[Federal Register Volume 82, Number 156 (Tuesday, August 15, 2017)]
[Notices]
[Pages 38723-38725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17172]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81365; File No. SR-IEX-2017-26]
Self-Regulatory Organizations: Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Correct
Nonsubstantive Conflicting Rule Text in Rule 11.190
August 9, 2017.
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 August 8, 2017, 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 correct nonsubstantive conflicting rule text related to the
behavior of market orders entered during the Pre-Market Session \6\
marked DAY that are eligible to participate in either auctions for IEX-
listed securities pursuant to
[[Page 38724]]
Rule 11.350, or the opening process for non-IEX-listed securities
pursuant to Rule 11.231. The Exchange has designated this rule change
as ``non-controversial'' under Section 19(b)(3)(A) of the Act \7\ and
provided the Commission with the notice required by Rule 19b-4(f)(6)
thereunder.\8\
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\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CRF 240.19b-4.
\6\ See Rule 1.160(z).
\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4.
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The text of the proposed rule change is available at the Exchange's
Web site 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 statement [sic] may be examined
at the places specified in Item IV below. The self-regulatory
organization has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule filing is to correct
nonsubstantive conflicting rule text related to the queuing behavior of
market orders entered during the Pre-Market Session marked DAY that are
eligible to participate in auctions for IEX-listed securities pursuant
to Rule 11.350, or in the opening process for non-IEX-listed securities
pursuant to Rule 11.231. On April 13, 2017, IEX filed with the
Commission a proposed rule change 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; and to amend
IEX Rules 11.190 and 11.220 to specify the order types eligible to
participate in the proposed opening process for non-IEX listed
securities and the priority of such orders (the ``Opening Process'').
The proposed rule change for the Opening Process was published for
comment in the Federal Register on April 28, 2017.\9\ On April 20,
2017, IEX filed with the Commission a proposed rule change to adopt
rules governing auctions in IEX-listed securities, provide for the
dissemination of auction related market data, and establish rules
relating to trading halts and pauses (``IEX Auctions''). The proposed
rule change for IEX Auctions was published for comment in the Federal
Register on May 9, 2017.\10\ On July 24th 2017, the Commission approved
on an accelerated basis IEX's proposed Opening Process, as modified by
Amendment 3.\11\ On August 4, 2017, the Commission approved on an
accelerated basis the IEX Auctions proposal, as modified by Amendment
2.\12\
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\9\ See Securities Exchange Act Release No. 80514 (April 24,
2017), 82 FR 19763 (April 28, 2017).
\10\ See Securities Exchange Act Release No. 80583 (May 3,
2017), 82 FR 21634 (May 9, 2017).
\11\ See Securities Exchange Act Release No. 81195 (July 24,
2017), 82 FR 35250 (July 28, 2017).
\12\ See Securities Exchange Act Release No. 81316 (August 4,
2017), awaiting publication to the Federal Register.
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The rule changes related to both the Opening Process and IEX
Auctions included a modification to Rule 11.190(a)(2)(E)(iii), to
specify that market orders marked DAY entered during the Pre-Market
Session 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, or until the Opening Process for non-IEX-listed securities
pursuant to IEX Rule 11.231. However, because the proposed rule changes
for the Opening Process and IEX Auctions were filed and pending action
from the Commission concurrently, the proposed rule changes specified
in Exhibit 5 to each rule change filing were each separately specified
as compared to existing IEX rules. Therefore, the Exhibits 5 to each
rule change filing specify distinct behavior, pursuant to Rule
11.190(a)(2)(E)(iii), for how market orders marked as DAY queue before
the applicable open for the security in question. Exhibit 5 to the IEX
Auctions filing provides that such orders queue until the Opening
Auction (or Halt Auction, as applicable) for IEX listed securities.
