
[Federal Register Volume 82, Number 155 (Monday, August 14, 2017)]
[Notices]
[Pages 37973-37975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17051]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81346; File No. SR-IEX-2017-25]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Make a 
Correction to the Exchange Fee Schedule Related to Fees for Executions 
That Involve Taking Resting Interest With Non-Displayed Priority With a 
Displayable Order

August 8, 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 7, 2017, the Investors Exchange LLC (``IEX'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule

[[Page 37974]]

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 Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ 
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the 
Commission a proposed rule change to make a correction to the Exchange 
Fee Schedule related to fees for executions that involve taking resting 
interest with non-displayed priority with a displayable order. The 
Exchange proposes to implement the change beginning on September 1, 
2017.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 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 Exchange proposes to amend its Fee Schedule, pursuant to IEX 
Rule 15.110(a) and (c), to make a correction related to the fees for 
executions that involve taking non-displayed resting interest with a 
displayable order. Subject to certain exceptions, the Exchange charges 
$0.0009 per share (or 0.30% of the total dollar value of the 
transaction for securities priced below $1.00) to Members for 
executions on IEX that include resting non-displayed interest \6\ for 
both the liquidity providing and liquidity removing order (the ``Non-
Displayed Match Fee'').\7\ One exception relates to certain displayable 
orders that remove non-displayed liquidity upon entry. The Exchange Fee 
Schedule provides that the Non-Displayed Match Fee is not charged for 
displayable orders \8\ that remove non-displayed liquidity upon entry 
if, on a monthly basis, at least 90% of the liquidity removing Member's 
aggregate executed shares of displayable orders added liquidity during 
the month in question.\9\
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    \6\ Non-displayed priority refers to an order or portion of a 
reserve order that is booked and ranked with non-display priority on 
the Order Book. See Rules 11.190(b)(3) and 11.190(b)(2).
    \7\ This pricing is referred to by the Exchange as the ``Non-
Displayed Match Fee'' on the Fee Schedule with a Fee Code of `I' 
which is provided by the Exchange on execution reports.
    \8\ See Rule 11.190(b)(3).
    \9\ However, in such transactions, the non-displayed liquidity 
adding interest will be subject to the Non-Displayed Match Fee. The 
Exchange also does not charge a fee where the adding and removing 
order originated from the same Exchange Member.
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    The Fee Schedule describes the calculation to determine if the Non-
Displayed Match Fee is charged with reference to ``TMVD'' which means 
``total monthly volume displayable calculated as the sum of executions 
from the Member's displayable orders during the calendar month.'' \10\ 
However, the reference to a ``Member's'' displayable orders was 
inadvertent, and should instead have referred to each of a Member's 
market participant identifiers, or MPIDs, which is how the Exchange in 
practice has been calculating TMVD and thus determines whether the Non-
Displayed Match Fee is applicable to particular executions.
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    \10\ See IEX Fee Schedule.
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    Accordingly, the Exchange proposes to correct the IEX Fee Schedule 
to provide that TMVD means ``total monthly volume displayable 
calculated as the sum of executions from each of the Member's MPIDs (on 
a per MPID basis) displayable orders during the calendar month.'' In 
addition, the Exchange proposes a clarifying amendment to the single 
asterisked footnote related to the Non-Displayed Match Fee to specify 
that the 90% calculation will be performed on a per MPID basis. Thus, 
the phrase ``on a per MPID basis'' would be added after the phrase ``at 
least 90% of TMVD'' in the footnote. Finally, the Exchange proposes to 
add a definition of MPID to the Fee Schedule.
    With respect to the calculation of the Non-Displayed Match Fee and 
the applicable 90% threshold exception for executions of displayable 
orders that remove resting non-displayed liquidity upon entry, IEX 
reviewed Member invoices since its launch as an exchange in August 2016 
through June 30, 2017 to assess whether any Members were charged fees 
that differed from those described in the Fee Schedule. In other words, 
IEX recalculated the Non-Displayed Match Fee and the 90% threshold 
exception on a ``per Member'' basis (which is how the Fee Schedule 
currently reads) instead of on a ``per MPID'' basis (which is how IEX 
in practice had been calculating that fee). This assessment identified 
that nine Members were charged such differential fees in particular 
months, in some cases more than the fees described in the Fee Schedule 
and in some cases less than the fees described in the Fee Schedule. In 
total, seven Members were charged and paid $18,948.54 in excess fees 
\11\ and eight Members were not charged $44,175.28 in fees that should 
have been charged.\12\ Five Members were overcharged and undercharged 
in different months.
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    \11\ The range is from $0.09 to 7811.66.
    \12\ The range is from $1.51 to $29,482.12.
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    In order to address the discrepancies, IEX will charge or credit 
each impacted member for the net amount overpaid or underpaid and will 
be included in the August 2017 monthly invoices to be sent in September 
2017 pursuant to IEX Rule 15.120 notwithstanding that fees included 
thereof are for trading activity that occurred over prior months.\13\
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    \13\ In the event that a Member owed a credit declines the 
credit, IEX will make a charitable donation in the amount of such 
credit.
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    The Exchange proposes to implement the revised fee on a going 
forward basis as of September 1, 2017, after which IEX will assess this 
fee on a MPID basis. Members will be charged for July and August based 
on the current Fee Schedule whereby the 90% calculation will be 
performed on a per Member basis, aggregating all of the Member's MPIDs.
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 Sections 6(b)(4) \15\ 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. In addition, the Exchange believes that it is 
consistent with the Act to correct the Fee Schedule so that the Fee 
Schedule is accurate, avoiding

