[Federal Register Volume 90, Number 224 (Monday, November 24, 2025)]
[Notices]
[Pages 53037-53042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-20745]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104221; File No. SR-IEX-2025-27]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
IEX's Fee Schedule Concerning the Supplemental Market Quality Program
November 19, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the
[[Page 53038]]
``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that,
on September 30, 2025, 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 Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the
Securities and Exchange Commission (``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) to
modify the Supplemental Market Quality Program by introducing a second
tier of qualifying securities and making it easier for Members to
qualify for the incentive fees. Changes to the Fee Schedule pursuant to
this proposal are effective upon filing,\8\ and will be operative
beginning on October 1, 2025.
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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 https://www.iexexchange.io/resources/regulation/rule-filings
and at the principal office of the Exchange.
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 amend its Fee Schedule to modify the
Supplemental Market Quality Program (``SMQ'' or the ``Program'') \9\ by
introducing a second tier of qualifying securities and modifying the
quoting requirements to make it easier for Members to qualify for the
SMQ incentive payments. The Program is intended to increase displayed
liquidity and promote order flow to the Exchange by offering a
financial incentive for Members to enter displayed orders or quotes
(i.e., displayed trading interest) priced at the NBBO \10\ on the
Exchange for a significant portion of the day in certain securities
designated by the Exchange (``SMQ Securities''). The Exchange now
proposes to modify the SMQ by: (i) expanding the number of securities
covered by the current SMQ (as explained below, these securities will
now be referred to as ``SMQ Level 1 Securities'') and creating a new,
higher incentive payment tier for certain newly added securities which
are more difficult to quote (which will be referred to as ``SMQ Level 2
Securities''); (ii) increasing the minimum number of securities in
which a Member must have qualifying quoting activity in the current
Program from 50 securities to 100 securities; and (iii) changing the
quoting requirements to qualify for the SMQ \11\ by basing qualifying
quoting activity on a Member's percentage of market hours quoting on
the NBB \12\ plus that Member's percentage of market hours quoting on
the NBO.\13\ Notwithstanding the increase in the minimum number of
securities in which a Member must have qualifying quoting activity, the
Exchange believes that this change to the quoting requirements will
make it easier for Members to achieve the minimum threshold required to
be eligible for payment under the Program because more quoting activity
will qualify under this proposed change.
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\9\ The Exchange filed the proposed rule change establishing the
SMQ on May 16, 2025. See Securities Exchange Act Release No. 103131
(May 27, 2025), 90 FR 23397 (June 2, 2025) (SR-IEX-2025-07) (``SMQ
Product Filing'').
\10\ See IEX Rule 1.160(u).
\11\ Currently, if a Member quotes on the NBB and NBO
concurrently for 20% of market hours, the Member's Percent Time at
the NBBO would be 20%. Under this proposal, the Percent Time at NBB
and Percent Time at NBO would be added together and become ``NBBO
Time.'' In this example, the Member's NBBO Time would be 40%. As set
forth in SR-IEX-2025-26 (the ``ETP Quoting Filing'') and explained
infra, IEX proposes to define ``NBBO Time'' as the sum of the
Member's ``Percent Time at NBB'' and ``Percent Time at NBO.'' And
IEX proposes to define ``Percent Time at NBB'' and ``Percent Time at
NBO'' as the aggregate percentage of time during Regular Market
Hours where a Member has a displayed order of at least one round lot
at the NBB or NBO, respectively.
\12\ See IEX Rule 1.160(u).
\13\ See IEX Rule 1.160(u).