Exhibit 5 to the Opening Process filing provides that such orders queue
until the Opening Process for non-listed securities. As a technical
matter, after the Commission's approval of the rule changes related to
IEX Auctions, which came subsequent to the Commission's approval of the
Opening Process, Rule 11.190(a)(2)(E)(iii) no longer specifies the
queueing behavior of market orders entered during the Pre-Market
Session marked DAY in the Opening Process. Accordingly, IEX proposes to
consolidate and correct the rule text changes to Rule
11.190(a)(2)(E)(iii), as approved in each rule filing to provide that
Market orders marked DAY submitted before the open of the Regular
Market Session are queued by the System until the Opening Auction (or
Halt Auction, as applicable) for IEX-listed securities pursuant to IEX
Rule 11.350, or until the Opening Process for non-IEX-listed securities
pursuant to IEX Rule 11.231, except market orders marked DAY that are
designated to route pursuant to Rule 11.230(c). Market orders marked
DAY are eligible to trade or route during the Regular Market Session
and treated by the System as having a time-in-force of IOC.
As recently announced by IEX Trading Alert #2017-027, on August 24,
2017 the Exchange is beginning a multi-phase deployment of the Opening
Process functionality for non-test securities.\13\ Furthermore, the
Exchange believes that some Members are currently in the process of
making or testing technology changes for the Exchange's Opening
Process. Accordingly, in order to provide clarity to Members and other
market participants regarding the Opening Process, and specifically to
avoid potential confusion regarding the queueing behavior of market
orders entered during the Pre-Market Session marked as DAY, the
Exchange is proposing to make the conforming change to Rule
11.190(a)(2)(E)(iii) described above to clearly state that such orders
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, or until the Opening Process for non-IEX-listed pursuant to IEX
Rule 11.231.
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\13\ See IEX Trading Alert #2017-027 (Deployment Schedule for
New Opening Process for Non-IEX-Listed Securities), August 3, 2017.
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2. Statutory Basis
IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \14\ of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act \15\ 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. The Exchange believes it is consistent with the Act to
correct the conflicting rule provisions so that IEX's rules are
accurate and descriptive of the System's functionality as approved by
the
[[Page 38725]]
Commission, and to avoid any potential confusion among Members and
market participants regarding the Opening Process.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(5).
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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 believes that the
proposed correction does not impact competition in any respect since it
is designed to correct a conflict between two approved versions of
Exchange rule 11.190(a)(2)(E)(iii), without changing the substance of
the Rules as separately approved.
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 Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \16\ of the Act and Rule 19b-4(f)(6) \17\
thereunder. Because the 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 and Rule 19b-
4(f)(6) thereunder.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ Under Rule 19b-4(f)(6)(iii), the Exchange is required to
provide the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Exchange has requested that the
Commission waive the prefiling requirement for its proposal in order
to allow it to file this clarification without undue delay. The
Commission hereby waives that requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative upon filing. The Exchange represents that waiver
will allow it to promptly reconcile a potential conflict between two
recently-approved changes to IEX Rule 11.190(a)(2)(E)(iii) without
changing the substance of that Rule, thus avoiding any potential
confusion among market participants regarding the Exchange's Opening
Process. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest as it will resolve a potential ambiguity in IEX's rules
concerning queuing of market orders marked DAY before the open of
trading involving either IEX-listed securities or non-IEX-listed
securities. While the current rule text references the term ``Opening
Auction'' for both types of securities, IEX uses the term ``Opening
Process'' for the latter. To avoid any potential confusion, IEX is
proposing to use that more precise term in this subsection of the rule
when it references non-IEX-listed securities. Accordingly, the proposed
rule change raises no new or novel issues and the Commission hereby
waives the 30-day operative delay requirement and designates the
proposed rule change operative upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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-2017-26 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-IEX-2017-26. This file
number should be included in 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 Web site (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 Web site viewing and
printing in the Commission's Public Reference Section, 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 Web site at www.iextrading.com. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-IEX-2017-26 and should be submitted on
or before September 5, 2017.
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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,
Assistant Secretary.
[FR Doc. 2017-17172 Filed 8-14-17; 8:45 am]
BILLING CODE 8011-01-P