[Federal Register Volume 87, Number 71 (Wednesday, April 13, 2022)]
[Notices]
[Pages 21945-21957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07853]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94630; File No. SR-IEX-2022-02]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Fee Schedule To Adopt Market Data Fees

April 7, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on April 1, 2022, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 Act,\3\ 
and Rule 19b-4 thereunder,\4\ the Exchange is filing with the 
Commission a proposed rule change to modify its Fee Schedule, pursuant 
to IEX Rules 15.110(a) and (c), to assess fees for receipt of its 
proprietary market data feeds. IEX intends to implement the proposed 
fees beginning on July 1, 2022, to provide an opportunity for 
subscribers to update their data subscriptions to suit their particular 
market data needs.
---------------------------------------------------------------------------

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

    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    IEX is proposing to modify its Fee Schedule, pursuant to IEX Rules 
15.110(a) and (c), to assess fees for receipt of its proprietary market 
data feeds.
Background
    IEX previously filed a proposal to charge market data fees on 
November 1, 2021, with the proposed fee changes effective on filing but 
not operative until January 3, 2022 (``First Fee Filing'').\5\ The 
First Fee Filing was published for comment in the Federal Register on 
November 17, 2021.\6\ The Commission received no comments on the First 
Fee Filing before December 30, 2021. On that date, the Commission 
suspended the First Fee Filing and requested public comment and 
additional information on various aspects of the First Fee Filing.\7\ 
To date, the Commission has received four comment letters in response 
to its Suspension Order, none of which stated that the First Fee Filing 
should not be approved by the Commission.\8\ Generally, the letters 
either commended IEX for the level of transparency raised in its rule 
filing and offered support for approval, or raised issues which are 
irrelevant to the consideration of IEX fees. As described more fully 
below, this filing provides additional transparency in support of IEX's 
proposed approach to charging for proprietary market data, as well as 
providing additional data and information included in the Commission's 
requests for comments in the Suspension Order.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 93557 (November 10, 
2021), 86 FR 64268 (November 17, 2021) (SR-IEX-2021-14).
    \6\ See supra note 3.
    \7\ See Securities Exchange Act Release No. 93883 (December 30, 
2021), 87 FR 523 (January 5, 2022) (SR-IEX-2021-14) (``Suspension 
Order'').
    \8\ See January 27, 2022 letter from Erika Moore (Nasdaq Vice 
President and Corporate Secretary), January 26, 2022 letter from 
Tyler Gellasch (Executive Director, Healthy Markets Association), 
January 26, 2022 letter from Douglas Cifu (CEO, Virtu Financial, 
Inc.), and February 28, 2022 letter from Hope M. Jarkowski (General 
Counsel, New York Stock Exchange Group, Inc.). The comment letters 
are accessible at: https://www.sec.gov/comments/sr-iex-2021-14/sriex202114.htm.
---------------------------------------------------------------------------

    The Exchange withdrew the First Fee Filing on April 1, 2022 and now 
submits this proposal for immediate effectiveness (``Second Fee 
Filing''), with a scheduled implementation date of July 1, 2022. This 
Second Fee Filing revises the fees proposed in the First Fee Filing to 
remove the proposed redistribution fees \9\ and provide additional 
clarity regarding how the fees apply to affiliated market data 
subscribers. Further, as discussed below, in connection with the First 
Fee Filing, IEX obtained feedback from some current market data 
subscribers with respect to their anticipated plans with respect to 
IEX's fee liable market data products (i.e., products for which IEX 
would charge a fee) which was not available at the time of filing of 
the First Fee Filing. This feedback enables IEX to supplement this 
Second Fee Filing with additional details relevant to its revenue 
projections. Additionally, this filing responds to various questions 
and requests for information contained in the Suspension Order.
---------------------------------------------------------------------------

    \9\ IEX determined not to propose a redistribution fee in this 
Second Fee Filing (referred to as distribution fees in the fee 
schedule proposed in the First Fee Filing) because of challenges 
allocating costs directly to redistribution by a Data Subscriber.
---------------------------------------------------------------------------

    As explained in the First Fee Filing, IEX's proposed market data 
fees were derived based on IEX's costs to produce the market data 
products to which the fees apply and applying a reasonable markup over 
those costs (i.e., a ``cost-plus model''). Further, as discussed more 
fully below, the proposed allocation of these fees to the two market 
data products is informed by the extent to which demand for each 
product drives IEX's overall market data costs and the different uses 
of the products by different types of participants.

[[Page 21946]]

    IEX has not previously imposed any fees to access its real-time top 
of book (``TOPS'' \10\) and depth of book (``DEEP'' \11\) proprietary 
market data feeds (``IEX Data''),\12\ either by direct recipients or 
through redistribution. In general, IEX believes that exchanges, in 
setting fees of all types, should meet very high standards of 
transparency to demonstrate why each new fee or fee increase meets the 
Exchange Act requirements. IEX believes this high standard is 
especially important when an exchange imposes fees for its own depth of 
book market data because each exchange is the exclusive source of its 
own depth of book market data. IEX further believes that, as a general 
matter, market data fees cannot be sufficiently justified based on 
unproven assumptions about competition for market data. Rather, IEX 
believes that market data fees can be best justified by an exchange 
demonstrating that its fees bear a reasonable relationship to its 
related costs and business needs (i.e., to obtain a reasonable return 
on its costs) and that it is not taking unfair advantage of its unique 
position as the source of its own proprietary market data. IEX believes 
that it does not need to address questions about market competition in 
the context of this filing because the proposed fees are so clearly 
consistent with the Act based on a cost analysis.
---------------------------------------------------------------------------

    \10\ See IEX Rule 11.330(a)(1).
    \11\ See IEX Rule 11.330(a)(2).
    \12\ As discussed below, both TOPS and DEEP also include last 
sale information.
---------------------------------------------------------------------------

    In proposing to charge fees for access to IEX Data, IEX has sought 
to determine such fees in a transparent way in relation to its own 
aggregate costs of providing the related service, that also carefully 
and transparently assesses the impact on Data Subscribers \13\--both 
generally and in relation to other Data Subscribers, i.e., to assure 
the fee will not create an unfair financial burden on any participant 
and will not have an undue impact in particular on smaller Data 
Subscribers and competition among Data Subscribers in general.
---------------------------------------------------------------------------

    \13\ ``Data Subscriber'' refers to any natural person or entity 
that receives real-time market data either directly from IEX or from 
another non-affiliated Data Subscriber. IEX notes that the current 
recipients of IEX Data include many Members of the Exchange, see IEX 
Rule 1.160(s), but also include several non-Members, including 
vendors who redistribute IEX Data to third-party recipients.
---------------------------------------------------------------------------

    IEX believes that this level of diligence and transparency is 
called for by the requirements of Section 19(b)(1) under the Act,\14\ 
and Rule 19b-4 thereunder,\15\ with respect to the types of information 
self-regulatory organizations (``SROs'') should provide in seeking 
approval of any fee changes, and Section 6(b) of the Act,\16\ which 
requires, among other things, that exchange fees be reasonable and 
equitably allocated,\17\ not designed to permit unfair 
discrimination,\18\ and that they not impose a burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\19\ This rule change proposal addresses those requirements, and 
the analysis and data in each of the sections that follow are designed 
to clearly and comprehensively show how they are met.\20\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(1).
    \15\ 17 CFR 240.19b-4.
    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 15 U.S.C. 78f(b)(8).
    \20\ In May 2019, the Commission staff published guidance 
suggesting the types of information that SROs may use to demonstrate 
that their fee filings comply with the standards of the Exchange Act 
(``Guidance''). While IEX understands that the Guidance does not 
create new legal obligations on SROs, the Guidance is consistent 
with IEX's view about the type and level of transparency that 
exchanges should meet to demonstrate compliance with their existing 
obligations when they seek to charge new fees. See Staff Guidance on 
SRO Rule Filings Relating to Fees (May 21, 2019) available at 
https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
---------------------------------------------------------------------------

    As noted above, IEX offers two real-time proprietary market data 
feeds: TOPS and DEEP. TOPS is an uncompressed data feed that offers 
aggregated top of book quotations for all displayed orders resting on 
the Order Book \21\ and last sale information for executions on the 
Exchange.\22\ The data available in TOPS is also available through the 
securities information processor (``SIP'') feeds. DEEP is an 
uncompressed data feed that provides aggregated depth of book 
quotations for all displayed orders resting on the Order Book at each 
price level and last sale information for executions on the 
Exchange.\23\ DEEP includes all resting displayed liquidity on the 
Exchange, aggregated by price level, meaning it includes the top of 
book quotes contained in TOPS, and also contains any less aggressively 
priced displayed quotes. The content of both TOPS and DEEP is derived 
exclusively from orders that are sent by the Exchange's Members,\24\ 
which the Exchange formats and rebroadcasts to market participants and 
to data vendors.
---------------------------------------------------------------------------

    \21\ See IEX Rule 1.160(p).
    \22\ See IEX Rule 11.330(a)(1).
    \23\ See IEX Rule 11.330(a)(2).
    \24\ See IEX Rule 1.160(s).
---------------------------------------------------------------------------