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Expansion of Securities Covered by the SMQ Program
As set forth in the SMQ Product Filing, the Exchange determines
which securities to designate as SMQ Securities by applying several
objective factors concerning each security's trading characteristics
and generally designates as SMQ Securities those securities that meet
certain thresholds with respect to these factors.\14\ These factors
include IEX's current relative quote presence in each security (i.e.,
displayed order volume and time at the NBBO for each security traded on
the Exchange), the number of market-wide daily price changes and the
average market-wide quote size for each security, and each security's
share price and average notional value traded.\15\ IEX uses these
factors to assess which securities are suitable for inclusion in the
list of SMQ Securities, with a goal of identifying securities in which
increased quoting would be impactful to both IEX and the market, but
not unduly burdensome to its Members in meeting the quoting
requirements to qualify for the SMQ.
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\14\ As set forth in the SMQ Product Filing, the Exchange
discussed with Commission staff the thresholds it applies to these
objective factors. See SMQ Product Filing, supra note 9 at 90 FR at
23398.
\15\ See SMQ Product Filing, supra note 9 at 90 FR at 23398.
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As noted above, IEX is proposing to expand the number of securities
included in the list of SMQ Securities. To do so, IEX is adjusting the
thresholds it applies to the objective criteria described above, but is
making no changes to the criteria used to assess a security's
suitability for inclusion in the SMQ.
IEX also proposes to expand the SMQ by introducing a second tier of
SMQ Securities, which it proposes to call ``SMQ Level 2 Securities.''
SMQ Level 2 Securities will be selected from among the newly added SMQ
Securities using the same objective criteria used for the current SMQ
Securities, but the threshold values will be adjusted to select for
symbols that are more difficult to quote (for example they are
generally more expensive per share and experience more quote changes).
As a result, market participants entering displayed trading interest in
these securities put more capital at risk, potentially face higher risk
of adverse
[[Page 53039]]
selection, and due to the increased frequency of quote changes, may be
required to more closely manage their quotes in order to maintain a
quote at the NBB, NBO, or the NBBO. To incentivize displayed trading
interest in these SMQ Level 2 Securities, the Exchange proposes to
provide a higher SMQ Incentive Payment \16\ that will apply to
qualifying quoting activity in these securities of $400 per qualified
security per month. In order to receive the SMQ Incentive Payment for
quoting in SMQ Level 2 Securities, a Member must have an NBBO Time of
at least 40% in at least 20 or more SMQ Level 2 Securities. The
Exchange believes that introducing a new, higher incentive fee for the
SMQ Level 2 Securities would be particularly impactful to IEX and the
market more generally by increasing quoting competition in securities
that are relatively more difficult to quote.
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\16\ As described infra, ``SMQ Incentive Payment'' shall mean
``the fixed dollar amount paid per SMQ Security to a Member that
satisfies the requirements for the SMQ listed herein.''
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The Exchange will identify all securities that it determines are
suitable to be included in the Level 2 tier, and identify them as such
in the list of SMQ Level 2 Securities that the Exchange will maintain
on its website. The Exchange also proposes to add to the SMQ section of
the Fee Schedule a new Calculation Table (the ``SMQ Level 2 Calculation
Table''), which will specify the above criteria for qualifying for the
SMQ Incentive Payment based upon quoting activity in SMQ Level 2
Securities. The new SMQ Level 2 Calculation Table will be as follows:
SMQ Level 2 Calculation Table
------------------------------------------------------------------------
SMQ qualifying activity: average daily
number of SMQ Level 2 securities with SMQ incentive payment
an NBBO Time of at least 40%
------------------------------------------------------------------------
0-19................................... $0 per qualified security per
month.
20 or more SMQ Level 2 Securities **... $400 per qualified security per
month.
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** SMQ Payouts will be made for all qualified securities if Member had
SMQ Qualifying Activity in at least 20 SMQ Level 2 Securities during
the month.
To distinguish the SMQ Level 2 Securities from the rest of the SMQ
Securities, IEX proposes to rename the first tier of SMQ qualifying
securities from ``SMQ Securities'' to ``SMQ Level 1 Securities,'' and
revise the definition of ``SMQ Securities'' to include SMQ Level 1 and
Level 2 Securities. Thus, as proposed, the SMQ section of the Fee
Schedule will contain the following definitions of SMQ Securities:
``SMQ Securities'' shall mean either SMQ Level 1 or SMQ
Level 2 Securities, as defined below.
