[Federal Register Volume 84, Number 26 (Thursday, February 7, 2019)]
[Notices]
[Pages 2596-2598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01390]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85036; File No. SR-IEX-2019-01]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Reject
Market Orders With a Time-in-Force of DAY That Are Entered in the Pre-
Market Session for Non-IEX-Listed Securities
February 1, 2019.
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 January 28, 2019, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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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 Act,\4\
and Rule 19b-4 thereunder,\5\ IEX is filing with the Commission a
proposed rule change to reject market orders with a time-in-force \6\
of DAY that are entered in the Pre-Market Session \7\ for non-IEX-
listed securities, including for the Opening Process for non-IEX-listed
securities pursuant to Rule 11.231 (the ``Opening Process''). 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(f)(6) thereunder.\9\
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CRF [sic] 240.19b-4.
\6\ See Rule 11.190(c).
\7\ See Rule 1.160(z).
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4.
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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.
[[Page 2597]]
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
Background
The purpose of this proposed rule change is to reject market orders
with a time-in-force of DAY that are entered in the Pre-Market Session
for non-IEX-listed securities, including for the Opening Process. On
July 24, 2017, the Commission approved a proposed rule change filed by
the Exchange to amend IEX Rule 11.231 to modify the manner in which the
Exchange opens trading for non-IEX-listed securities beginning at the
start of Regular Market Hours (the ``Opening Process'').\10\
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\10\ See Securities Exchange Act Release No. 81195 (July 24,
2017), 82 FR 35250 (July 28, 2017).
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Pursuant to Rule 11.231, the Exchange attempts to perform the
Opening Process in each non-IEX-listed security, in which all eligible
interest resting on the Order Book in the Pre-Market Session available
for continuous trading (i.e., orders on the ``Continuous Book'') as
well as all eligible interest queued for execution in the Regular
Market Session \11\ (i.e., orders on the ``Cross Book'') is executed at
a single price. Currently, prior to the beginning of Regular Market
Hours,\12\ Users that wish to participate in the Opening Process may
enter limit, non-routable market, and pegged orders designated with a
time-in-force of DAY and limit orders designated with a time-in-force
of GTX, which queue in the System and are eligible for execution in the
Opening Process (i.e., orders on the Cross Book); interest resting on
the Order Book in the Pre-Market Session available for continuous
trading (i.e., orders on the Continuous Book) are also eligible for
execution in the Opening Process (collectively, ``Cross Eligible
Orders'').
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\11\ See Rule 1.160(gg).
\12\ See Rule 1.160(gg).
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Cross Eligible Orders resting on the Continuous Book are ranked by
the price at which they are resting on the Continuous Book and Cross
Eligible Orders resting on the Cross Book are ranked by the limit price
defined by the User, if any, except in the case of pegged orders, which
are ranked by their current book price (in each case, the order's
``resting price'').\13\
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\13\ See Rule 11.220(a)(2). See also Rule 11.231(a)(1).
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The Exchange proposes to reject market orders with a time-in-force
of DAY that are entered in the Pre-Market Session for non-IEX-listed
securities, including for the Opening Process. Specifically, as
proposed, market orders marked DAY submitted before the open of the
Regular Market Session would be rejected for non-IEX-listed securities,
but will be queued by the System until the Opening Auction (or Halt
Auction, as applicable) for IEX-listed securities pursuant to IEX Rule
11.350,\14\ except market orders marked DAY that are designated to
route pursuant to Rule 11.230(c).\15\ The Exchange is not proposing any
further changes to the handling or functional behavior of market
orders. Finally, the Exchange is proposing a conforming change to Rule
11.220 (Priority of Orders) to reflect that, as proposed, market orders
will not be eligible for execution in the Opening Process for non IEX-
listed securities.
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\14\ See Rule 11.350(a)(1)(A)(iii).
\15\ See Rule 11.190(a)(2)(E)(iii).
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2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \16\ of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act \17\ 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
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.
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\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes the proposed rule change is
consistent with the protection of investors and the public interest in
that it is designed to prevent market participants from entering market
orders with a time-in-force of DAY on IEX instead of the primary
listing market, that could cause an opening match price on IEX that
significantly deviates from the current market for the security.\18\
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\18\ The Exchange notes as well that it does not accept Market-
On-Open orders for the Opening Process because such orders could
have a similar impact.
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Based on informal conversations with various market participants,
the Exchange understands that market orders with a time-in-force of DAY
are often entered during the pre-market session by market participants
to interact in opening auctions on the listing exchange for listed
securities. Accordingly, IEX and other listing exchange [sic] accept
market orders with a time-in-force of DAY for such auctions.\19\ While
the IEX Opening Process is designed to provide an opportunity to match
buy and sell orders at a price that is reflective of market conditions
for the security, the Exchange also appreciates the important goal of
aggregating liquidity in the opening auction (as well as the closing
auction) on the listing exchange to facilitate price discovery for the
auction. Therefore, the Exchange believes that restricting market
participants from entering market orders with a time-in-force of DAY in
non-IEX-listed securities may facilitate the aggregation of liquidity
in the primary market opening auction and enhance market-wide price
discovery, consistent with the protection of investors and the public
interest. In addition, the Exchange believes the proposed change would
not significantly impact the protection of investors or the public
interest because prior to offering the Opening Process for non-IEX-
listed securities,\20\ the Exchange rejected market orders with a time-
in-force of DAY that were entered before the Regular Market Session,
and such interest was not eligible for the prior opening mechanism.
Thus, the proposed rule change does not present any new or novel issues
not already considered by the Commission.
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\19\ See supra note 11 [sic]. See also, e.g., Cboe BZX Exchange,
Inc. Rules 11.23(a)(8) and 11.9(b)(7).
\20\ See supra note 10.
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Lastly, the Exchange believes the proposed conforming change to
Rule 11.220 is consistent with the protection of investors and the
public interest in that it will make the Exchange's rules more concise
and accurate, to the benefit of all market participants.
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 respect
[[Page 2598]]
to intra-market competition, the Exchange notes that the proposed
changes will apply to all Members on a fair and equal basis.
Furthermore, market participants seeking to interact in the Opening
Process may continue to enter other Cross Eligible Orders on fair and
equal terms. With respect to inter-market competition, the Exchange
believes that the proposed change does not result in any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. To the contrary, the Exchange believes that
rejecting market orders with a time-in-force of DAY to avoid causing an
opening match price that deviates from the current market for the
security will support, and thereby promote competition between the
Exchange's Opening Process and the opening mechanisms offered by other
market centers, while avoiding unnecessary fragmentation of order flow
intended for the primary market's opening auction.
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) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 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.
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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 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-2019-01 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-2019-01. 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 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 Number SR-IEX-2019-01, and should be submitted on
or before February 28, 2019.
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\23\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01390 Filed 2-6-19; 8:45 am]
BILLING CODE 8011-01-P