[Federal Register Volume 82, Number 221 (Friday, November 17, 2017)]
[Notices]
[Pages 54425-54430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24930]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82058; File No. SR-IEX-2017-39]


Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Rules Pertaining to Certain Listing Regulatory Reporting and 
Operational Requirements

November 13, 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 October 31, 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

[[Page 54426]]

solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 adopt rules pertaining to certain 
listing regulatory reporting and operational requirements. The Exchange 
has designated this proposal as non-controversial and provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the 
Act.\6\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

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
    On June 17, 2016 the Commission granted IEX's application for 
registration as a national securities exchange under Section 6 of the 
Act including approval of rules applicable to the qualification, 
listing and delisting of companies on the Exchange.\7\ The Exchange 
plans to begin a listing program in 2017 and is proposing to adopt 
rules pertaining to certain listing regulatory reporting and 
operational requirements, as described below.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 34-78101 (June 17, 
2016), 81 FR 41141 (June 23, 2016) (File No. 10-222).
---------------------------------------------------------------------------

Short-Interest Reporting
    The Financial Industry Regulatory Authority (``FINRA''), the Nasdaq 
Stock Market (``Nasdaq'') and the New York Stock Exchange (``NYSE'') 
each have rules requiring that members of such self-regulatory 
organization (``SRO'') record and report specified short positions in 
all customer and proprietary accounts.\8\ This data is also referred to 
as short interest. In the case of Nasdaq, the recording and reporting 
requirements apply to positions in securities listed on Nasdaq, while 
the FINRA and NYSE rules apply to all equity securities. The FINRA, 
Nasdaq and NYSE rules each require reporting on a bi-monthly basis by 
their member firms. FINRA, NYSE and Nasdaq firms provide their short 
position reports to FINRA through the Firm Gateway.\9\ Firms must 
report their mid-month short positions as of the close of business on 
the settlement date of the 15th of each month, or, where the 15th is a 
non-settlement date, on the preceding settlement date. Firms must 
report their end-of-month short positions as of the close of business 
on the last business day of the month on which transactions settle 
pursuant to FINRA and exchange rules. Both reports must be received by 
FINRA no later than the second business day after the reporting 
settlement date.
---------------------------------------------------------------------------

    \8\ See FINRA Rule 4560, Nasdaq Rule 3360, and NYSE Rule 4560.
    \9\ FINRA members are required to report short interest 
positions through a web-based interface which is accessible via the 
Firm Gateway. See, Regulatory Notice 16-32 entitled ``Short Interest 
Reporting'' accessible at http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-16-32.pdf.
---------------------------------------------------------------------------

    FINRA consolidates the short position reports submitted by each 
firm, and provides such reports to the relevant listing exchange for 
each listed security (i.e., NYSE, Nasdaq and Bats BZX Exchange, Inc. 
(``Bats'')). In order to provide transparency \10\ regarding aggregate 
short interest in equities securities, the listing exchanges publish 
the consolidated short interest data seven business days after the 
reporting settlement date. Similarly, FINRA publishes consolidated 
short interest data for securities that are not listed on an exchange 
on the same time frame. Short interest data is also used by FINRA for 
regulatory purposes, including to assess compliance with Regulation 
SHO.
---------------------------------------------------------------------------

    \10\ Short interest reporting and publication began in 1986 in 
connection with a study and recommendation by Irving M. Pollack (a 
former Commissioner of the SEC) on behalf of the National 
Association of Securities Dealers, Inc., the predecessor to FINRA.
---------------------------------------------------------------------------

    IEX proposes to adopt a comparable rule requiring short interest 
recording and reporting in securities listed on IEX by Members. 
Specifically, IEX proposes to adopt new Rule 3.293, entitled Short-
Interest Reporting, that requires IEX Members, to the extent such 
information is not otherwise reported to FINRA in conformance with 
FINRA Rule 4560, to comply with FINRA Rule 4560 with respect to 
securities listed on IEX, as if such rule were part of IEX's rules, and 
to report required information in the form and manner specified by IEX. 
Thus, as proposed, IEX Members are subject to the following 
requirements:

    (a) Each Member shall maintain a record of total ``short'' 
positions in all customer and proprietary firm accounts in 
securities listed on IEX \11\ and shall regularly report such 
information to FINRA in such a manner as may be prescribed by IEX. 
Reports shall be received by FINRA no later than the second business 
day after the reporting settlement date designated by IEX.
---------------------------------------------------------------------------

    \11\ FINRA Rule 4560(a) provides that the short interest 
recording and reporting requirements are not applicable to 
Restricted Equity Securities, as defined in FINRA Rule 6420 which 
further references the definition of ``restricted security'' in Rule 
144(a)(3) under the Securities Act of 1933. Restricted securities 
are not eligible for listing on IEX since they are subject to 
trading restrictions, so this limitation is not necessary for 
inclusion in IEX Rule 3.293.
---------------------------------------------------------------------------

    (b) Members shall record and report all gross short positions 
existing in each individual firm or customer account, including the 
account of a broker-dealer, that resulted from (1) a ``short sale'', 
as that term is defined in Rule 200(a) of SEC Regulation SHO, or (2) 
where the transaction(s) that caused the short position was marked 
``long,'' consistent with SEC Regulation SHO, due to the firm's or 
the customer's net long position at the time of the transaction. 
Members shall report only those short positions resulting from short 
sales that have settled or reached settlement date by the close of 
the reporting settlement date designated by IEX.
    (c) The recording and reporting requirements shall not apply to:
    (1) Any sale by any person, for an account in which he has an 
interest, if such person owns the security sold and intends to 
deliver such security as soon as is possible without undue 
inconvenience or expense; and
    (2) any sale by an underwriter, or any member of a syndicate or 
group participating in the distribution of a security, in connection 
with an over-allotment of securities, or any lay-off sale by such a 
person in connection with a distribution of securities through 
rights or a standby underwriting commitment.

    While FINRA Rule 4560 requires such recording and reporting in all 
equity securities, not all IEX Members are also members of FINRA. 
Therefore, the Exchange believes that with the launch of its listing 
program, it is appropriate to add an IEX rule requiring recording and 
reporting of short interest positions

[[Page 54427]]

in securities listed on IEX, so that IEX Members that are not FINRA 
members are subject to such requirements and their short positions in 
IEX listed securities will be consolidated for publication and 
available to FINRA for regulatory purposes.
    Further, as proposed, IEX Rule 3.293 specifies that information 
required to be reported pursuant to FINRA Rule 4560 shall be reported 
to IEX in the form and manner specified by IEX.\12\ As proposed, IEX 
Rule 3.293 is substantially similar to FINRA Rule 4560 except that 
Members are only required to record and report short positions in 
securities listed on IEX. This limitation is substantially similar to 
Nasdaq Rule 3360, which also limits short interest reporting to 
securities listed on Nasdaq.\13\
---------------------------------------------------------------------------

    \12\ IEX Members will use the FINRA Gateway to report short 
interest positions. IEX believes that virtually all IEX Members 
already have access to the FINRA Firm Gateway. To the extent there 
are any Members that do not already have access, FINRA will provide 
such Members with access to the Firm Gateway. Following 
effectiveness of this rule change, and prior to listing launch, IEX 
will disseminate a notice to Members advising of the reporting 
process and timelines.
    \13\ See Nasdaq Rule 3360(a).
---------------------------------------------------------------------------