``SMQ Level 1 Securities'' shall mean a list of securities
designated as such, that are used for purposes of qualifying for the
SMQ. The universe of these securities will be determined by the
Exchange and published on the Exchange's website here. Prior to the
start of each month, the Exchange will reevaluate and, as applicable,
update its list of SMQ Level 1 Securities, and it will publish the
updated list on the Fee Schedule at least one day prior to the start of
the month.
``SMQ Level 2 Securities'' shall mean a list of securities
designated as such, that are used for purposes of qualifying for the
SMQ. The universe of these securities will be determined by the
Exchange and published on the Exchange's website here. Prior to the
start of each month, the Exchange will reevaluate and, as applicable,
update its list of SMQ Level 2 Securities, and it will publish the
updated list on the Fee Schedule at least one day prior to the start of
the month.
Increasing the Quoting Activity Required To Qualify for SMQ Level 1
Securities
To qualify for the SMQ Incentive Payment currently, a Member must
enter displayed trading interest (i.e., at least one displayed order or
quote of at least one round lot size) at either the NBB, the NBO, or
the NBBO, for at least 40% of time during regular market hours \17\ in
at least 50 of the SMQ Level 1 Securities (based on an average daily
number) during the month. The Exchange proposes to increase the average
daily number of SMQ Level 1 Securities in which a Member must have the
minimum amount of qualifying quoting activity from 50 SMQ Securities to
100 SMQ Level 1 Securities. The Exchange also proposes to rename the
current SMQ Calculation Table in the SMQ section of the Fee Schedule as
the ``SMQ Level 1 Calculation Table'', and to update the text as
follows:
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\17\ In the ETP Quoting Filing (SR-IEX-2025-26), the Exchange
amended references to ``regular trading hours'' in the Fee Schedule
to ``Regular Market Hours.''
SMQ Level 1 Calculation Table
------------------------------------------------------------------------
SMQ qualifying activity: average daily
number of SMQ Level 1 securities with SMQ incentive payment
an NBBO Time of at least 40%
------------------------------------------------------------------------
0-99................................... $0 per qualified security per
month.
100 or more SMQ Level 1 Securities *... $125 per qualified security per
month.
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* SMQ Payouts will be made for all qualified securities if Member had
SMQ Qualifying Activity in at least 100 SMQ Level 1 Securities during
the month.
The Exchange believes this increase is commensurate with the other
modifications described herein, namely the increase in the number of
securities that will be on the SMQ Level 1 Securities list, as
described above, and the manner in which IEX will make it easier for
Members to meet the quoting requirements, as described below. While
this increase will require Members to engage in more quoting activity
to qualify for SMQ Payments, Members will now have a larger number of
securities in which to quote and, as described below, more relaxed
quoting requirements. Taken together, the Exchange believes these
changes will make it easier for Members to satisfy the
[[Page 53040]]
minimum requirements. In addition, the Exchange believes that
increasing the minimum average daily number of SMQ Level 1 Securities
is appropriate to ensure the continuing effectiveness of the SMQ
Program in improving trading conditions for all market participants
through increased quoting competition on the Exchange in a larger
number of securities.
The Exchange also proposes to revise two defined terms in the SMQ
section of the Fee Schedule for clarity and consistency. Specifically,
IEX proposes to rename the ``SMQ Incentive Fee'' as the ``SMQ Incentive
Payment.'' IEX proposes to make this change because it is a more
accurate description of the payments Members receive for participation
in the SMQ, which are in fact payments, not fees charged to them.