    IEX currently does not charge fees for access to IEX Data, 
irrespective of whether the Data Subscriber is a Member or not, the 
manner in which the data is received or used, the number of users, how 
quickly the recipient is able to receive the data after it is made 
available by the System,\25\ or whether the data is subject to any 
delay through the redistribution process. The objective of this 
approach was to eliminate any fee-based barriers to access IEX Data 
when IEX launched as a national securities exchange in 2016, and it was 
successful in achieving this objective in that a large number of both 
Members and non-Members currently receive either TOPS, DEEP, or both. 
As discussed more fully below, IEX recently calculated its annual 
aggregate costs for providing IEX Data to its Data Subscribers at 
approximately $2.5 million. Because IEX has to date offered IEX Data 
free of charge, IEX has borne 100% of all costs for the compilation and 
dissemination of IEX Data to IEX's Data Subscribers.
---------------------------------------------------------------------------

    \25\ See IEX Rule 1.160(nn).
---------------------------------------------------------------------------

Proposal
    In order to establish fees that are designed to recover the 
aggregate costs of providing IEX Data to its Data Subscribers and limit 
the amount of potential return in excess of those costs to no more than 
a reasonable markup, the Exchange is proposing to modify its Fee 
Schedule, pursuant to IEX Rules 15.110(a) and (c), to charge all Data 
Subscribers fees to access IEX Data in real time.
    As proposed, the following definitions and concepts will be 
applicable to market data fees:
     ``Real-Time'' means IEX market data that is accessed, 
used, or distributed less than fifteen (15) milliseconds after it was 
made available by the Exchange. IEX provides only Real-Time IEX market 
data to Data Subscribers.
     ``Data Subscriber'' means any natural person or entity 
that receives Real-Time IEX market data either directly from the 
Exchange or from another non-affiliate Data Subscriber. A Data 
Subscriber must enter into a Data Subscriber Agreement with IEX in 
order to receive Real-Time IEX market data. A natural person or entity 
that receives Real-Time IEX market data from an affiliated Data 
Subscriber is subject to the Data Subscriber Agreement of such 
affiliated Data Subscriber.
     A Data Subscriber may redistribute Real-Time IEX market 
data that it receives from the Exchange on a Real-Time basis to a 
natural person or entity. Receipt of IEX market data on a Real-Time 
basis by an affiliate of a Data Subscriber is not subject to additional 
Fees beyond those paid by such affiliated Data Subscriber.
     ``Delayed'' means IEX market data that is accessed, used, 
or distributed at

[[Page 21947]]

least fifteen (15) milliseconds after it was made available by the 
Exchange. A Data Subscriber may redistribute Real-Time IEX market data 
that it receives from the Exchange on a Delayed basis to a natural 
person or entity. In addition, a recipient of Delayed IEX market data 
may further redistribute such Delayed IEX market data to a natural 
person or entity.
    IEX proposes to charge the following flat fees to each Data 
Subscriber: $500 per month for Real-Time access to the TOPS feed and 
$2,500 per month for Real-Time access to the DEEP feed, whether 
received directly from IEX or from another Data Subscriber, except for 
an affiliated Data Subscriber \26\ as described more fully below. As 
proposed, IEX will only provide Real-Time IEX Data, and every recipient 
of such data (whether directly or indirectly) is required to become a 
Data Subscriber and enter into a Data Subscriber Agreement with 
IEX.\27\ A Data Subscriber may redistribute IEX Data on either a Real-
Time basis or subject to a delay. IEX is not proposing to charge a fee 
for redistribution of IEX Data. However, a recipient of Real-Time IEX 
Data would be required to become a Data Subscriber, and would be 
subject to the applicable fees, except for an affiliated recipient of 
the Data Subscriber. Further, a recipient of IEX Data that is subject 
to at least a 15-millisecond delay (whether from an IEX Data Subscriber 
or other recipient) is not required to become a Data Subscriber or pay 
any fees to IEX.\28\ IEX is not proposing to charge any additional fees 
to a Data Subscriber based on the way it uses the data, e.g., display 
v. non-display use, and is not proposing to impose any individual per 
user fees.
---------------------------------------------------------------------------

    \26\ As specified in the IEX Fee Schedule, as proposed, the 
terms ``affiliate'' and ``affiliated'' have the meaning specified in 
Rule 12b-2 of the Exchange Act which provides that such terms as ``a 
person that directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with, the person specified''. The Data Subscriber Agreement 
provides additional context and defines affiliate as ``any 
individual, corporation, company, partnership, limited partnership, 
limited liability company, trust, association or other entity that, 
directly or indirectly through one or more intermediaries, controls, 
is controlled by or is under common control with such party.'' A 
non-affiliated third-party is any individual, corporation, company, 
partnership, limited partnership, limited liability company, trust, 
association or other entity that is not an affiliate of the Data 
Subscriber pursuant to such definition.
    \27\ See IEX Market Data Policies, available at https://storage.googleapis.com/assets-bucket/exchange/assets/Market_Data_Agreements/IEX_Market_Data_Policies_Jan_2022.pdf.
    \28\ The Delayed IEX Data recipient may be subject to any fees 
charged by the redistributor of the Delayed IEX Data, based upon the 
contractual arrangement between the Delayed IEX Data recipient and 
the provider of Delayed IEX Data. Such fees would not be paid to the 
Exchange.
---------------------------------------------------------------------------

    The Suspension Order sought clarification on how affiliated 
entities are treated for purposes of the Data Subscriber definition, 
noting an apparent inconsistency between that language and IEX's 
calculation of the amount that exchange companies would be required to 
pay for IEX Data. To address that question, this Second Fee Filing 
clarifies that the definition of Data Subscriber includes any 
affiliates of the Data Subscriber. Thus, for example, a broker-dealer 
subscriber and an investment adviser under common control could both 
use the data from a particular feed for a single fee. Real-Time 
distribution of IEX Data to an affiliate of the Data Subscriber would 
not subject the affiliated recipient to any additional fees beyond 
those paid by the IEX Data Subscriber. Further, an affiliate that 
receives Real-Time IEX Data from an affiliated Data Subscriber is 
subject to the Data Subscriber Agreement of such Data Subscriber.
IEX Framework
    The Suspension Order seeks additional information and comments on 
various aspects of the First Fee Filing. In many respects, the 
Commission's questions about the First Fee Filing raise broader 
questions around the factors the SEC should consider and the type of 
data and analysis an exchange should provide in considering whether 
market data or connectivity fees are fair and reasonable under a cost-
based methodology.
    In this Second Fee Filing, IEX offers a conceptual framework for 
further considering the Commission's questions that draws on IEX's 
experience over several years in analyzing its own costs. The elements 
of that framework are as follows:
    First, we allocate costs to market data products as part of a 
comprehensive and coherent methodology for allocating costs to 
different types of exchange products. That methodology does not allow 
``double-counting'' of the same costs for different classes of exchange 
products--for example market data, physical connectivity, or 
``logical'' port connections. Our general methodology was detailed in 
our 2019 Study of exchange costs, described below. This methodology 
reflects our belief that in conducting a cost analysis, it is both 
realistic and appropriate to segregate the costs of producing market 
data, for example, from the costs of other general aspects of an 
exchange's operation, including the receiving and matching of orders 
for execution.
    Second, we have sought to carefully and narrowly allocate specific 
costs to the market data products to which the fees apply. In this 
filing, we provide more detail about how that allocation was 
determined, including by providing information about tangential cost 
items that were not included. In general, we believe that the more an 
exchange can demonstrate its cost accounting is carefully 
circumscribed, the stronger it can make the case that its fees are fair 
and reasonable.
    Third, in accounting for costs, we have included certain costs we 
have incurred in the last year to enhance our technology related to 
market data. We believe such expenses are appropriately included if 
they are identified and can be shown to bear a reasonable relationship 
to projected future expenses of this type.
    Fourth, our framework recognizes that the cost elements related to 
market data are largely common across different types of market data 
products. Accordingly, we have set fees for each of our two market data 
products based on factors other than differences between the two in 
cost to produce. These other factors include differences in the use and 
need for depth of book compared to top of book data among different 
types of participants, and the impact of the need for more detailed 
real-time data in driving many operational costs of the Exchange.
    Fifth, we have sought to maximize the availability of data that is 
not needed on a very time-sensitive basis to investors and other market 
participants. For that reason, we are not proposing to charge for any 
data that a user receives with a delay of 15 milliseconds or more. IEX 
believes that promoting the wide availability of market data to market 
participants other than latency-sensitive traders is consistent with 
the goal of fair and efficient markets.
    Sixth, IEX has created a flat, simple fee structure that imposes a 
single monthly fee for each Data Subscriber and its affiliates, without 
added fees based on the way the data is used or individual per user 
fees. IEX believes this relatively simple, flat structure is 
transparent and easy for users to apply, and this difference also helps 
to show that it meets the objectives of the Act.
    Finally, because it is difficult to predict how much revenue IEX 
will receive from market data fees with precision, IEX is committing to 
conduct a one-year review after implementation of these fees, and to 
publish the results of that review. IEX expects that it may propose to 
adjust fees at that time, to increase fees in the event that revenues 
fail to cover costs and a reasonable