Notification Requirements for Offering Participants
    SEC Regulation M is designed to prevent manipulation by individuals 
with an interest in the outcome of an offering of securities, and 
prohibits activities and conduct that could artificially influence the 
market for an offered security.\14\ Regulation M generally prohibits 
underwriters, broker-dealers, issuers and other persons participating 
in a distribution from directly or indirectly bidding for or purchasing 
the offered security (or inducing another person to do so) during the 
applicable ``restricted period,'' \15\ which commences on the later of 
one or five business days prior to determination of the offering price 
\16\ or such time that a person becomes a distribution participant, and 
ends upon such person's completion of participation in the 
distribution. Regulation M also governs certain market activities 
(i.e., stabilizing bids, syndicate covering transactions and penalty 
bids \17\) in connection with an offering and requires that 
notification of such activity be provided to the SRO with direct 
authority over the principal market in the United States for the 
security for which the syndicate covering transaction is effected or 
the penalty bid is imposed. In the case of a stabilizing bid, such 
notice must be provided to the market on which the stabilizing bid will 
be posted. Further, Regulation M prohibits any person from selling 
short a security that is the subject of a public offering and 
purchasing the security in the offering, if the short sale was effected 
during the restricted period.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 38067 (December 20, 
1996), 62 FR 520 (January 3, 1997) (File No. S7-11-96) (Anti-
Manipulation Rules Concerning Securities Offerings; Final Rules). 
See also generally SEC Staff Legal Bulletin No. 9, Frequently Asked 
Questions About Regulation M (April 12, 2002 update) at https://www.sec.gov/interps/legal/mrslb9.htm.
    \15\ The term ``restricted period'' is defined in Rule 100(b) of 
Regulation M. See 17 CFR 242.100(b).
    \16\ The term ``offering price'' means the price at which the 
security is to be or is distributed. See 17 CFR 242.100(b).
    \17\ See 17 CFR 242.100(b) (definitions of ``stabilizing,'' 
``syndicate covering transaction,'' and ``penalty bid''). Generally, 
a ``stabilizing bid'' is a bid that is intended to maintain the 
price of the offered security and is necessary to prevent or retard 
a decline in the security's price. A ``penalty bid'' allows a lead 
underwriter to reclaim a selling concession paid to a syndicate 
member if that member's customers sell their allocated shares in the 
immediate aftermarket. A ``syndicate covering transaction'' is 
generally defined as placing a bid or effecting a purchase to reduce 
a syndicate short position.
---------------------------------------------------------------------------

    IEX and FINRA are parties to a regulatory services agreement 
pursuant to which FINRA performs certain regulatory functions on behalf 
of IEX.\18\ IEX and FINRA also entered into an agreement to reduce 
regulatory duplication for IEX Members that are also members of FINRA 
whereby IEX has allocated certain regulatory responsibilities to FINRA 
pursuant to Rule 17d-2 under the Act.\19\ Compliance with Regulation M 
is included within the regulatory functions and responsibilities that 
FINRA performs with respect to IEX Members. As part of FINRA's program 
to monitor for compliance with Regulation M, FINRA reviews trading and 
quoting activity for prohibited purchases, bids or attempts to induce 
bids or purchases during the applicable restricted period and for 
prohibited short sales during the restricted period prior to the 
pricing of an offering. Thus, FINRA must receive pertinent distribution 
related information in a timely fashion to facilitate its review of IEX 
Members' compliance with Regulation M.
---------------------------------------------------------------------------

    \18\ See IEX Rule 1.160(hh).
    \19\ See Securities Exchange Act Release No. 78434 (July 28, 
2016), 81 FR 51256 (August 3, 2016) (File No. 4-700).
---------------------------------------------------------------------------

    Accordingly, in preparation for becoming a listing market, the 
Exchange proposes to amend Rule 11.160, which is currently reserved, to 
adopt provisions requiring notification requirements for offering 
participants that are substantially identical to those specified in 
NYSE Rule 5190.\20\ As proposed, Rule 11.160 is entitled ``Notification 
Requirements for Offering Participants'' and includes the following 
provisions:
---------------------------------------------------------------------------

    \20\ Proposed IEX Rule 11.160 is also substantially similar to 
FINRA Rule 5190, except that the FINRA rule has a broader scope 
since the IEX rule applies only to offerings in securities listed on 
IEX, and minor terminology differences.
---------------------------------------------------------------------------