Consistent with this change, IEX proposes to revise the right-hand
column in the SMQ Calculation Tables to now refer to the ``SMQ
Incentive Payment.'' To avoid any potential confusion, IEX proposes to
rename the otherwise-similarly named term ``SMQ Payment'' as the ``SMQ
Payout'', and to update the footnote to both SMQ Calculation Tables to
now refer to SMQ Payouts. These proposed changes are designed to
improve the clarity and accuracy of the SMQ section of the Fee
Schedule.
Expansion of SMQ Qualifying Quoting Activity
Currently, a Member qualifies for the SMQ by entering displayed
trading interest at either the NBB, the NBO, or the NBBO, for at least
40% of time during regular market hours in at least 50 of the SMQ
Securities on average per day during the month (the ``Percent Time at
NBBO'' requirement). The Exchange calculates the number of SMQ
Securities for which each Member's Percent Time at NBBO was at least
40% (``SMQ Qualifying Activity'') on a daily basis. At the end of the
month, the Exchange calculates the monthly average of the number of SMQ
Securities in which the Member had SMQ Qualifying Activity. If a
Member, on an average daily basis, has SMQ Qualifying Activity in at
least 50 of the SMQ Securities during the month, the Exchange pays the
Member the ``SMQ Incentive Payment'' of $125 per SMQ Security for which
the Member satisfied the SMQ requirements.\18\
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\18\ Currently, the Exchange pays SMQ Payments for all qualified
securities if the Member had SMQ Qualifying Activity in at least 50
SMQ Securities during the month.
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As discussed above, the Exchange proposes to change the quoting
requirements to qualify for the SMQ by basing qualifying quoting
activity on a Member's NBBO Time: the Member's percentage of market
hours quoting on the NBB plus the Member's percentage of market hours
quoting on the NBO. For example, for a particular security, if a
Member's Percent Time at NBB is 25% and Percent Time at NBO is 15%, its
NBBO Time would be 40%. Alternatively, if a Member's Percent Time at
NBB is 20% and concurrently, the Member's Percent Time at NBO is also
20%, then that Member's NBBO Time also would be 40%. Put differently,
quoting activity on either side of the NBBO will now count toward the
relevant eligibility threshold.
In a rule filing filed by the Exchange concurrently with this
one,\19\ the Exchange moved certain terms and definitions in the SMQ
section of the Fee Schedule that were applicable to other parts of the
Fee Schedule to the Definitions and Notes subheadings of the
Transaction Fees section of the Fee Schedule. Thus, the term ``Percent
Time at NBBO'' has been removed from the Fee Schedule and replaced with
the terms ``Percent Time at NBB,'' \20\ ``Percent Time at NBO'' \21\
and ``NBBO Time'' \22\ which appear in the ``Definitions'' subheading
of the Transaction Fees section of the Fee Schedule. Additionally, the
ETP Quoting Filing moved the language about trading days and hours that
are excluded from the quoting calculations as well as how Members can
aggregate their activity with their affiliates from the SMQ section of
the Fee Schedule to the Notes subheading of the Transaction Fees
section of the Fee Schedule. IEX also modified the language, so that it
now describes how the Exchange applies these exclusions and
aggregations to the SMQ as well as to certain other quoting and trading
based fee incentives. For clarity purposes, IEX proposes to add a
bullet under the ``Supplemental Market Quality Program'' subheading
that reads:
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\19\ See ETP Quoting Filing (SR-IEX-2025-26).
\20\ The Fee Schedule defines this term as ``the aggregate of
the percentage of time during Regular Market Hours where a Member
has a displayed order of at least one round lot at the national best
bid (`NBB').''
\21\ The Fee Schedule defines this term as ``the aggregate of
the percentage of time during Regular Market Hours where a Member
has a displayed order of at least one round lot at the national best
offer (`NBO').''
\22\ The Fee Schedule defines this term as ``the Member's
Percent Time at NBB plus the Member's Percent Time at NBO. For
example, for a particular security, if a Member's Percent Time at
NBB is 25% and Percent Time at NBO is 15%, its NBBO Time would be
40%. Alternatively, if a Member's Percent Time at NBB is 20% and
concurrently, the Member's Percent Time at NBO is also 20%, then
that Member's NBBO Time would be 40%.''
