[Federal Register Volume 86, Number 53 (Monday, March 22, 2021)]
[Notices]
[Pages 15275-15277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05822]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91335; File No. SR-IEX-2021-04]


Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Transaction Fees Pursuant to IEX Rule 15.110

March 16, 2021.
    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 March 9, 2021, the Investors Exchange LLC (``IEX'' or 
the ``Exchange'') filed with the Securities and Exchange Commission
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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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    (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 19b-4 thereunder,\5\ IEX is filing with the Commission a 
proposed rule change to conform language in Footnote 1 to the Fee Code 
Modifiers table of the IEX Fee Schedule to a pending rule change to 
allow Retail orders \6\ to execute for free against an unprotected 
displayed odd lot order priced more aggressively than the Midpoint 
Price.\7\ Changes to the Fee Schedule pursuant to this proposal are 
effective upon filing,\8\ and the Exchange plans to implement the 
changes on March 15, 2021.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ See IEX Rules 11.190(b)(15) and 11.232(a)(2).
    \7\ The term ``Midpoint Price'' shall mean the midpoint of the 
NBBO. See IEX Rule 1.160(t). The term ``NBBO'' shall mean the 
national best bid or offer, as set forth in Rule 600(b) of 
Regulation NMS under the Act, determined as set forth in IEX Rule 
11.410(b).
    \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 amend its Fee Schedule, pursuant to IEX 
Rule 15.110(a) and (c), to conform language in Footnote 1 to the Fee 
Code Modifiers table of the IEX Fee Schedule to a pending rule change 
to allow Retail orders to execute for free against an unprotected 
displayed odd lot order priced more aggressively than the Midpoint 
Price. Footnote 1 to the Fee Code Modifiers table describes the 
application of Fee Code R, and that it applies only to a Retail order 
submitted by an IEX Retail Member Organization that (i) satisfies the 
criteria set forth in IEX Rules 11.190(b)(15) and 11.232(a)(1) and (ii) 
is a Discretionary Peg order or Midpoint Peg order with a Time-in-Force 
of IOC or FOK only eligible to trade at the Midpoint Price. Further, as 
specified in the IEX Fee Schedule, executed orders subject to Fee Code 
R are free.\9\
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    \9\ Since IEX launched its Retail Price Improvement Program, 
Retail orders have always executed free of charge. See Securities 
Exchange Act Release No. 86854 (September 3, 2019), 84 FR 47330 
(September 9, 2019) (SR-IEX-2019-08).
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    IEX's Retail Price Improvement Program is designed to provide 
retail investors with meaningful price improvement opportunities by 
offering price improvement to Retail orders. Only Members \10\ that the 
Exchange has approved as Retail Member Organizations \11\ may submit 
Retail orders to the Exchange on behalf of retail customers.\12\
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    \10\ See IEX Rule 1.160(s).
    \11\ See IEX Rule 11.232(a)(1).
    \12\ For a Member to be approved as a Retail Member 
Organization, it must complete an application and submit materials 
reflecting that it either conducts a retail business or routes 
retail orders on behalf of another broker-dealer. See IEX Rule 
11.232(b).

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[[Page 15276]]