     Paragraph (a) provides general information and states that 
IEX Rule 11.160 sets forth the notice requirements applicable to 
Members participating in offerings of listed securities for purposes of 
monitoring compliance with the provisions of SEC Regulation M. In 
addition, the paragraph notes that Members also must comply with all 
applicable rules governing the withdrawal of quotations in accordance 
with SEC Regulation M.
     Paragraph (b) states that the terms shall have the 
meanings as set forth in Rules 100 and 101 of SEC Regulation M: 
``actively traded'', ``affiliated purchaser'', ``covered security'', 
``distribution'', ``distribution participant'', ``offering price'', 
``penalty bid'', ``restricted period'', ``selling security holder'', 
``stabilizing'' and ``syndicate covering transaction''.
     Paragraph (c) is entitled ``Notice Relating to 
Distributions of Listed Securities Subject to a Restricted Period Under 
SEC Regulation M'' and sets forth the notification requirements 
applicable to distributions of listed securities that are ``covered 
securities'' \21\ subject to a restricted period under Rule 101 or 102 
of Regulation M. Required notices must be provided in such form as 
specified by the Exchange with respect to: The Member's determination 
as to whether a one-day or five-day restricted period applies under 
Rule 101 of Regulation M and the basis for such determination, 
including the contemplated date and time of the commencement of the 
restricted period, the listed security name and symbol, and 
identification of the distribution participants and affiliated 
purchasers, no later than the business day prior to the first complete 
trading session of the applicable restricted period, unless later 
notification is necessary under specific circumstances; the pricing of 
the distribution, including the listed security name and symbol, the 
type of security, the number of shares offered, the offering price, the 
last sale before the distribution, the pricing basis, the SEC effective 
date and time, the trade date, the restricted period, and 
identification of the distribution participants and affiliated 
purchasers, no later than the

[[Page 54428]]

close of business the next business day following the pricing of the 
distribution, unless later notification is necessary under specific 
circumstances; and the cancellation or postponement of any distribution 
for which prior notification of commencement of the restricted period 
has been submitted under paragraph (c)(1)(A) of Rule 11.160, 
immediately upon the cancellation or postponement of such distribution. 
If no Member is acting as a manager (or in a similar capacity) of such 
distribution, then each Member that is a distribution participant or 
affiliated purchaser shall provide the notice required under paragraph 
(c)(1) of Rule 11.160, unless another Member has assumed responsibility 
in writing for compliance therewith. Paragraph (c) also provides that 
any Member that is an issuer or selling security holder in a 
distribution of any listed security that is a covered security subject 
to a restricted period under Rule 102 of SEC Regulation M shall comply 
with the notice requirements of paragraph (c)(1) Rule 11.160, unless 
another Member has assumed responsibility in writing for compliance 
therewith.
---------------------------------------------------------------------------

    \21\ The term ``covered security'' is defined in Rule 100(b) of 
Regulation M. See 17 CFR 242.100(b).
---------------------------------------------------------------------------