Please refer to the Definitions and Notes sections located at
the beginning of the Transaction Fees section for the definition of
NBBO Time as well as information about how the Exchange calculates
NBBO Time and allows Members to aggregate their NBBO Time with their
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affiliates.
The effect of these proposed changes will be to relax the quoting
activity requirements to qualify for the SMQ Program so that any
quoting activity at the NBB or the NBO (or NBB and NBO combined) will
count toward the eligibility threshold. The Exchange believes that this
proposed change will make it easier for Members to qualify for, and
expand opportunities to participate in, the Program, thereby providing
enhanced liquidity for all market participants through increased
displayed trading interest and narrower bid-ask spreads on the
Exchange.
All other aspects of calculating a Member's eligibility for SMQ
payments remain unchanged. As the Exchange does currently, on a daily
basis the Exchange will calculate the average daily number of SMQ Level
1 Securities in which the Member had SMQ Qualifying Activity based on
the Member's daily quoting activity. For clarity and consistency, IEX
proposes to modify the definition of SMQ Qualifying Activity in the SMQ
section of the Fee Schedule to read as follows:
``SMQ Qualifying Activity'': As described in the Notes section,
above, on a daily basis, the Exchange will determine the number of
SMQ Level 1 and/or Level 2 Securities in which a Member meets the
threshold for NBBO Time set forth in the below SMQ Calculation
Tables. At the end of the month, the Exchange will calculate the SMQ
Qualifying Activity by taking the average (rounded to the nearest
whole number) of the number of SMQ Level 1 and/or Level 2 Securities
for which the Member's NBBO Time was at least the threshold value
set forth in the Calculation Tables below.
The relevant text in the Notes section referred to in the
definition of SMQ Qualifying Activity \23\ reads as follows:
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\23\ This text was added to the Fee Schedule by the ETP Quoting
Filing.
Unless otherwise specified, for any tiers that include NBBO Time
as a required criteria (for example, the Displayed Liquidity Adding
Rebate Tiers in footnote 4 and the Supplemental Market Quality
Program), on a daily basis, the Exchange will determine the number
of securities in which a Member meets the threshold value (set forth
in the tier) for NBBO Time for that day. At the end of the month,
the Exchange will take the average (rounded to the nearest whole
number) of the number of securities in which a Member's NBBO Time
was at least the
[[Page 53041]]
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threshold value set forth in the applicable tier.
In summary, if a Member has SMQ Qualifying Activity in an average
of at least 100 of the SMQ Level 1 Securities during the month, the
Exchange will pay the Member $125 per qualified security.\24\ If a
Member has SMQ Qualifying Activity in an average of at least 20 SMQ
Level 2 Securities, the Exchange will pay the Member $400 per qualified
security. Furthermore, both SMQ Level 1 and Level 2 Calculation Tables
will have a footnote explaining that SMQ Payments will be made for all
qualified securities if the Member had SMQ Qualifying Activity in at
least the threshold number of SMQ Securities during the month.
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\24\ The SMQ Incentive Payment for SMQ Level 1 Securities will
remain unchanged at $125 per qualified security.
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The following examples illustrate how the amended SMQ will work.
Example No. 1 (SMQ Level 1 Securities)
Assume that in a particular month, IEX has designated 500
securities as SMQ Level 1 Securities. There are 20 trading days in that
month, and on ten of those days Member A's NBBO Time is 40% for 200 of
the SMQ Level 1 Securities. On the other ten trading days, Member A's
NBBO Time is 40% for 100 of the SMQ Securities. At the end of the
month, IEX calculates the average number of SMQ Securities in which
Member A has at least 40 Percent NBBO Time on a daily basis to be 150
SMQ Level 1 Securities. IEX provides a lump sum payment of $18,750 to
Member A ($125 x 150 SMQ Level 1 Securities) (the ``SMQ Payment'').
