[Federal Register Volume 89, Number 220 (Thursday, November 14, 2024)]
[Notices]
[Pages 90098-90101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26421]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101562; File No. SR-IEX-2024-24]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Fee Schedule Concerning Transaction Pricing
November 7, 2024.
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 October 28, 2024, 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,
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.
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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\ the Exchange is filing with the
Commission a proposed rule change to amend the Exchange's fee schedule
applicable to Members \6\ (the ``Fee Schedule'' \7\) pursuant to IEX
Rule 15.110(a) and (c). Changes to the Fee Schedule pursuant to this
proposal are effective upon filing,\8\ and will be operative on
November 1, 2024.
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ See IEX Rule 1.160(s).
\7\ See Investors Exchange Fee Schedule, available at https://www.iexexchange.io/resources/trading/fee-schedule.
\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 the
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify its Fee Schedule, pursuant to IEX
Rule 15.110(a) and (c), to introduce four new Displayed Liquidity
Adding Rebate Tiers (and to modify the two current tiers) for
executions priced at or above $1.00. The Exchange proposes to implement
these changes effective November 1, 2024.
Displayed Liquidity Adding Rebate Tiers
As reflected in the Transaction Fees section of the Fee Schedule,
IEX currently offers two Displayed Liquidity Adding Rebate tiers.
Specifically, Displayed Liquidity Adding Rebate Tier 1 provides the
Exchange's base rebate of $0.0014 per share to all executions of
displayed liquidity adding orders priced at or above $1.00 per share
(``Added Displayed Liquidity'').\9\ And Displayed Liquidity Adding
Rebate Tier 2 provides a rebate of $0.0020 per share to all Added
Displayed Liquidity for Members that add at least 10,000,000 ADV \10\
of Added Displayed Liquidity.
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\9\ Nothing in this rule filing affects trades below $1.00 per
share (``sub-dollar trades''). Sub-dollar trades would not impact
the rebate tier calculations and remain ineligible for rebates.
\10\ The Fee Schedule defines ``ADV'' as the number of shares
added or removed that execute at or above $1.00 per share, combined,
per day, calculated on a monthly basis.
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To further incentivize the posting of displayed liquidity on the
Exchange, IEX proposes to modify the two current Displayed Liquidity
Adding Rebate tiers and introduce four new tiers. Under this proposal,
the fees/rebates the Exchange charges for adding displayed liquidity to
the Exchange will be:
Members that add less than 3,000,000 ADV of displayed
liquidity will be charged a fee of FREE for their displayed liquidity
adding executions (Tier 1).
Members that trade at least 5,000,000 non-displayed ADV
and less than 10,000,000 non-displayed ADV will receive a rebate of 10
mils per share for their displayed liquidity adding executions (Tier
2).\11\
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\11\ IEX designed Tier 2, which provides a 10 mil rebate to
Members that trade at least 5,000,000 non-displayed ADV, to provide
Members additional ways to qualify for a tiered rebate incentive.
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[[Page 90099]]
Members that: (1) add at least 3,000,000 ADV of displayed
liquidity and less than 10,000,000 ADV of displayed liquidity; or (2)
trade at least 10,000,000 non-displayed ADV, will receive a rebate of
14 mils per share for their displayed liquidity adding executions (Tier
3).\12\
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\12\ IEX designed Tier 3, which provides a 14 mil rebate to
Members that trade at least 10,000,000 non-displayed ADV (or add
between 3,000,000 and 10,000,000 displayed ADV), to provide Members
additional ways to qualify for a tiered rebate incentive.
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Members that add at least 10,000,000 ADV of displayed
liquidity and less than 15,000,000 ADV of displayed liquidity will
receive a rebate of 16 mils per share for their displayed liquidity
adding executions (Tier 4).
Members that add at least 15,000,000 ADV of displayed
liquidity and less than 20,000,000 ADV of displayed liquidity will
receive a rebate of 18 mils per share for their displayed liquidity
adding executions (Tier 5).
Members that add at least 20,000,000 ADV of displayed
liquidity will receive a rebate of 20 mils per share for their
displayed liquidity adding executions (Tier 6).
Proposed Displayed Liquidity Adding Rebate Tiers 2 and 3 are based
on a Member's trading (both adding and removing) of non-displayed ADV
on the Exchange.\13\ Therefore, IEX proposes to update the definition
of ``ADV'' in the Definitions and Information portion of the
Transaction Fees section of the IEX Fee Schedule to explain which fee
code combinations count as ``non-displayed ADV.'' Specifically, IEX
proposes to add a bullet under the ADV definition that states:
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\13\ Tier 3 is also available to a Member that adds at least
3,000,000 displayed ADV and less than 10,000,000 displayed ADV,
irrespective of the Member's non-displayed ADV.