     Paragraph (d) is entitled ``Notice Relating to 
Distributions of ``Actively Traded'' Securities Under Regulation M'' 
and sets forth the notification requirements applicable to 
distributions of any listed security that is considered an ``actively 
traded'' security under Rule 101 of Regulation M. Required notices must 
be provided in such form as specified by the Exchange with respect to: 
The Member's determination that no restricted period applies under Rule 
101 of SEC Regulation M and the basis for such determination; and the 
pricing of the distribution, including the listed security name and 
symbol, the type of security, the number of shares offered, the 
offering price, the last sale before the distribution, the pricing 
basis, the SEC effective date and time, the trade date, and 
identification of the distribution participants and affiliated 
purchasers. Paragraph (d) also provides that such notice shall be 
provided no later than the close of business the next business day 
following the pricing of the distribution, unless later notification is 
necessary under specific circumstances. Further if no Member is acting 
as a manager (or in a similar capacity) of such distribution, then each 
Member that is a distribution participant or an affiliated purchaser 
shall provide the notice required, unless another Member has assumed 
responsibility in writing for compliance therewith.
     Paragraph (e) is entitled ``Notice of Stabilizing Bids, 
Penalty Bids and Syndicate Covering Transactions in Listed Securities'' 
and sets forth the notification requirements for such activities. 
Required notices must be provided in such form as specified by the 
Exchange with respect to: The Member's intention to conduct such 
activity, prior to placing or transmitting the stabilizing bid, 
imposing the penalty bid or engaging in the first syndicate covering 
transaction, including identification of the listed security and its 
symbol and the date such activity will occur; and confirmation that the 
Member has placed or transmitted a stabilizing bid, imposed a penalty 
bid or engaged in a syndicate covering transaction, within one business 
day of completion of such activity, including identification of the 
listed security and its symbol, the total number of shares and the 
date(s) of such activity.
    All required notifications pursuant to IEX Rule 11.160 will be 
submitted by IEX Members to FINRA through the Firm Gateway.\22\ Upon 
effectiveness of this rule change and prior to the first IEX listing, 
the Exchange will disseminate a regulatory circular to Members advising 
of the form and manner for submission of required notifications through 
the FINRA Firm Gateway.
---------------------------------------------------------------------------

    \22\ Information regarding FINRA's Firm Gateway is available at: 
http://www.finra.org/sites/default/files/NoticeDocument/p125975.pdf. 
IEX believes that virtually all IEX Members that would be required 
to submit notifications pursuant to IEX Rule 11.160 already have 
access to the FINRA Firm Gateway. Generally, such Members must be 
members of FINRA in order to distribute shares to the public, unless 
such Member is an issuer or selling security holder in a 
distribution of a listed security pursuant to Rule 102 of Regulation 
M. To the extent there are any Members that fall into this 
exception, and do not already have access to the Firm Gateway, such 
Members will be provided with access to the Firm Gateway.
---------------------------------------------------------------------------

Short Sale Circuit Breaker Restriction
    Rule 201 of Regulation SHO \23\ provides for the imposition of a 
short sale circuit breaker, in a covered security by trading centers in 
the event that the price of a covered security \24\ decreases by 10% or 
more from the covered security's closing price as determined by the 
listing market \25\ for the covered security as of the end of regular 
trading hours \26\ on the prior day. If the circuit breaker is 
triggered, paragraph (b)(1) of Rule 201 requires each trading center to 
establish, maintain, and enforce written policies and procedures 
reasonably designed to prevent the execution or display of a short sale 
order of a covered security at a price that is less than or equal to 
the current national best bid (subject to certain specified exceptions) 
for the remainder of the trading day on which it is triggered and the 
following day.
---------------------------------------------------------------------------

    \23\ 17 CFR 242.201.
    \24\ 17 CFR 242.201(a)(1).
    \25\ 17 CFR 242.201(a)(3).
    \26\ 17 CFR 242.201(a)(7).
---------------------------------------------------------------------------

    Paragraph (b)(3) of Rule 201 further provides that the listing 
market for a covered security shall determine whether the price of such 
covered security has decreased by 10% or more from the covered 
security's closing price as of the end of regular trading hours on the 
prior day, and, if such decrease has occurred shall immediately notify 
the single plan processor responsible for consolidation of information 
for the covered security pursuant to Rule 603(b) of Regulation NMS.\27\ 
The single plan processor must then disseminate this information, 
thereby triggering the short sale circuit breaker restriction.\28\
---------------------------------------------------------------------------

    \27\ 17 CFR 242.603(b).
    \28\ See, FAQ 1.3 of ``Division of Trading and Markets: 
Responses to Frequently Asked Questions Concerning Rule 201 of 
Regulation SHO.''
---------------------------------------------------------------------------