[[Page 21948]]

mark-up of such costs. Similarly, IEX would propose to decrease fees in 
the event that revenue materially exceeds our current projections. In 
addition, IEX will periodically conduct a review to inform its decision 
making on whether a fee change is appropriate (e.g., to monitor for 
costs increasing/decreasing or subscribers increasing/decreasing, etc. 
in ways that suggest the then-current fees are becoming dislocated from 
the prior cost-based analysis) and would propose to increase fees in 
the event that revenues fail to cover market data costs and a 
reasonable mark-up, or decrease fees in the event that revenue or the 
mark-up materially exceeds our current projections. In the event that 
IEX determines to propose a fee change, the results of a timely review, 
including an updated cost estimate, will be included in a rule filing 
proposing the fee change. More generally, we believe that, in applying 
a cost-plus model, it is appropriate for an exchange to refresh and 
update information about its relevant costs and revenues in seeking any 
future changes to fees, and IEX commits to do so.
    IEX believes that applying this framework to the proposed fees 
shows that they are consistent with the requirements of the Act, 
leaving aside the stark contrast in the amount of the proposed fees in 
comparison to market data fees commonly charged by other exchanges.
IEX Market Data Costs
    The proposed fees are based on a comprehensive and transparent 
``cost-plus'' methodology, wherein the proposed fees bear a reasonable 
relationship to the cost of producing market data products using a 
rigorous and narrow allocation of costs.\29\ Moreover, IEX believes 
that any potential profit over IEX's costs of offering market data is 
reasonably based on realistic revenue assumptions, as described below. 
Further, as described above, IEX will conduct a review of these fees 
one year after implementation (as well as subsequent periodic reviews), 
including public disclosure of its revenues based on actual experience, 
and may propose to adjust such fees if warranted based on that review. 
In addition, IEX intends to provide updated information about its 
market data costs and revenue in any future filing to change its 
fees.\30\
---------------------------------------------------------------------------

    \29\ IEX first published a comprehensive study of its aggregate 
costs to produce market data and connectivity in January 2019. See 
``The Cost of Exchange Services--Disclosing the Cost of Offering 
Market Data and Connectivity as a National Securities Exchange'' 
available at https://iextrading.com/docs/The%20Cost%20of%20Exchange%20Services.pdf. (``IEX Study'').
    \30\ Notwithstanding that IEX does not currently charge for its 
market data products, it does not believe that a review is warranted 
sooner than one year after implementation because of the feedback it 
received from current market data subscribers regarding their plans 
with respect to IEX's fee liable market data products, as discussed 
supra. This feedback provides a reasonable basis for IEX to project 
anticipated revenue and support that the proposed fees are 
consistent with the Act.
---------------------------------------------------------------------------

    In determining the appropriate fees to charge, IEX considered its 
costs of providing market data, using what it believes to be a 
conservative methodology (i.e., that strictly considers only those 
costs that are most clearly directly and exclusively related to the 
production and distribution of IEX Data) to estimate such costs,\31\ 
and set fees that are designed to cover its costs with a limited 
potential return in excess of such costs. However, as discussed more 
fully below, such fees may also result in IEX recouping less than all 
of its costs of providing market data because of the uncertainty of 
forecasting Data Subscriber decision-making with respect to their IEX 
market data subscriptions.
---------------------------------------------------------------------------

    \31\ For example, IEX only included the costs associated with 
physical assets that are directly responsible for producing and 
transmitting IEX Data and excluded from its market data cost 
calculations any physical connectivity assets that are used to 
provide both order entry and market data. See IEX Study at 16. Thus, 
IEX notes that this methodology underestimates the total costs of 
providing market data.
---------------------------------------------------------------------------

    Prior to the Commission's suspension of its First Fee Filing, IEX 
advised its current Data Subscribers of the proposed market data fees 
and received feedback from a significant number of such Data 
Subscribers as to whether they planned to continue to receive real-time 
IEX Data following implementation of such fees. Based on that feedback, 
which is described below, IEX believes it is likely that the proposed 
fees will not fully cover its costs and that a ``best case'' scenario 
is a return of approximately six percent in excess of such costs. The 
following describes IEX's cost allocation methodology, and how such 
methodology supports that the proposed fees are clearly consistent with 
the Act.
    IEX was the first exchange to conduct a comprehensive review of its 
costs to produce market data, physical connectivity (the physical 
connections required to access IEX in its data center), and logical 
connectivity products (the cost to offer and maintain order entry 
ports) and published the results of that review in the January 2019 IEX 
Study.\32\ The IEX Study explained how hardware, software, and 
personnel costs were allocated for market data and connectivity and 
identified an annual dollar cost for each line item in each category. 
The IEX Study also explained graphically and textually the relationship 
of the different parts of the operation of an electronic exchange, to 
allow readers to understand the interrelationship among the various 
components. The IEX Study estimated IEX's aggregate annual cost to 
offer IEX Data to its Data Subscribers to be approximately $1.8 million 
per year, for the year 2019, as reflected in Table 1.\33\
---------------------------------------------------------------------------

    \32\ See supra note 27.
    \33\ See IEX Study at 15-18 for details on how IEX estimated the 
costs of its market data infrastructure; see also supra note 29.

             Table 1--Annual IEX Market Data Infrastructure
                                 [2019]
------------------------------------------------------------------------
                                                           ($1,791,403)
------------------------------------------------------------------------
Top of Book Servers (TOPS) (5)..........................       ($12,833)
Depth of Book Servers (DEEP) (5)........................        (12,833)
Market Data Feeds Switches (2 x 24 port)................        (13,333)
ITF Market Data.........................................         (7,333)
Data Center Space, Power, Security......................        (10,605)
Administrative Access...................................        (33,333)
Monitoring..............................................       (596,135)
Personnel...............................................     (1,104,998)
                                                         ---------------
    Total Annual Costs..................................     (1,791,403)
------------------------------------------------------------------------

    In 2021, in preparation for the First Fee Filing, IEX updated and 
refreshed the cost estimates contained in the IEX Study. As further 
detailed below, this update reflects somewhat lower annual hardware 
costs related to market data than contained in the 2019 IEX Study, and 
somewhat higher personnel costs. Considering all factors together, the 
updated estimates reflect an increase in total annual costs to produce 
market data from $1,791,403 to $2,483,644.
    Table 2, below, details the individual annual line-item costs 
considered by IEX to be directly related to offering IEX Data to Data 
Subscribers.\34\ The chart shows three cost components: (1) Direct 
costs, such as servers, infrastructure, and monitoring; (2) enhancement 
initiative costs (e.g., new functionality for IEX Data and increased 
capacity for the proprietary market data feeds, as described below); 
\35\ and (3) personnel

[[Page 21949]]

costs. The costs allocated to IEX Data do not include the de minimis 
costs for creation of ``HIST'' \36\ files available for download from 
IEX's website, or separate costs associated with transmitting IEX 
market data to the SIPs.\37\
---------------------------------------------------------------------------

    \34\ Table 2 also shows the breakdown of the 2019 estimated 
market data infrastructure costs.
    \35\ As described more fully below, these enhancement initiative 
costs are a routine part of offering proprietary market data. Some 
of the enhancement costs in Table 2, such as the introduction of the 
snapshot functionality for TOPS and DEEP, are one-time costs, but 
each year IEX expects to incur new enhancement costs such as the 
costs associated with increasing the capacity of its market data 
feeds and costs associated with upgrading its market data 
infrastructure, as well as any new functionality. Thus, IEX believes 
that its annual enhancement costs on an ongoing basis will be 
similar and that the enhancement costs included in the 2021 update 
are not extraordinary.
    \36\ See IEX Rule 11.330(a)(4). HIST data is available for 
download at https://iextrading.com/trading/market-data/#hist-download.
    \37\ IEX also notes that the SIPs are operated separately from 
IEX's provision of proprietary market data, with correspondingly 
separate costs and revenue streams.
---------------------------------------------------------------------------

    The servers and related hardware included were limited to those 
specifically dedicated to IEX Data, subject to the depreciation 
schedule described below. Network Infrastructure and Administrative 
Access costs consist of 100% of the network equipment (switches and 
cabling) to enable data transmission and maintenance. Data Center costs 
consist of the fees charged by the third-party data centers used by IEX 
and represent less than 10% the Exchange's total data center costs 
based on space utilized. Monitoring costs include 100% of the hardware 
and vendor licenses needed to enable the IEX technology team to monitor 
these servers and the health of the market data products provided by 
such assets, which are primarily used for market data monitoring.\38\ 
The monitoring consists of real-time monitoring of system performance, 
integrity, and latency of market data products.
---------------------------------------------------------------------------

    \38\ These assets may be used infrequently for incidental 
purposes to assess the status of Exchange systems.
---------------------------------------------------------------------------

    All physical assets were valued at cost for financial accounting 
purposes and depreciated over three years. All software used for market 
data purposes was developed internally, and the applicable costs are 
captured in the personnel category. For purposes of the allocation of 
these costs to market data, IEX allocates the annual depreciation 
expense (i.e., one-third of the initial asset value) of in-scope 
physical assets in each year. For personnel costs, IEX calculated an 
allocation of employee time for employees whose functions include 
providing and maintaining IEX Data and/or the proprietary market data 
feeds used to transmit IEX Data,\39\ and used a blended rate of 
compensation reflecting salary, stock and bonus compensation, benefits, 
payroll taxes, and 401(k) matching contributions.\40\ Enhancement costs 
are allocated similarly (i.e., hardware is subject to a three year 
depreciation schedule) and consist primarily of personnel costs (over 
80%), with the balance comprised of hardware utilized for development 
and operation of each enhancement.
---------------------------------------------------------------------------

    \39\ Notably, IEX did not include any costs associated with 
operating the Exchange itself in calculating the costs of offering 
IEX Data.
    \40\ Applying the methodology of the IEX Study, IEX determined 
cost allocation for employees who perform work in support of 
compiling and disseminating IEX Data to arrive at a full time 
equivalent (``FTE'') of 6.15 FTEs across all the identified 
personnel (the FTE at the time of the IEX Study was 4.05). IEX then 
multiplied the FTE times a blended compensation rate for all 
relevant IEX personnel to determine the personnel costs associated 
with compiling and disseminating IEX Data.