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``non-displayed ADV'' refers to executions with the
following Fee Code Combinations: MI, MIB, TI, TIB, TIY, TIYB, TIR, TLW,
TLWB, and MIA.
IEX notes that this model of offering volume-based rebates is
consistent with the rebates offered by competitor exchanges.\14\ The
Exchange also notes that the highest rebate in this proposal, the
$0.0020 rebate for Tier 5, is well within the range of rebates offered
by competing exchanges.\15\
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\14\ See, e.g., MEMX Equities Fee Schedule (Effective July 16,
2024), available at https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/. However, IEX's proposed rebate
tiers will continue to be based on each Member's ADV, without a
requirement to meet a total consolidated volume threshold.
\15\ See, e.g., MEMX Equities Fee Schedule, supra note 14
(maximum rebate of $0.0037); Nasdaq Equity VII, Section 114 (maximum
rebate of $0.0036); New York Stock Exchange Price List 2024 (as of
June 3, 2024), https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (maximum rebate of $0.0035).
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Accordingly, IEX proposes to update its Fee Schedule to make
several revisions to reflect the proposed amended rebate tiers. First,
the Exchange proposes to amend the Fee Schedule's Base Rates table to
update the description and fees associated with Base Fee Code ML (``Add
displayed liquidity''). As amended, the Base Rates table will list six
base rates for Fee Code ML--the FREE execution applied if ``Member adds
less than 3,000,000 ADV of displayed liquidity''; the $0.0010 rebate
applied if ``Member trades at least 5,000,000 non-displayed ADV and
less than 10,000,000 non-displayed ADV''; the $0.0014 rebate applied if
``Member: (1) adds at least 3,000,000 ADV and less than 10,000,000 ADV
of displayed liquidity; or (2) trades at least 10,000,000 non-displayed
ADV''; the $0.0016 rebate applied if ``Member adds at least 10,000,000
ADV and less than 15,000,000 ADV of displayed liquidity''; the $0.0018
rebate applied if ``Member adds at least 15,000,000 and less than
20,000,000 ADV of displayed liquidity''; and the $0.0020 rebate applied
if ``Member adds at least 20,000,000 ADV of displayed liquidity.''
IEX also proposes to amend Footnote 4 to the Transaction Fees
section, which is applicable to fee code ML in the Base Rates table,
and to Fee Code Combinations ML, MLB, MLY, and MLYB in the Fee Code
Combination and Associated Fees table. As proposed, Footnote 4 will be
amended to reflect the six tiers proposed in this filing, including the
required criteria for each rebate tier and the applicable rebate, as
described above.
The Exchange believes the proposed amendments to the Displayed
Liquidity Adding Rebate Tiers would provide an incremental incentive
for Members to send more orders to the Exchange in an effort to qualify
for the proposed enhanced rebates offered by Tiers 2-5 for executions
of Added Displayed Volume. As such, the proposed Displayed Liquidity
Adding Rebate Tiers are designed to encourage Members that provide
liquidity on the Exchange to maintain or increase their order flow,
thereby contributing to a deeper and more liquid market to the benefit
of all market participants and enhancing the attractiveness of the
Exchange as a trading venue.
As noted above, the Exchange is not proposing to change the fees
applicable to executions of and with orders with an execution price
below $1.00 per share, which would remain free for such orders that
provide displayed liquidity and subject to a fee of 0.09% of the total
dollar volume of the execution for orders that take displayed
liquidity. IEX is also not proposing to make any changes to the fees
applicable to the execution of Retail \16\ orders that remove displayed
liquidity, which will continue to execute for free.
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\16\ See IEX Rule 11.190(b)(15).
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2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \17\ of the Act in general and furthers the
objectives of Sections 6(b)(4) \18\ of the Act, in particular, in that
it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities. The Exchange believes that the proposed fee change is
reasonable, fair and equitable, and non-discriminatory.
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\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(4).
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The Exchange operates in a highly competitive market in which
market participants can readily direct order flow to competing venues
if they deem fee levels at a particular venue to be excessive. IEX has
concluded that, in the context of current regulatory requirements
governing access fees and rebates, it will be able to more effectively
compete with other exchanges for order flow by offering more targeted
rebate incentives. Based upon informal discussions with market
participants, IEX believes that Members and other market participants
may be more willing to send displayed orders to IEX if the proposed fee
structure was adopted.