    Accordingly, in preparation for becoming a listing market, the 
Exchange proposes to amend IEX Rule 11.290 to adopt provisions 
regarding the required determinations and processes related to the 
short sale circuit breaker. As proposed, paragraph (b) of IEX Rule 
11.290 is amended to add ``Trigger Price'' as a defined term with 
respect to the existing description of the Short Sale Price Test. 
Paragraph (c) of IEX Rule 11.290 (which is currently reserved) is 
titled ``Determination of Trigger Price'' and provides that, for 
covered securities for which the Exchange is the listing market, the 
System \29\ shall determine whether a transaction in a covered security 
has occurred at a Trigger Price \30\ and shall immediately notify the 
responsible single plan processor. Further, the System will not 
calculate the Trigger Price of a covered security outside of the 
Regular Market Session,\31\ and, if a covered security did not trade on 
the Exchange on the prior trading day (due to a trading halt, trading 
suspension, or otherwise), the Exchange's determination of the Trigger 
Price shall be based on the last sale price on the Exchange for that 
security on the most recent day on which the security traded. In 
addition, the Exchange proposes to add provisions to paragraph (d)(1) 
of IEX Rule 11.290 to provide that the Exchange may lift the Short Sale 
Price

[[Page 54429]]

Test \32\ before the Short Sale Period \33\ ends for securities for 
which the Exchange is the listing market if the Exchange determines 
pursuant to IEX Rule 11.270 that the triggering transaction was a 
clearly erroneous execution as soon as practicable following such 
determination. Further, the Exchange may also lift the Short Sale Price 
Test before the Short Sale Period ends, for a covered security for 
which the Exchange is the listing market, if the Exchange has been 
informed by another exchange or a self-regulatory organization 
(``SRO'') that a transaction in the covered security that occurred at 
the Trigger Price was a clearly erroneous execution, as determined by 
the rules of that exchange or SRO. Finally, proposed paragraph (d)(2) 
of IEX Rule 11.290 provides that if the Exchange determines that the 
prior day's closing price for a listed security is incorrect in the 
System and resulted in an incorrect determination of the Trigger Price, 
the Exchange may correct the prior day's closing price and lift the 
Short Sale Price Test before the Short Sale Period ends.
---------------------------------------------------------------------------

    \29\ The term ``System'' is defined in IEX Rule 1.160(nn).
    \30\ See amendments to Rule 11.290(b).
    \31\ See Rule 1.160(gg).
    \32\ The term ``Short Sale Price Test'' is defined in IEX Rule 
11.290(b), and encompasses the restrictions of the short sale 
circuit breaker pursuant to Rule 201 of Regulation SHO. 17 CFR 
242.201.
    \33\ The term ``Short Sale Period'' is defined in IEX Rule 
11.290(d), and encompasses the duration of the short sale circuit 
breaker pursuant to Rule 201(b)(1)(ii) of Regulation SHO. 17 CFR 
242.201(b)(1)(ii).
---------------------------------------------------------------------------