             Table 2--Annual IEX Market Data Infrastructure
------------------------------------------------------------------------
                                               2019            2021
                                           ($1,791,403)    ($2,483,644)
------------------------------------------------------------------------
Direct Costs:
    Servers.............................       ($32,999)       ($26,696)
    Network Infrastructure & Admin              (46,666)       (152,783)
     Access.............................
    Monitoring..........................       (596,135)       (213,109)
    Data Center (Space, Power, Security)        (10,605)        (79,142)
Enhancement Initiatives Costs:
    DEEP Snapshot.......................             N/A        (95,974)
    TOPS Snapshot.......................             N/A        (95,974)
    Capacity Planning...................             N/A       (232,856)
    Monitoring Tools....................             N/A        (49,609)
Ongoing Personnel Costs.................     (1,104,998)     (1,537,500)
                                         -------------------------------
    Total Annual Costs..................     (1,791,403)     (2,483,644)
------------------------------------------------------------------------

    As noted in Table 2, IEX continues to introduce enhancement 
initiatives to IEX Data. First, effective February 3, 2021, IEX 
launched ``DEEP Snapshot'', which allows Data Subscribers to download 
point-in-time snapshots of DEEP in order to enable Data Subscribers to 
accelerate late start recovery.\41\ Second, effective September 27, 
2021, IEX launched ``TOPS Snapshot'', which allows Data Subscribers to 
download point-in-time snapshots of TOPS in order to enable them to 
accelerate late-start recovery. Third, IEX is in the process of 
expanding the capacity and monitoring tools that support the efficient 
transmission of IEX Data to the IEX's proprietary market data feeds.
---------------------------------------------------------------------------

    \41\ See Trading Alert No. 2021-003, available at https://iextrading.com/alerts/#/135.
---------------------------------------------------------------------------

    IEX also notes that it has made recent changes to its system 
functionality and architecture which improve the content and speed of 
IEX's proprietary market data feeds, but that have no impact on IEX's 
estimated costs of providing IEX Data. For example, effective February 
16, 2021, IEX removed its outbound 350 microsecond latency 
``speedbump'' while retaining its inbound 350 microsecond latency 
``speedbump.'' \42\ Prior to that date, IEX disseminated its top of 
book data and last sale data to the SIPs free of any artificial delays, 
but all other outbound messages, including IEX Data transmitted through 
IEX's proprietary market data feeds, were subjected to a 350-
microsecond latency.\43\ Additionally, on April 1, 2021, IEX began to 
display odd lot sized orders, which are aggregated by price on DEEP, 
and can aggregate to form the top of book quote on TOPS.\44\ And on 
October 13, 2021, IEX began disseminating a ``Retail Liquidity 
Indicator'' on both TOPS and DEEP, which tells market participants when

[[Page 21950]]

IEX has at least one round of Retail Liquidity Provider order \45\ 
interest available for a particular security, which is resting at the 
Midpoint Price \46\ and priced at least $0.001 better than the NBB \47\ 
or NBO.\48\ The Retail Liquidity Indicator reflects the symbol and side 
of the resting interest, but does not include the price or size.\49\
---------------------------------------------------------------------------

    \42\ See Trading Alert No. 2021-006, available at https://iextrading.com/alerts/#/138.
    \43\ See Securities Exchange Act Release No. 91016, January 29, 
2021, 86 FR 8238 (February 4, 2021) (SR-IEX-2020-18).
    \44\ See Trading Alert 2021-010, available at https://iextrading.com/alerts/#/142; see also, See Securities Exchange Act 
Release No. 90933, January 15, 2021, 86 FR 6687 (January 22, 2021) 
(SR-IEX-2021-01).
    \45\ See IEX Rule 11.190(b)(14).
    \46\ The term ``Midpoint Price'' means the midpoint of the NBBO. 
See IEX Rule 1.160(t). The term ``NBBO'' means the national best bid 
or offer, as set forth in Rule 600(b) of Regulation NMS under the 
Act, determined as set forth in IEX Rule 11.410(b).
    \47\ See IEX Rule 1.160(u).
    \48\ Id.
    \49\ See Trading Alert 2021-036, available at https://iextrading.com/alerts/#/169; see also, Securities Exchange Act 
Release No. 92398 (July 13, 2021), 86 FR 38166 (July 19, 2021) (SR-
IEX-2021-06).
---------------------------------------------------------------------------

    As discussed above, IEX's cost methodology allocates costs for 
hardware, software, and personnel expenses, and identified an annual 
dollar cost for each line item in each category. IEX's cost methodology 
does not provide for ``double-counting'', that is, the same cost items 
are not counted for more than one set of products. This was the 
approach followed in the IEX Study, the 2021 update, the First Fee 
Filing, and this Second Fee Filing. This segmentation of costs is also 
consistent with IEX's earlier filing to charge fees for order entry 
logical ``ports'' members use to communicate order messages to the 
Exchange (``Port Fee Filing'').\50\ In the Port Fee Filing, we detailed 
the servers, other hardware, monitoring, administrative, and personnel 
expenses that were directly connected to the provision of logical order 
entry ports. Consequently, there is no overlap with the costs IEX 
allocated to the provision of logical order entry ports and the 
provision of market data feeds.
---------------------------------------------------------------------------

    \50\ See Securities Exchange Act Release No. 86626 (August 9, 
2019), 84 FR 41793 (August 15, 2019) (SR-IEX-2019-07).
---------------------------------------------------------------------------

    In the First Fee Filing, IEX provided detail on how it allocated 
the costs of providing market data feeds. The Suspension Order raised 
questions about whether additional detail and explanation should be 
provided, as detailed below. As described in the IEX Study, IEX 
considers the following physical technology assets and services as 
relevant to the production of market data: \51\
---------------------------------------------------------------------------

    \51\ In some cases, these assets and services also entail fees 
from outside service providers, such as software licenses and data 
center costs. Additional detail is available in the IEX Study.

     Market Data Servers
     Market Data Feed Switches
     Software Licenses
     IEX Testing Facility (ITF) Infrastructure Hardware
     Data Center Space, Power, and Security
     Administrative Access \52\
---------------------------------------------------------------------------

    \52\ Administrative Access consists of the dedicated networking 
infrastructure to enable the technology team to manage and 
troubleshoot the production and distribution of market data.
---------------------------------------------------------------------------

     Monitoring Servers, Switches and Licenses \53\
---------------------------------------------------------------------------

    \53\ See IEX Study at 15. See also discussion supra describing 
monitoring functions.
---------------------------------------------------------------------------

    Hardware is depreciated on a straight-line three-year period, which 
in IEX's experience, is equal to the typical life expectancy of those 
assets. As noted above, one-third of the cost of each hardware asset is 
included in the annual costs allocated to market data. IEX only 
included hardware specifically dedicated to the market data feeds in 
calculating the costs of providing market data. This means that 
physical assets used for both order entry and market data were excluded 
from the calculation.\54\
---------------------------------------------------------------------------

    \54\ See IEX Study at 16.
---------------------------------------------------------------------------

    The Suspension Order asked if IEX should provide more detail about 
the methodology IEX used to determine how much of an employee's time is 
devoted to specific market data related activities. In considering the 
cost of personnel, IEX generally considered the time spent on various 
market data projects and initiatives through project management 
tracking tools, in the following areas:

Technology Teams:
     Technical Operations
     Software Engineering
     Quality Assurance
     Infrastructure
Non-Technology Teams:
     Market Operations
     Project Management
     Product Management
     Business Development/Corporate Communications
     Regulatory
     Legal
     Accounting/Finance

    Based on this analysis, IEX allocated 6.15 ``full time equivalent'' 
employees (or ``FTEs'') to direct market data costs. Generally, for the 
technology teams, we attributed approximately 8% of their aggregate 
time to market data. For the non-technology teams we attributed 
approximately 12% of their time to market data. Consistent with IEX's 
methodology, these allocations do not provide for any ``double 
counting''. Additionally, the Suspension Order asked if it is 
appropriate to include incentive compensation in the blended personnel 
compensation rate if the incentive compensation is not directly 
attributable to market data. IEX believes that inclusion is appropriate 
on the same basis as other personnel costs for in-scope employees 
because incentive compensation is a part of the total personnel costs 
associated with IEX's provision of market data. Moreover, IEX notes 
that it has taken a conservative approach in determining which 
employees to include in its cost analysis, in terms of function and 
percent allocation, so that the included personnel costs are directly 
and closely tied to the costs of providing market data. The FTE 
allocation represents just 7.1% of the Exchange's overall personnel 
costs. In addition, IEX allocated 1.58 FTEs to market data 
enhancements, which represents 1.8% of the Exchange's overall personal 
costs, totaling 7.73 FTEs and 8.9% when combined with personnel 
allocated to direct market data costs. Consistent with IEX's 
conservative methodology to limit costs allocated to market data, this 
approach includes only a de minimis personnel cost allocation for 
senior level executives and no allocation for members of IEX's board of 
directors. Accordingly, IEX believes that the allocated personnel 
expenses included are appropriately attributable to market data.
    Another way to evaluate whether costs are narrowly allocated is to 
consider other expenses that may bear an indirect relationship to the 
production of market data, but which were not included. Various expense 
items may be viewed as necessary to exchange functioning and therefore 
having some relationship to market data, but IEX chose not to allocate 
any portion of the cost of those items, because we believe limiting 
allocated costs to those with a more proximate relationship to market 
data is more justifiable and avoids the difficulties and potential 
arbitrariness of determining how to allocate a portion of general 
operational expenses to specific data products. IEX's excluded costs 
relate to:

 General and Administrative Expenses
    [cir] Travel, Sales, and Marketing
    [cir] Office and Miscellaneous/Occupancy and Overhead
    [cir] Professional Fees (including Audit Fees)
 Operating Expenses
    [cir] Costs Paid to Exchanges
    [cir] Other Technology and Infrastructure
 Other (Income)/Expense
 Income Tax (Benefit)/Expense

    The expenses associated with the above, excluded, items amount to 
many multiples of the approximately $2.5 million in annual costs that 
IEX

[[Page 21951]]

allocated to market data. Inclusion of just a small portion of these 
more tangential items would have more than doubled the estimated cost 
basis for IEX to provide market data feeds.
    Exchanges typically incur episodic expenses to upgrade market data 
or connectivity products, for example, to expand capacity, increase 
security or reliability, reduce latency, or to achieve other 
objectives. These expenses would not otherwise be captured in a 
methodology that looks exclusively at more static annualized expenses, 
such as servers, switches, and routine testing and monitoring 
functions. In the First Fee Filing, IEX detailed episodic expenses 
directly related to offering market data totaling $474,000, amounting 
to approximately 19% of the total of the approximately $2.5 million 
estimate for total market data infrastructure costs in 2021. These 
costs were approximately $282,000 for capacity planning and monitoring 
and approximately $192,000 for the addition of ``snapshot'' 
functionality, which facilitates the ability of users to construct an 
integrated stream of market data when there is a temporary 
interruption. IEX believes that this level of episodic expenses will 
likely recur, and that it is therefore appropriate to include such 
expenses as part of the cost allocation. In any event, variations in 
episodic expenses will be reflected in IEX's annual review of its 
market data fees and any proposed adjustments.
Characteristics and Pricing of Different Products
    IEX believes the process of allocating costs to individual exchange 
products necessarily involves some degree of subjectivity, but that an 
exchange's allocation of costs to identified products and services 
should be part of a coherent and transparent methodology for allocating 
costs across various products and services, so that the Commission and 
commenters can evaluate whether its decisions are reasonable and well-
grounded. Exchanges incur many operational costs as preconditions to 
being able to offer various products and services, but individual cost 
elements differ in how closely they are related to the offering of 
specific products, as distinct from general operational costs.
    If an exchange is proposing different fees for products of the same 
class, e.g., different connectivity options or different market data 
feeds, it may seek to allocate fees separately by product even if there 
are not material differences in terms of the cost of each product. It 
is IEX's experience, as explained in the IEX Study, that most of the 
expenses to offer a class of products and services, e.g., physical 
connectivity, logical connectivity, and market data feeds, are common 
to the category and not unique to individual products. Accordingly, IEX 
believes that an exchange may base price differences among products in 
a given category based on factors other than cost where there are other 
reasons to differentiate.
    Consistent with the practice at all other exchanges, IEX is 
proposing to charge different fees for its top of book (``TOB'') and 
depth of book (``DOB'') market data feeds, i.e., TOPS and DEEP 
respectively. The costs allocated to IEX's production of market data 
are in large part costs that are common to the offering of both market 
data feeds. Thus, IEX based its proposed pricing for Real-Time access 
to TOPS and DEEP, as well as minimally delayed access to TOPS and DEEP, 
on other factors as well. While there are some cost differences to 
compile and disseminate TOPS versus DEEP,\55\ IEX is basing its 
proposed pricing differential on other factors.
---------------------------------------------------------------------------

    \55\ DEEP is an aggregated feed that must perform additional 
logic on each order-related message received from the System to 
calculate the total number of displayed shares available at each 
price level. TOPS requires less processing than DEEP because it only 
aggregates displayed liquidity at a single price level, the top of 
book.
---------------------------------------------------------------------------

    First, IEX believes that the fee differential is justified based on 
the need for real-time DEEP data by electronic trading firms, the 
relative volume of and benefit to those firms in terms of their trading 
on the Exchange, and the need to compile and distribute real-time DOB 
data as a factor driving Exchange costs. Based on data from the fourth 
quarter of 2021, the top ten members of IEX by volume on the Exchange 
collectively represented over 60% of total Exchange volume. More 
tellingly, the same firms represented approximately 70% of message 
traffic on the Exchange. Over 90% of displayed orders are submitted by 
market participants that subscribe to DEEP. IEX believes that it is 
clear and well-established that trading that occurs on a millisecond 
and sub-millisecond time scale drives the majority of trading on U.S. 
exchanges. Further, IEX systems costs are heavily impacted by the need 
to support this activity, including the need to provide real-time depth 
data that is required by electronic trading firms. IEX believes that in 
order to provide market data that supports these types of trading 
strategies, IEX's market data needs to be published quickly enough 
(i.e., microsecond timescales) following order and trade events to be 
useful. Further, such publication timescales must be consistent and 
deterministic regardless of market volume and volatility.
    In contrast, IEX believes that the relative value of real-time TOPS 
is diminished by the availability of alternative sources of IEX's TOB 
market data. Specifically, IEX believes that several factors operate to 
restrain demand for real-time TOPS, including that real-time IEX TOB 
market data can be readily obtained from the SIPs \56\ and that 
fifteen-millisecond delayed TOPS data (which would not be subject to 
any IEX fees pursuant to this proposal) is adequate for many firms that 
are not electronic trading firms. In discussions with current market 
data subscribers regarding the fees proposed in the First Fee Filing, a 
number of such firms advised IEX that they would drop Real-Time access 
to TOPS to avoid the $500 monthly fee, and instead rely on the SIPs or 
delayed access for IEX's TOB market data. Thus, IEX believes that there 
are constraints that operate to limit its ability to base Real-Time 
TOPS pricing based on some type of pro rata cost allocation. In view of 
these factors, IEX believes that it is fair and reasonable to price 
Real-Time access to DEEP at five times the price of TOPS.
---------------------------------------------------------------------------

    \56\ Broadly speaking, the self-regulatory organizations 
(``SROs'') administer the SIPs and set pricing. Each SIP charges its 
own fees, which are determined by the operating committees of each 
SIP subject to the SEC rule filing process. While IEX is a member of 
the operating committee of each SIP, it has only one vote and does 
not exercise control over SIP pricing. IEX also notes that the SIPs 
charge pursuant to a different pricing structure than the pricing 
structure proposed by IEX in this filing.
---------------------------------------------------------------------------

    Further, IEX is charging only for data that is made available in 
Real-Time, because it is the very demand for Real-Time, low latency 
data that drives much of the costs associated with creating and 
distributing IEX Data. For example, IEX must invest more in the 
resiliency, capacity, and redundancy of its proprietary market data 
feeds to provide Real-Time, low latency access to IEX Data. Moreover, 
IEX's decision to not charge fees for Delayed IEX Data is also 
consistent with IEX's goal to make its data broadly available to a wide 
range of market participants including long-term investors.
    Specifically, IEX believes that minimally delayed market data may 
be useful to a much broader range of market participants. For example, 
such data may be useful in a variety of display use cases, for example, 
in streams of market data prices that are available in a graphical user 
interface, for episodic trading strategies that are less latency 
sensitive, for retail and individual investors that have no need for 
Real-Time data, for use by ``middle office'' or risk personnel at 
broker-

[[Page 21952]]

dealers, and for academics, among others.
    The Suspension Order asks if IEX should provide more detail about 
the types of market participants that choose to subscribe to TOPS, 
DEEP, or both, in that such information may be relevant to an 
assessment of its pricing of different market data products. IEX has 70 
Data Subscribers who it believes are individuals,\57\ and 170 other 
subscribers who are comprised of approximately one-third IEX Members, 
one-third professional market participants that are not IEX Members 
(e.g., hedge funds and broker-dealers), and one-third data vendors. Of 
the 170 non-individuals, 15 currently subscribe to only DEEP (4 IEX 
Members, 4 professional market participants, 7 vendors), 64 to only 
TOPS (14 IEX Members, 23 professional market participants, 27 vendors) 
and 91 to both (41 Members, 26 professional market participants, 24 
vendors). All of the individuals currently subscribe only to TOPS, and 
no individual subscriber has indicated that it will continue to receive 
TOPS in Real-Time once IEX begins charging the fee set forth in this 
proposal.
---------------------------------------------------------------------------