Accordingly, IEX has designed the proposed rebate tiers to attract
and incentivize displayed orders as well as order flow seeking to trade
with such displayed orders. Moreover, increases in displayed liquidity
would contribute to the public price discovery process which would
benefit all market participants and protect investors and the public
interest. Additionally, as discussed in the Purpose section, IEX has
designed Tiers 2 and 3, which provide a 10 mil rebate to Members that
trade at least 5,000,000 non-displayed ADV (but less than 10,000,000
non-displayed ADV) and a 14 mil rebate to Members that trade at least
10,000,000 non-displayed ADV to allow Members additional ways to
qualify for an incentive rebate tier.
The Exchange also believes that adding language to the ADV
definition in the Fee Schedule to explain which
[[Page 90100]]
fee codes count towards ``non-displayed ADV'' is reasonable, equitable,
and non-discriminatory because this language is designed to ensure that
the Fee Schedule is as clear and easily understandable as possible with
respect to the criteria applied by the Exchange for two of the new
proposed rebate tiers.
Thus, as discussed in the Purpose section, the Exchange believes
that the proposed addition of new volume-based rebate tiers that pay
progressively higher rebates to Members who add progressively more
displayed liquidity (on a monthly average basis) is reasonable and
consistent with the Act because it is designed to incentivize Members
to send additional displayed orders to IEX. Specifically, the Exchange
believes that the volume-based rebate tiers are reasonably designed to
incentivize Members to add a meaningful volume of displayed liquidity
by providing increasingly higher rebates for Members that qualify for
increasingly higher average minimum volume thresholds. As noted in the
Purpose section, other exchanges offer rebate tiers, and thus the
Exchange does not believe that this aspect of the proposal raises any
new or novel issues not already considered by the Commission. The
Exchange also believes that setting tier thresholds based on each
Member's own volume on the Exchange rather than based on consolidated
market-wide volume will facilitate the ability of Members to control
and predict the net fees that will apply to their transactions on the
Exchange each month.
As discussed above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive. Within that context, the proposed Displayed Liquidity Adding
Rebate Tier structure is designed to keep IEX's displayed trading
prices competitive with those of other exchanges. The proposed rebates
for the six Displayed Liquidity Adding Rebate tiers are within the
range offered by competing exchanges, and thus IEX does not believe
that the proposal raises any new or novel issues not already considered
by the Commission in the context of other exchanges' fees.
The Exchange also believes that it is reasonable and consistent
with the Act not to modify its displayed fees for sub-dollar executions
to synchronize those fees with the proposed fees for executions at or
above $1.00 per share. The Exchange believes that the existing fee
structure for such executions continues to be reasonably designed to
incentivize displayed order flow (and orders seeking to trade with
displayed order flow) in such securities.
Further, IEX believes that it is reasonable and consistent with the
Act not to change the fees applicable to the execution of Retail orders
that remove liquidity, which will continue to execute for free. In this
regard, the Exchange believes that the existing fee structure continues
to be reasonably designed to incentivize the entry of Retail orders,
and notes that the Commission, in approving IEX's Retail Price
Improvement Program, acknowledged the value of exchanges' offering
incentives to attract both retail investor orders and orders
specifically designated to execute only with retail orders.\19\
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\19\ See Securities Exchange Act Release No. 86619 (August 9,
2019), 84 FR 41769, 41771 (August 15, 2019) (SR-IEX-2019-05).
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Finally, to the extent this proposed fee change is successful in
incentivizing the entry and execution of displayed orders on IEX, such
greater liquidity will benefit all market participants by increasing
price discovery and price formation as well as market quality and
execution opportunities. And, as discussed above, IEX does not believe
that any aspect of this proposal raises new or novel issues not already
considered by the Commission.
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. The Exchange does not believe
that the proposed rule change will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if fee schedules at other venues are viewed as more
favorable. Consequently, the Exchange believes that the degree to which
IEX fees could impose any burden on competition is extremely limited
and does not believe that such fees would burden competition between
Members or competing venues. Moreover, as noted in the Statutory Basis
section, the Exchange does not believe that the proposed changes raise
any new or novel issues not already considered by the Commission.
The Exchange 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 because, while
different rebates and fees are assessed on Members, these rebate and
fee tiers are not based on the type of Member entering the orders that
match, but rather on the Member's own trading activity. Further, the
proposed fee changes continue to be intended to encourage market
participants to bring increased order flow to the Exchange, which
benefits all market participants.
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 foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) \20\ of the Act.
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\20\ 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-IEX-2024-24 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-2024-24. This file
number should be included on the
[[Page 90101]]
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
(https://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 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-IEX-2024-24 and should be submitted on or before December 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26421 Filed 11-13-24; 8:45 am]
BILLING CODE 8011-01-P