    As proposed, the amendments to IEX Rule 11.290 are substantially 
identical to Bats Rule 11.19.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act, in general and with Sections 6(b) 
\34\ of the Act in general, and furthers the objectives of Sections 
6(b)(5) of the Act,\35\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. The Exchange believes that 
the proposed rule change supports these objectives because it provides 
for certain listing regulatory reporting and operational requirements 
which are consistent with the public interest and the protection of 
investors.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f.
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Short-Interest Reporting
    The Exchange believes that it is consistent with the Act to require 
IEX Members to record and report short interest in securities listed on 
IEX, to the extent not otherwise reported to FINRA. As discussed in the 
Purpose section, recording and reporting of short interest provides 
transparency regarding aggregate short interest and is also used by 
FINRA for regulatory purposes, including to assess compliance with 
Regulation SHO. The Exchange believes that requiring short interest 
recording and reporting by IEX Members in securities listed on IEX is 
thus consistent with the public interest and the protection of 
investors in support of these objectives. Further, the Exchange 
believes that the requirement that all IEX Members record and report 
short interest is equitable and not unfairly discriminatory because the 
requirement will result in all IEX Members being subject to such 
requirements, regardless of whether such Member is a member of FINRA.
    The Exchange also notes that proposed Rule 3.293 is substantially 
identical to FINRA Rule 4560 and Nasdaq Rule 3360, as described in the 
Purpose section, and thus the Exchange does not believe it raises any 
new or novel issues not already considered by the Commission.
Notification Requirements for Offering Participants
    The Exchange believes that it is consistent with the Act to require 
IEX Members that are offering participants to provide the specified 
notifications to IEX in such form as specified by IEX, which, as 
discussed in the Purpose section, will be to FINRA through the Firm 
Gateway. The Exchange believes that imposing the specified notification 
requirements, and specifying that notification be to FINRA through the 
Firm Gateway, is consistent with the public interest and the protection 
of investors, since FINRA must receive such notifications in order to 
monitor IEX Members and other market participants for compliance with 
Regulation M. As described in the Purpose section, as part of FINRA's 
program to monitor for compliance with Regulation M, and pursuant to 
IEX regulatory services agreement with FINRA and allocation to FINRA 
pursuant to Rule 17d-2 under the Act, FINRA reviews trading and quoting 
activity for prohibited purchases, bids or attempts to induce bids or 
purchases during the applicable restricted period and for prohibited 
short sales during the restricted period prior to the pricing of an 
offering. Thus, FINRA must receive pertinent distribution related 
information in a timely fashion to facilitate its review of IEX 
Members' compliance with Regulation M. Accordingly, IEX believes that 
requiring such notifications is consistent with the protection of 
investors and the public interest.
    Further, the Exchange believes that imposition of the notification 
requirements is equitable and not unfairly discriminatory because all 
IEX Members will be subject to such requirements in the same manner.
    The Exchange also notes that the proposed amendments to Rule 11.160 
are substantially identical to those specified in NYSE Rule 5190 and 
substantially similar to FINRA Rule 5190, as described in the Purpose 
section, and thus the Exchange does not believe that the proposed 
amendments raise any new or novel issues not already considered by the 
Commission.
Short Sale Circuit Breaker Restriction
    The Exchange believes that it is consistent with the Act to amend 
IEX Rule 11.290 to adopt provisions regarding the required 
determinations and processes related to the short sale circuit breaker, 
as required by Rule 201 of Regulation SHO, as described in the Purpose 
section. Further, the Exchange believes that the rule amendments are 
equitable and not unfairly discriminatory because such amendments will 
apply to all IEX Members in the same manner.
    The Exchange also believes that the rule amendments are consistent 
with the Act, since they are designed to encourage fair and orderly 
trading and markets. Additionally, as proposed the rule amendments are 
substantially identical to Bats Rule 11.19, and thus the Exchange does 
not believe that the proposed amendments raise any 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. As described in the Purpose and 
Statutory Basis sections, the proposed rule change effectuates listing 
regulatory reporting and operational requirements and is not designed 
to address or advance any competitive issues. To the contrary, the 
Exchange believes that the proposed rule change facilitates competition 
since

[[Page 54430]]

it is designed to effectuate IEX's operation as a listing market 
thereby enhancing competition with the other listing markets.

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

    Because the foregoing 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 \36\ and Rule 19b-
4(f)(6) thereunder.\37\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19(b)-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.\38\ The Exchange has 
asked the Commission to waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposed 
rule change is substantially identical to the rules of other self-
regulatory organizations and thus raises no novel issues.\39\ 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change as operative upon filing.\40\
---------------------------------------------------------------------------

    \38\ Rule 19b-4(f)(6) requires an SRO to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the -date of filing the proposed 
rule change, or such shorter time as designated by the Commission. 
See 17 CFR 240.19b-4(f)(6). The Exchange has satisfied this 
requirement.
    \39\ See supra notes 12-13 and accompanying text and supra note 
20 and accompanying text. See also Bats Rule 11.19.
    \40\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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) \41\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2017-39 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-2017-39. 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 20549-1090. Copies of the filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-IEX-2017-39 and should be 
submitted on or before December 8, 2017.
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24930 Filed 11-16-17; 8:45 am]
BILLING CODE 8011-01-P