    \57\ IEX's belief in this regard is based on an assessment that 
the Data Subscriber has a natural person name (i.e., fist name--last 
name), rather than an entity name.
---------------------------------------------------------------------------

    As proposed, IEX is structuring its fees so that fee levels are 
aligned with access to Real-Time DOB market data of the type that is 
needed by the relatively small number of firms that drive much of the 
Exchange's market data costs. Because of this dynamic, the proposed fee 
structure means that the absolute amount of fees charged for DOB market 
data will be far less than those charged by other exchanges for the 
equivalent products \58\ and result in fees that are fair and 
reasonable from the standpoint of all users, including electronic 
trading firms. This structure serves the goal of promoting the wide 
availability of minimally delayed data to a broad range of market 
participants, including investors. IEX believes that these distinctions 
are not only allowed by the Act but fully align with the principles of 
fair and efficient markets more than many other fee structures now in 
place. IEX's proposed cost structure serves to provide wide 
availability of market data on a cost-effective (and in some cases, 
free) basis, which is itself a fundamental purpose of the Securities 
Acts Amendments of 1975.\59\
---------------------------------------------------------------------------

    \58\ For examples of other exchange's market data fees, see 
https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf; https://nasdaqtrader.com/Trader.aspx?id=DPUSdata; and https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \59\ Public Law 94-29, 89 Stat. 97 (1975).
---------------------------------------------------------------------------

    IEX proposes to provide Delayed IEX Data free of charge in order to 
minimize barriers to access IEX Data and thereby potentially increase 
trading on IEX. IEX's business model seeks to primarily generate 
revenue from trading rather than from data and connectivity fees, so an 
essential objective of the proposed fee structure is to enable broad 
access to IEX Data while it is still timely and useful to most IEX Data 
consumers without incurring any IEX fees.
    IEX notes that other equities exchanges also offer delayed market 
data free of charge, but they define ``delayed data'' as data that is 
disseminated at least fifteen minutes after the same data is 
disseminated in Real Time.\60\ These delayed data feeds are often used 
by brokerage firms \61\ or online distributors of market data \62\ to 
provide stock quote information free of charge, even if it is 15 
minutes old.
---------------------------------------------------------------------------

    \60\ See, e.g., NYSE Comprehensive Market Data Policies, Section 
7 (Delayed Data Policy), available at https://www.nyse.com/publicdocs/data/Policy-ComprehensivPackage_PDP.pdf; Cboe Global 
Markets North American Data Policies, Section 5 (Delayed Data), 
available at https://cdn.batstrading.com/resources/membership/Market_Data_Policies.pdf; Nasdaq Delayed Data Policy, available at 
http://www.nasdaqtrader.com/content/administrationsupport/policy/delayeddatapolicy.pdf.
    \61\ See, e.g., Interactive Brokers Delayed and Streaming Market 
Data, available at https://www.interactivebrokers.com/en/software/webtrader/webtrader/marketdata/delayedandstreamingmarketdata.htm 
(``Delayed market data is available for instruments for which you do 
not currently hold market data subscriptions.'').
    \62\ See, e.g., MarketWatch Market Data Terms of Use, available 
at https://www.marketwatch.com/site/investing-terms-of-use 
(``comprehensive quotes and volume reflect trading in all markets 
and are delayed at least 15 minutes.'').
---------------------------------------------------------------------------

    In determining the appropriate delay interval, IEX sought to strike 
a balance between offering IEX Data at a reasonable and transparent 
price to market participants who require real-time data, while also 
offering market participants a commercially viable option for the 
receipt of free IEX Data within a time period in which the data will 
remain useful to market participants who do not require near 
instantaneous real-time market data for trading purposes. Knowing there 
is no ``exact science'' to the determination of how long to delay data 
before allowing it to be retransmitted free of charge, IEX sought 
informal feedback from Members and other Data Subscribers. Based upon 
that informal feedback, IEX believes that most, if not all, non-
electronic trading desks would be able to continue to use IEX Data if 
it was received subject to at least a fifteen-millisecond delay. Also 
based on that informal feedback, IEX believes that there will be some 
current Data Subscribers--e.g., algorithmic traders, data vendors, and 
any electronic trading platform that we believe typically use real-time 
data to calculate the NBBO--that will continue to pay for Real-Time IEX 
Data.
    In addition, IEX is not proposing to charge fees for HIST and did 
not include the de minimis incremental costs to create daily HIST files 
in its market data costs. IEX believes that HIST is not used for 
trading decisions since it is available only on a T+1 basis, other than 
possibly for back testing and research. Accordingly, all the factors 
that apply to IEX's decision not to charge for Delayed Data are even 
more applicable to HIST (which is significantly more delayed than 15 
milliseconds), including the objective to provide broad access to IEX 
Data.
    The proposed fees will not apply differently based upon the size or 
type of the market participant, but rather based upon the speed with 
which the Data Subscriber wishes to obtain IEX Data, based upon factors 
deemed relevant by each Data Subscriber, such as the cost to access and 
process IEX Data as well as business models.
    Finally, IEX notes that this simple, transparent market data fee 
proposal will simplify IEX audits for compliance with applicable market 
data policies. Any Data Subscriber receiving Real-Time IEX Data will 
enter into a Data Subscriber Agreement with IEX, even if the Data 
Subscriber obtains its data through a third-party vendor (as noted 
above, if the Real-Time data is received by an affiliate of the Data 
Subscriber, there will be no additional fees charged). Further, any 
Delayed IEX Data recipient does not need to enter into a Data 
Subscriber Agreement with IEX. Therefore, to assess compliance with 
applicable market data policies, IEX would simply audit whether any 
redistribution of IEX Data to any external, non-affiliate third party 
Data Subscribers is occurring, and if so, whether such redistribution 
is in Real Time or subject to at least a fifteen-millisecond delay.
    IEX's proposed fee structure is designed to recoup its costs and 
limit any revenue in excess of costs to an amount that represents no 
more than what IEX believes is a reasonable rate of return over such 
costs.\63\ IEX conducted an updated analysis of potential

[[Page 21953]]

revenue, based on responses from current market data subscribers in 
connection with the First Fee Filing. Specifically, IEX obtained 
feedback from existing Data Subscribers in connection with the First 
Fee Filing on whether they intend to continue to subscribe to Real-Time 
TOPS and/or DEEP following the implementation of the fees proposed 
therein. As discussed above, this feedback, which was not available at 
the time of filing of the First Fee Filing, enables IEX to supplement 
this Second Fee Filing with additional details relevant to revenue 
projection. Based upon that feedback, and the expertise of IEX 
employees, IEX expects that most, if not all, of the individual Data 
Subscribers will terminate their subscriptions for Real-Time IEX Data 
and, if they choose to continue to receive IEX Data, can opt to receive 
Delayed IEX Data from a third-party vendor or through HIST. Of the non-
individual Data Subscribers IEX projects the following: Over one-third 
overall will drop Real-Time IEX Data and use Delayed IEX Data, SIP 
feeds or obtain Real-Time IEX Data through an affiliate; approximately 
two-thirds of Members that are Data Subscribers will retain Real-Time 
access; over 50% of vendors will drop Real-Time IEX Data; and those 
Data Subscribers that currently only subscribe to TOPS are more likely 
to drop compared to those that subscribe to DEEP.
---------------------------------------------------------------------------

    \63\ IEX notes that it is not only being transparent about its 
costs associated with producing IEX Data, but is also being 
transparent about its anticipated markup over costs.
---------------------------------------------------------------------------

    Based on the feedback received, IEX believes that in the worst 
case, assuming no subscribers that have not yet indicated whether they 
will continue to subscribe elect to subscribe, we estimate annual 
revenues of $1.75 million, amounting to a loss of 29.5% under our 
estimated costs. In the best case, if all such subscribers choose to 
continue to subscribe, we estimate annual revenue of $2.63 million, 
representing a potential markup of just 6.1%. IEX believes that this 
revenue and cost recovery range is clearly reasonable and does not come 
even close to constituting taking an unfair advantage of its unique 
position as the sole source of its own proprietary market data.
    IEX does not have visibility into other equities exchanges' costs 
to provide market data, and therefore cannot use those exchanges' 
market data fees as a benchmark to determine a reasonable markup over 
the costs of providing market data. Nevertheless, IEX believes the 
other exchanges' market data fees are a useful example of alternative 
approaches to providing and charging for market data. To that end, IEX 
notes that its proposed fees are materially lower than what competing 
equities exchanges charge IEX for similar market data products.\64\ 
Specifically, during 2022, IEX pays an aggregate monthly cost of 
$101,024 to the 11 other equities exchanges \65\ that charge for their 
market data \66\ to obtain TOB, DOB and last sale market data. By 
comparison, to obtain the equivalent market data from IEX (as proposed) 
the aggregate monthly cost for those 11 equity exchanges would be 
$3,000 per exchange family, compared to the approximately $34,000 (on 
average) that IEX pays each exchange family to obtain such equivalent 
market data. As proposed, the 11 competing exchanges will, in the 
aggregate, be subject to monthly fees of $9,000 or approximately one-
eleventh of the aggregate fees that IEX pays to those 11 exchanges. 
Additionally, as noted in the IEX Study, the actual costs IEX incurs to 
obtain market data from other exchanges often involve aggregating 
several different kinds of fees, making it difficult to ascertain the 
actual costs to a market participant of obtaining equivalent market 
data from other exchanges.\67\ For example, several other exchanges 
charge separate fees depending on whether exchange data is 
redistributed internally \68\ or externally,\69\ is used for non-
display or other forms of use,\70\ or is calculated on a per user 
basis, with different fees for non-professional \71\ and professional 
\72\ users of the data feeds.\73\ By contrast, IEX's fee proposal is 
much simpler--charging a flat fee for any entity to access one or both 
of the IEX Data feeds ($500 month for TOPS/$2,500 for DEEP), with no 
fee to redistribute TOPS, DEEP, or both TOPS and DEEP in Real-Time or 
on a Delayed basis (regardless of the number of recipients that the 
entity redistributes to). This simple fee structure means the cost 
burden for subscribing to receive IEX Data would be relatively flat 
regardless of the size of the Data Subscriber's firm. At the same time, 
IEX believes that the fees are set at a level that will not represent a 
significant cost to any Data Subscriber. For example, because IEX will 
not be charging any variable per user fees, Data Subscribers will not 
need to expend resources on monthly reporting of market data usage that 
can be required when subscribing to other exchange data feeds with 
pricing that differs based on the various factors noted above. 
Furthermore, because IEX will not be charging different usage fees 
(such as for ``display'' vs. ``non-display'' usage) or charging based 
on ``controlled'' and ``uncontrolled'' products, the Data Subscribers 
will not need to expend resources on managing different methods of 
receiving and distributing IEX Data or different types of application 
usage. Furthermore, IEX understands that the above administrative 
concerns can result in contentious audits or even litigation between 
data subscribers and providers of proprietary market data, all of which 
can result in substantial costs to the subscribers of other exchanges' 
market data feeds.
---------------------------------------------------------------------------