[[Page 37975]]

any potential confusion among Members. The Exchange further believes 
that the correction to the Fee Schedule is reasonable, equitable, and 
not unfairly discriminatory because all similar situated Members will 
be subject to the same fee structure.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes that it is consistent with the Act and 
an equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities to measure 
whether the 90% threshold for adding liquidity with displayable orders 
is reached on an MPID basis. As explained in IEX's rule change adopting 
the exception to the Non-Displayed Match Fee, the flexibility is 
designed to address limited inadvertent liquidity removal by Members 
who are largely adding displayed liquidity and generally intend to add 
displayed liquidity on IEX, to further encourage aggressively priced 
displayed orders.\16\ The Exchange believes that Members that utilize 
multiple MPIDs generally use different MPIDs for different trading 
strategies or customers. Therefore, the Exchange believes that 
measuring by MPIDs is a more precise manner of assessing whether a 
Member's trading strategy (or that of a customer) is largely adding 
displayed liquidity and generally intends to add displayed liquidity 
with displayable orders.
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    \16\ See Securities Exchange Act Release No. 78550 (August 11, 
2016), 81 FR 54873 (August 17, 2016) (SR-IEX-2016-09).
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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 proposed rule change is 
designed to correct an inadvertent error rather than a competitive 
issue. The Exchange does not believe the proposed rule change will 
result on a burden on intramarket competition because all Members will 
be subject to the Non-Displayed Match Fee in the same manner on a fair 
and consistent basis. While different fees will be assessed in some 
circumstances, these different fees are not based on the type of Member 
entering the order and all Members can submit any type of order. 
Further, assessing whether the Non-Displayed Match Fee is applicable on 
a per MPID basis is intended to encourage market participants to enter 
aggressively priced displayed orders on the Exchange, which enhances 
price discovery and deepens the Exchange's liquidity pool to the 
benefit of all market participants. Further, the Exchange operates in a 
highly competitive environment in which market participants can readily 
favor competing venues if fee schedules at other venues are viewed as 
more favorable.
    The Exchange also does not believe that the proposed rule change 
will result in any burden on intermarket competition because other 
venues are free to adopt comparable pricing.

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) \17\ of the Act. 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) \18\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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 rule-comments@sec.gov. Please include 
File Number SR-IEX-2017-25 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-2017-25. 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 Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at principal office of the Exchange. 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-2017-25 and should be 
submitted on or before September 5, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-17051 Filed 8-11-17; 8:45 am]
 BILLING CODE 8011-01-P