Example No. 2 (SMQ Level 2 Securities)
Assume that in a particular month, IEX has designated 100
securities as SMQ Level 2 Securities. There are 21 trading days in that
month, and on eleven of those days Member B's NBBO Time is 40% for 25
of the SMQ Level 2 Securities. On the other ten trading days, Member
B's NBBO Time is 40% for 30 of the SMQ Level 2 Securities. At the end
of the month, IEX calculates the average daily number of SMQ Level 2
Securities in which Member B had at least 40 Percent NBBO Time to be 27
\25\ SMQ Level 2 Securities. IEX provides a lump sum payment of $10,800
to Member B ($400 x 27 SMQ Level 2 Securities) (the ``SMQ Payment'').
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\25\ As set forth in the proposed Fee Schedule, the Exchange
will calculate the SMQ Qualifying Activity by taking the average of
the number of SMQ Level 2 Securities for which the Member's NBBO
Time was at least 40% and round that number to the nearest whole
number. Thus, 27.38 SMQ Securities is rounded to 27.
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As noted above, the Exchange will apply the same exclusions to the
calculation of NBBO Time that currently apply to the SMQ (e.g.,
excluding time periods of system disruptions, days with scheduled early
market close, or any regular market hours when an SMQ Security is
subject to a trading halt or Limit Up-Limit Down pause).\26\ For
example, if an SMQ Security was halted for 30 minutes during one
trading day, and a Member provided displayed trading interest in that
security at the NBB (NBO) for 2.4 hours of that trading day, the
Member's Percent Time at NBB (NBO) for that day would be 40%, because
2.4 hours is 40% of 6 hours.\27\
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\26\ See, e.g., IEX Rules 11.271 and 11.280.
\27\ If IEX did not exclude the time a security is halted from
its calculation of Percent Time at NBB (NBO), in this example the
Member's Percent Time at NBB (NBO) would be 37% (2.4 hours divided
by the full 6.5 hour trading day), and the Member's trading activity
in that security for that day would not count towards its SMQ
Qualifying Activity.
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The Exchange will continue to allow Members to aggregate their
Percent Time at NBB and their Percent Time at NBO (and thus their NBBO
Time) with other Members with which they are affiliated,\28\ if Members
provide prior notice to the Exchange. As proposed, to the extent that
two or more affiliated companies maintain separate memberships with the
Exchange and can demonstrate their affiliation by showing they control,
are controlled by, or are under common control with each other, the
Exchange would permit such Members to aggregate their Percent Time at
NBB (and their Percent Time at NBO). Members will be responsible for
having proper internal documentation in their books and records
substantiating that the two or more Members seeking to aggregate their
Percent Time at NBB and their Percent Time at NBO are affiliates of one
another.
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\28\ As defined in Rule 12b-2 under the Act, 17 CFR 240.12b-2.
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The SMQ, as amended with the changes described herein, will remain
open to all Members and will not impose any two-sided quotation
obligations on any Member seeking to qualify for the SMQ. Accordingly,
the amended SMQ will continue to be designed to attract liquidity from
any firm willing to provide liquidity at the NBB or NBO in SMQ Level 1
or Level 2 Securities. Through these proposed changes, the Exchange is
proposing to increase opportunities for Members to earn an SMQ Payment
by increasing the number of securities in the Program, offering an
increased incentive payment for displayed trading interest in
relatively more difficult-to-quote securities, and changing the quoting
activity calculation to count time quoting at either the NBB or the NBO
as the basis for the SMQ Qualifying Activity, thereby making it easier
to satisfy the quoting activity requirement. As noted in the SMQ
Product Filing, the SMQ Program is similar to quote incentive programs
at other national securities exchanges.\29\
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\29\ See SMQ Product Filing, supra note 9, 90 FR at 23400
(comparing the SMQ to the Enhanced Market Quality Program offered by
Nasdaq BX, the Market Quality program offered by MIAX PEARL, and
Cboe EDGA's NBBO Setter Program); see also LTSE's Liquidity
Incentive Program, available at https://ltse.com/trading/fee-schedules.
