the IPO or Opening Auction 
processes. Instead, the proposed changes simply clarify which of the 
existing IEX Auction processes will be utilized to begin trading in a 
new IEX-listed security that is not the subject of an IPO or otherwise 
being priced pursuant to Rule 11.280(h)(9). In this regard, the 
Exchange believes that the choice of which auction applies is 
consistent with the Act because the IPO Auction presupposes that a 
financial advisor is willing to perform the specified underwriter 
functions and it would not make sense to use an IPO Auction in the 
absence of such a financial advisor. Further, the proposed progression 
of reference prices that will be utilized as the Final Consolidated 
Last Sale Eligible Trade and the Final Last Sale Eligible Trade for a 
security that is not the subject of an IPO or otherwise being priced 
pursuant to Rule 11.280(h)(9) is consistent with the protection of 
investors and the public interest in that such prices most accurately 
reflect the market for the security and are also consistent with the 
Exchange's current reference prices.
    Furthermore, the Exchange believes the proposed rule changes are 
consistent with the protection of investors and the public interest 
because as described above, the IPO Auction is not designed to account 
for continuous trading, and thus running an IPO Auction alongside 
continuous trading could result in auction pricing that does not 
account for all available interest in, or reflect the current market 
for, the security. Accordingly, the Exchange proposes to clarify that 
an IEX-listed security that is not the subject of an IPO or otherwise 
being priced pursuant to Rule 11.280(h)(9) will be eligible to begin 
trading in the Pre-Market Session and have an Opening Auction on IEX at 
the start of Regular Market Hours, rather than an IPO Auction.

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

    IEX does not believe that the proposed rule changes will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, in that the proposed rule 
changes are consistent with the rules of other primary listing 
markets.\45\ Thus, the Exchange believes there are no new inter-market 
competitive burdens imposed as a result of the proposed rule changes.
---------------------------------------------------------------------------

    \45\ See e.g., the Nasdaq Stock Market, LLC (``Nasdaq'') Rules 
4753 and 4120(c)(8)-(9).
---------------------------------------------------------------------------

    In addition, the Exchange does not believe that the proposed 
changes will have any impact on intra-market competition. Specifically, 
as discussed above, the proposed clarification does not alter the 
substantive functionality governing the IPO or Opening Auction 
processes. Instead, the proposed changes simply clarify which of the 
existing IEX Auction processes will be utilized to begin trading in a 
new IEX-listed security that is not the subject of an IPO or otherwise 
being priced pursuant to Rule 11.280(h)(9). Furthermore, the Exchange 
believes the proposed rule change is designed to make IEX's rules more 
complete, and descriptive of the System's functionality to avoid any 
potential confusion among Members and market participants regarding 
such functionality, to the benefit of all market participants. Lastly, 
the Exchange notes that the proposed changes will apply to all Members 
on a fair and equal basis. Accordingly, the Exchange believes there are 
no new intra-market competitive burdens imposed as a result of the 
proposed rule changes.

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 foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \46\ of the Act and Rule 19b-
4(f)(6) thereunder.\47\
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78s(b)(3)(A)
    \47\ 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, 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. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \48\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \49\ permits the 
Commission to 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 immediately upon filing. The Exchange 
states that waiver of the 30-day operative delay would avoid any 
potential confusion regarding IEX Auctions as IEX continues industry-

[[Page 18370]]

wide testing of the technology changes being made by the Exchange and 
its Members to support IEX as a listings market, including IEX 
Auctions.\50\ The Commission notes that IEX's proposal incrementally 
amends the opening auction rule to address a scenario that the Exchange 
did not originally contemplate, and does so in a manner consistent with 
the Commission's prior approval of that rule without raising any novel 
issues. In addition, as noted above, the proposal is consistent with 
the rules of another primary listing market. Accordingly, the 
Commission believes the waiver of the operative delay is consistent 
with the protection of investors and the public interest. Therefore, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\51\
---------------------------------------------------------------------------

    \48\ 17 CFR 240.19b-4(f)(6).
    \49\ 17 CFR 240.19b-4(f)(6)(iii).
    \50\ See supra note 42.
    \51\ 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).
---------------------------------------------------------------------------

    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-IEX-2018-08 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 No. SR-IEX-2018-08. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-IEX-2018-08, and should be submitted on or 
before May 17, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\52\
---------------------------------------------------------------------------

    \52\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08726 Filed 4-25-18; 8:45 am]
 BILLING CODE 8011-01-P