    Currently, Retail orders can only execute at the Midpoint Price. 
IEX recently made an immediately effective rule filing to allow 
displayed odd lot orders on the Exchange,\13\ which is pending 
implementation,\14\ and a related immediately effective rule filing 
\15\ to provide that Retail orders will execute against an unprotected 
displayed odd lot order priced more aggressively than the Midpoint 
Price (the ``Retail Displayed Odd Lot Filing''). The Retail Displayed 
Odd Lot Filing also included amendments to the definition of a Retail 
order to no longer specify that such orders must be only eligible to 
trade at the Midpoint Price. Accordingly, IEX proposes to amend 
Footnote 1 to the Fee Code Modifiers table, which references the 
definition of Retail order, to remove the words ``only eligible to 
trade at the Midpoint Price'' from the end of the footnote. With this 
change a Retail order will continue to execute for free, whether it 
executes against an order at the Midpoint Price or against an 
unprotected displayed odd lot order priced more aggressively than the 
Midpoint Price (thereby offering the Retail order even more price 
improvement than it would receive executing at the Midpoint Price).
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    \13\ See Securities Exchange Act Release No. 90933 (January 15, 
2021), 86 FR 6687 (January 22, 2021) (SR-IEX-2021-01).
    \14\ See https://iextrading.com/alerts/#/142 (March 2, 2021).
    \15\ See SR-IEX-2021-03 filed on March 1, 2021.
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    IEX is not proposing any other changes to its Fee Schedule, and 
will implement this change on March 15, 2020, so that it takes effect 
the first day of its phased implementation of displayed odd lot 
functionality.\16\
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    \16\ See https://iextrading.com/alerts/#/142 (March 2, 2021).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(4) \18\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
fees among IEX Members and persons using its facilities. Additionally, 
IEX believes that the proposed changes to the Fee Schedule are 
consistent with the investor protection objectives of Section 6(b)(5) 
\19\ of the Act, in particular, in that they are 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; and are not designed to permit 
unfair discrimination between customers, brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(4).
    \19\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange's proposal to not charge fees for 
execution of Retail orders that match with unprotected displayed odd 
lot orders priced more aggressively than the Midpoint Price is 
consistent with the Exchange's pricing scheme of not charging fees for 
Retail order executions.\20\ IEX designed this pricing approach to 
maximize participation in the Retail Price Improvement Program by 
incentivizing market participants to submit such orders to IEX, thereby 
enhancing IEX's ability to compete with competing exchange and non-
exchange venues that offer programs for the execution of the orders of 
retail customers. This fee structure is designed to attract the orders 
of retail customers (and counterparties that wish to trade with retail 
customers) to the Exchange, thereby supporting the competitiveness of 
the Exchange's Retail Price Improvement Program.
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    \20\ See supra note 9.
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    The Exchange continues to believe that offering free execution of 
Retail orders is a reasonable approach to incentivizing Members to send 
such orders to IEX. While the recent changes to the Retail Price 
Improvement Program to allow Retail orders to obtain price improvement 
by executing against unprotected displayed odd lot orders priced more 
aggressively than the Midpoint Price offers the opportunity for Retail 
orders to obtain even more meaningful price improvement, the Exchange 
continues to believe that allowing Retail orders to execute for free 
will enhance such incentive. The Exchange also believes that allowing 
all Retail orders to execute for free will not only benefit retail 
investors, but will also incentivize and benefit the posting of 
displayed odd lot orders on the Exchange that view interacting with 
retail investors as desirable.
    IEX also believes that it is equitable and not unfairly 
discriminatory to provide free executions to all Retail orders 
notwithstanding that not all Members handle Retail orders. There is 
ample precedent for differentiation of retail order flow in the retail 
programs of other exchanges.\21\ Further, other exchanges provide 
pricing incentives to retail orders in the form of lower fees and/or 
higher rebates.\22\ Consequently, the Exchange does not believe that 
continuing to provide free executions for all Retail orders raises any 
new or novel issues not already considered by the Commission.
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    \21\ See e.g., Securities Exchange Act Release No. 85160 
(February 15, 2019), 84 FR 5754, 5762 (February 22, 2019) (SR-NYSE-
2018-28); Securities Exchange Act Release No. 71176 (December 23, 
2013), 78 FR 79524 (December 30, 2013) (SR-NYSEArca-2013-107); 
Securities Exchange Act Release No. 68303 (November 27, 2012), 77 FR 
71652 (December 3, 2012) (SR-BYX-2012-019); Securities Exchange Act 
Release No. 73702 (November 28, 2014), 79 FR 72049 (December 4, 
2014) (SR-BX-2014-048).
    \22\ See, e.g., Nasdaq BX price list available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, IEX 
believes that charging no fees for the execution of all Retail orders, 
including Retail orders that execute against unprotected displayed odd 
lot orders priced more aggressively than the Midpoint Price, would 
continue to enhance competition and execution quality for retail order 
flow among execution venues and contribute to the public price 
discovery process. The Exchange does not believe that the proposed rule 
change will impose any burden on intermarket competition since 
competing venues have and can continue to adopt similar fees for orders 
executing in their retail programs, subject to the SEC rule change 
process. Further, the Exchange operates in a highly competitive market 
in which market participants can easily direct their orders to 
competing venues, including off-exchange venues, if fees are viewed as 
non-competitive.
    The Exchange also 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. While Retail 
orders will be treated differently from other orders, those differences 
are not based on the type of Member entering orders but on whether the 
order is for a retail customer, and there is no restriction on whether 
a Member can handle retail customer orders.

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.

[[Page 15277]]

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) \23\ of the Act.
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    \23\ 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 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 Number SR-IEX-2021-04 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-2021-04. 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 will also be available for inspection 
and copying at the IEX's principal office and on its internet website 
at www.iextrading.com. 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-2021-04 
and should be submitted on or before April 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05822 Filed 3-19-21; 8:45 am]
BILLING CODE 8011-01-P