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2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \30\ of the Act in general, and furthers the
objectives of Sections 6(b)(4) \31\ 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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\30\ 15 U.S.C. 78f.
\31\ 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. Based
upon informal discussions with Members regarding the current SMQ
Program, IEX has concluded that it will be able to more effectively
compete with other exchanges for order flow by expanding the list of
SMQ-eligible securities; offering Members an increased incentive
payment for posting displayed liquidity on the Exchange in securities
that are relatively more difficult-to-quote compared to other
securities; and relaxing the quoting activity that qualifies for the
SMQ. IEX believes that Members and other market participants may be
more willing to send displayed trading interest to IEX if the proposed
rule changes are adopted.
Accordingly, IEX has designed the proposed changes to further
incentivize Members to send displayed quotes at the NBB (NBO) in a
wider range of securities and specifically, in lower displayed volume
securities. IEX believes that an increase in displayed liquidity and
order flow to the Exchange will, in turn, improve the quality of the
IEX market and increase its attractiveness to existing and prospective
participants. In addition,
[[Page 53042]]
the proposal is equitable and not unfairly discriminatory as the
proposal would equitably allocate SMQ Payments among Members by paying
Members based on their total quoting activity in SMQ Level 1 Securities
and SMQ Level 2 Securities in any given month.
As noted in the Purpose section, the Exchange believes the proposed
incentive payments in the Supplemental Market Quality Program will
incentivize Members to direct additional displayed liquidity-providing
orders to the Exchange in SMQ Securities, thereby promoting price
discovery and market quality in the SMQ Securities and more generally
on the Exchange, and, further, that the resulting increased displayed
liquidity and narrower spreads will benefit all investors by deepening
the Exchange's liquidity pool, supporting the quality of price
discovery, enhancing quoting competition across all exchanges, and
promoting market transparency.
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. The SMQ is comparable to quote incentive programs at other
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.\32\ To the extent this proposed fee
change is successful in incentivizing the entry and execution of
displayed trading interest 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.
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\32\ See supra note 29.
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Finally, the Exchange believes that the textual changes to the Fee
Schedule, specifically moving some definitions to the Transaction Fees
section of the Fee Schedule and updating definitions in the SMQ section
of the terms ``SMQ Qualifying Activity'', ``SMQ Incentive Payments'',
and ``SMQ Payouts''; is consistent with the requirements above. These
proposed changes are designed to reduce any potential confusion for
market participants using IEX's Fee Schedule and to provide clarity,
accuracy, and consistency between the Fee Schedule and the Rule Book.
Further, IEX believes these changes would contribute to reasonably
ensuring that the requirements of the SMQ Program, and any other
activity-based incentive or rebate described in the Fee Schedule, are
clear, accurate, and consistent with the Rule Book.
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 favor 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 Members may qualify for different amounts of SMQ Payments,
these payments are not based on the type of Member entering the
displayed trading interest, but rather on the amount of displayed
trading interest in a wide range of eligible securities that each
Member submits to the Exchange. Further, the proposed fee changes are
intended to incentivize 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 is effective upon filing pursuant to
Section 19(b)(3)(A) \33\ of the Act and subparagraph (f)(2) of Rule
19b-4 \34\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\33\ 15 U.S.C. 78s(b)(3)(A).
\34\ 17 CFR 240.19b-4(f)(2).
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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.
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-2025-27 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-2025-27. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the filing 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-2025-27 and
should be submitted on or before December 15, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-20745 Filed 11-21-25; 8:45 am]
BILLING CODE 8011-01-P