    \64\ See supra note 56.
    \65\ Currently, IEX pays for market data from four NYSE 
exchanges (New York Stock Exchange LLC, NYSE American LLC, and NYSE 
Arca, Inc.), three Nasdaq exchanges (Nasdaq Stock Market LLC, Nasdaq 
BX, Inc., and Nasdaq PHLX LLC) and four Cboe exchanges (Cboe BYX 
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., 
and Cboe EDGX Exchange, Inc.).
    \66\ Long-Term Stock Exchange Inc.; MEMX LLC; MIAX PEARL, LLC; 
and NYSE Chicago, Inc. currently do not charge for their market 
data. However, MEMX LLC has announced a plan to begin charging for 
market data on April 1, 2022, which would increase IEX's fees.
    \67\ See IEX Study at 18.
    \68\ Internal distribution is receiving market data from an 
exchange and distributing it within the same entity that received 
the data.
    \69\ External distribution is receiving market data from an 
exchange and distributing it to a third party outside of the entity 
that received the data.
    \70\ Non-display usage means any method of accessing a market 
data product that involves access or use by a machine or automated 
device without access or use of a display by a natural person.
    \71\ Non-professional users are natural persons who use data for 
personal, not commercial, purposes, and are not a registered 
financial services professional.
    \72\ Anyone who is not a non-professional user is considered a 
professional user.
    \73\ See supra note 56.
---------------------------------------------------------------------------

    IEX acknowledges that there are trade-offs between the benefits of 
a relatively simple fee structure and a fee structure that is more 
graduated based on the extent and variety of uses of IEX Data. IEX 
believes it has struck an appropriate balance of these interests by 
creating a fee model that is simple, easy to understand and administer, 
and set at a level that is affordable for all firms that need real-time 
data, while imposing no charge on recipients of Delayed IEX Data that 
do not need Real-Time IEX Data.
    As discussed above, IEX estimates that this fee proposal would 
result in it receiving at most an amount equal to approximately 6.1% 
over its estimated costs of providing market data, with a significant 
possibility that IEX will not even recoup all of its costs.\74\ We 
believe

[[Page 21954]]

the fact that some current users have indicated to IEX they no longer 
plan to subscribe to Real-Time IEX Data owes in part to the fact that 
they will have the option to receive Delayed IEX Data (at a minimal 
delay of only 15 milliseconds) in lieu of Real-Time IEX Data, without 
paying a fee to IEX. IEX believes that Data Subscribers that are not 
engaged in high speed, low latency trading may not choose to pay for 
Real-Time IEX Data. As proposed, Data Subscribers may provide Delayed 
IEX Data to market participants who do not require (or quite possibly 
even have the necessary technology tools to use) near instantaneous 
access to IEX Data.\75\ These Delayed IEX Data recipients that elect to 
receive Delayed IEX Data from a Data Subscriber of IEX Data will not 
incur any IEX fees.\76\ Conversely, a market participant that values 
near instantaneous market data (e.g., algorithmic traders or other 
equities venues that use proprietary market data feeds to calculate the 
NBBO for each security) will have the option of paying $3,000 per month 
to receive Real-Time TOPS and DEEP. IEX also notes that any consumers 
can continue to obtain all the data in TOPS and DEEP free of charge on 
a T+1 basis from IEX's HIST data product. And a market participant can 
also choose to obtain IEX TOB market data from the SIPs instead of from 
IEX.
---------------------------------------------------------------------------

    \74\ IEX notes that the proposed fee filing introduces a new 
subscription model, and IEX will notify all current Data Subscribers 
that before July 1, 2022, they will need to enter into a new Data 
Subscriber Agreement with IEX if they wish to continue receiving IEX 
Data in real time (either directly from IEX or via a third party). 
Furthermore, anyone who elects to receive Delayed IEX Data from a 
third party would no longer need to enter into a Data Subscriber 
Agreement with IEX, as required under IEX's current market data 
policies.
    \75\ As noted above, IEX will only provide real-time IEX Data 
and will not itself delay the dissemination of IEX Data to Data 
Subscribers.
    \76\ The Delayed IEX Data recipient may be subject to any fees 
charged by the redistributor of the Delayed IEX Data, based upon the 
contractual arrangement between the Delayed IEX Data recipient and 
the provider of Delayed IEX Data. Such fees would not be paid to the 
Exchange.
---------------------------------------------------------------------------

Annual Review of Fees
    In its Suspension Order, the Commission asks whether exchanges 
should periodically reevaluate fees on an ongoing and periodic basis in 
order to assure that actual revenue aligns with a reasonable cost-plus 
model. IEX intends to conduct a review (as described above) one year 
after implementation of the proposed fees and will publish the results 
of that review, including the aggregate revenue received during the 
year from subscription to each market data product. IEX expects that it 
may propose to adjust fees at that time, to increase fees in the event 
that revenues fail to cover costs. Similarly, IEX would propose to 
decrease fees in the event that revenue materially exceeds our current 
projections and is above a reasonable mark-up of market data costs. 
Further, and as discussed above, IEX will periodically conduct a review 
to inform its decision making on whether a fee change is appropriate 
(e.g., to monitor for costs increasing/decreasing or subscribers 
increasing/decreasing, etc. in ways that suggest the then-current fees 
are becoming dislocated from the prior cost-based analysis). In the 
event that IEX determines to propose a fee change, the results of a 
timely review, including an updated cost estimate, will be included in 
a rule filing proposing the fee change. IEX believes this approach will 
further increase transparency around market data costs and help to 
ensure that Exchange fees continue to be reasonably related to costs.
Specific Changes to the Fee Schedule
    In order to effectuate the proposed fee changes, IEX is proposing 
to make the following changes to the definitions in the ``Market Data 
Fees'' part of its Fee Schedule:
     Remove the definitions for ``Internal Distribution Fee'' 
and ``External Distribution Fee'' because IEX is not proposing to 
charge any distribution fees.
     Define the term ``Real-Time'' as ``IEX market data that is 
accessed, used, or distributed less than fifteen (15) milliseconds 
after it was made available by the Exchange. IEX provides only Real-
Time IEX market data to Data Subscribers. A Data Subscriber may 
redistribute Real-Time IEX market data that it receives from the 
Exchange on a Real-Time basis to a natural person or entity. Receipt of 
IEX market data on a Real-Time basis by an affiliate of a Data 
Subscriber is not subject to additional Fees beyond those paid by such 
Data Subscriber.\1\''
     Define the term ``Delayed'' as ``IEX market data that is 
accessed, used, or distributed at least fifteen (15) milliseconds after 
it was made available by the Exchange. A Data Subscriber may 
redistribute Real-Time IEX market data that it receives from the 
Exchange on a Delayed basis to a natural person or entity. In addition, 
a recipient of Delayed IEX market data may further redistribute such 
Delayed IEX market data to a natural person or entity.''
     Define the term ``Data Subscriber'' as ``any natural 
person or entity that receives Real-Time IEX market data either 
directly from the Exchange or from another non-affiliate Data 
Subscriber. A Data Subscriber must enter into a Data Subscriber 
Agreement with IEX in order to receive Real-Time IEX market data. A 
natural person or entity that receives Real-Time IEX market data from 
an affiliated Data Subscriber is subject to the Data Subscriber 
Agreement of such affiliated Data Subscriber.''
     Remove the definition of ``Usage Fee'' because IEX is not 
proposing to charge any usage fees for its market data.
     Add the following words before the ``Service/Fee'' table: 
``The following fees\2\ are assessed by IEX on market data 
recipients:''
    IEX is also proposing to the make the following changes to the 
``Service/Fee'' table in the Market Data Fees section of the Fee 
Schedule:
     Delete the references to the Internal Distribution, 
External Distribution, and Usage Fees.
     Add the following entries to the table:

------------------------------------------------------------------------
                  Service                                Fee
------------------------------------------------------------------------
DEEP Feed (Real-Time).....................  $2,500 per month.\3\
TOPS Feed (Real-Time).....................  $500 per month.\3\
DEEP Feed (Delayed).......................  FREE.
TOPS Feed (Delayed).......................  FREE.
------------------------------------------------------------------------

     Define footnote 1 to say: ``The terms ``affiliate'' and 
``affiliated'' have the meaning specified in Rule 12b-2 of the Exchange 
Act.''
     Define footnote 2 to say: ``The fees set forth below 
include only fees charged by IEX. Receipt of Real-Time IEX market data 
from a Data Subscriber or Delayed IEX market data from a Data 
Subscriber or other person may also be subject to fees agreed to 
between the Data Subscriber and recipient of such IEX market data.''
     Define footnote 3 to say: ``These fees will be operative 
beginning July 1, 2022.''
Implementation Schedule
    As noted above, the proposed rule change is effective on filing and 
the fees proposed herein will become operative on July 1, 2022. Delayed 
implementation will provide an opportunity for current Data Subscribers 
to modify the manner in which they receive IEX Data, if they choose to 
do so, allowing them to obtain IEX Data without incurring any charge 
from IEX if they receive it subject to at least a fifteen-millisecond 
delay,\77\ before the first month in which IEX will charge for access 
to IEX Data.\78\
---------------------------------------------------------------------------

    \77\ The Delayed IEX Data recipient may be subject to any fees 
charged by the redistributor of the Delayed IEX Data, based upon the 
contractual arrangement between the Delayed IEX Data recipient and 
the provider of Delayed IEX Data. Such fees would not be paid to the 
Exchange.
    \78\ IEX will bill all Data Subscribers directly, even if the 
Data Subscriber obtains IEX Data from a vendor, rather than 
indirectly billing the Data Subscriber through the vendor and 
requiring the Data Subscriber to reimburse the vendor from which it 
receives IEX Data.

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

[[Page 21955]]

2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) \79\ of the Act in general and furthers the 
objectives of Section 6(b)(4) \80\ 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 also believes that the proposed fee change 
promotes just and equitable principles of trade and will not be 
unfairly discriminatory, consistent with the objectives of Section 
6(b)(5) \81\ of the Act.
---------------------------------------------------------------------------

    \79\ 15 U.S.C. 78f(b).
    \80\ 15 U.S.C. 78f(b)(4).
    \81\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Reasonableness
    With regard to reasonableness, the Exchange understands that the 
Commission has traditionally taken a market-based approach to examine 
whether the SRO making the fee proposal was subject to significant 
competitive forces in setting the terms of the proposal. IEX 
understands that in general the analysis considers whether the SRO has 
demonstrated in its filing that (i) there are reasonable substitutes 
for the product or service; (ii) ``platform'' competition constrains 
the ability to set the fee; and/or (iii) revenue and cost analysis 
shows the fee would not result in the SRO taking supracompetitive 
profits. If the SRO demonstrates that the fee is subject to significant 
competitive forces, IEX understands that in general the analysis will 
next consider whether there is any substantial countervailing basis to 
suggest the fee's terms fail to meet one or more standards under the 
Exchange Act. IEX further understands that if the filing fails to 
demonstrate that the fee is constrained by competitive forces, the SRO 
must provide a substantial basis, other than competition, to show that 
it is consistent with the Exchange Act, which may include production of 
relevant revenue and cost data pertaining to the product or service.
    As discussed in the Purpose section, IEX believes that as a general 
matter, because each exchange is the exclusive source of its own market 
data (particularly its depth of book data), market data fees cannot be 
sufficiently justified based on unproven assumptions about competition 
for market data, notwithstanding that a newer and/or smaller securities 
exchange, such as IEX, may be less able to set prices for its market 
data free of competition pressures than may be the case for more 
established securities exchanges. Nevertheless, IEX has not determined 
its proposed overall market data fees based on assumptions about market 
competition, instead relying upon a cost-plus model to determine a 
reasonable fee structure that is informed by the extent to which demand 
for each product drives IEX's overall market data costs and the 
different uses of the products by different types of participants. In 
this context, IEX believes the proposed fees overall are fair and 
reasonable as a form of cost recovery plus the possibility of a 
reasonable return for IEX's aggregate costs of offering IEX Data to its 
Data Subscribers.
    As discussed in the Purpose section, IEX believes that charging 
$500 per month for TOPS and $2,500 per month for DEEP is reasonable 
because it is based both on the relative costs to IEX to generate TOPS 
and DEEP, the extent to which each product drives IEX's overall costs 
and the relative value of each, as well as IEX's objective to make TOPS 
broadly available to a range of market participants including long-term 
investors. Therefore, IEX believes that it is reasonable to charge a 
higher fee for DEEP than for TOPS.
    IEX also believes the proposed fees are reasonable because they are 
designed to generate annual revenue to recoup some or all of IEX's 
annual costs of providing market data. As discussed in the Purpose 
section, subsequent to the First Fee Filing, IEX conducted an updated 
analysis of potential revenue, based on responses from current market 
data subscribers. Based on that analysis, assuming no subscribers that 
have not yet indicated whether they will continue to subscribe elect 
not to subscribe, we estimate annual revenues of $1.75 million in 
market data fees, amounting to a loss of 29.5% under our estimated 
costs of providing that data. Even if all such subscribers choose to 
continue to subscribe, we estimate this fee filing will result in 
annual revenue of $2.63 million, representing a potential markup of 
just 6.1% over the cost of providing market data. Accordingly, IEX 
believes that this fee methodology is reasonable because it both allows 
IEX to recoup some or all of its expenses for providing market data 
(with any additional revenue representing no more than what IEX 
believes to be a reasonable rate of return), while continuing to allow 
market participants to access IEX Data free of charge if they can wait 
at least fifteen milliseconds to receive it.
    Additionally, IEX believes the proposed fees are reasonable because 
IEX is only charging Data Subscribers who use IEX Data in Real-Time, 
and as described in the Purpose section, these Data Subscribers are the 
very ones creating the demand for Real-Time IEX Data, thereby causing 
IEX to incur the costs described above to produce Real-Time market data 
feeds.
    IEX also believes that the proposed fees are reasonable because 
they are significantly less than the fees charged by competing equities 
exchanges, notwithstanding that the competing exchanges may have 
different system architectures that may result in different cost 
structures for the provision of market data. As described above, the 
three large exchange families charge significantly more than IEX's 
proposed fees for real-time access to their proprietary market data. 
Significantly, they charge these fees without offering an option to 
receive delayed market data within a time frame that is usable for most 
trading purposes. The delayed data offered by other exchanges is also 
offered free of charge, but only fifteen minutes after it is first 
disseminated, which IEX believes generally makes the data stale for any 
subscribers using the data to make trading decisions.
    Finally, as described in the Purpose section above, IEX believes 
that this fee proposal is reasonable because it will not impose onerous 
audit requirements on Data Subscribers, because there will be no need 
to substantiate the number of users of IEX Data or the manner in which 
it is being used, but rather only whether it is being redistributed in 
real time or subject to at least a fifteen-millisecond delay.
Equitable Allocation and Non-Discrimination
    IEX believes that its proposed fees are reasonable, fair, and 
equitable, and not unfairly discriminatory because they are designed to 
align fees with services provided, will apply equally to all Data 
Subscribers that require real-time data, and will minimize barriers to 
entry by providing IEX Data for free after at least fifteen 
milliseconds, thereby allowing all but the most latency sensitive 
market participants access to IEX Data within a time frame that is 
usable for most trading purposes.
    The Exchange believes that providing Delayed IEX Data without 
charging any fees and charging as much as $3,000 per month to Data 
Subscribers who require Real-Time IEX Data is fair and equitable, and 
not unfairly discriminatory because it will enable all market 
participants to access Delayed IEX Data without paying

[[Page 21956]]

any fees to IEX \82\ and will charge only the users who require the 
fastest market data feeds available (which, as discussed in the Purpose 
section, drives much of the costs associated with creating and 
distributing IEX Data because it increases the resiliency, capacity and 
redundancy costs associated with IEX's proprietary market data feeds) 
for access to IEX Data. Additionally, as noted in the Purpose section, 
anyone can obtain TOPS and DEEP data free of charge on a T+1 basis 
through IEX's HIST data product. IEX believes this approach to market 
data fees will equitably distribute the costs of IEX Data among market 
participants whose business models require the highest speed market 
data available but without unfairly discriminating among market 
participants based on any distinctions between or among Members, 
customers, broker-dealers, or any other entity, because they are solely 
determined by the individual market participant based on its business 
needs.
---------------------------------------------------------------------------

    \82\ Although IEX will not charge any distribution fees to a 
redistributor of Delayed IEX Data, the redistributor may still 
charge its own fees to its customers that receive Delayed IEX Data 
from such redistributor.
---------------------------------------------------------------------------

    Furthermore, IEX believes that charging $500 per month for TOPS and 
$2,500 per month for DEEP is fair and equitable because, as discussed 
in the Purpose section, it is based on the relative value of DEEP and 
TOPS, the fact that demand for real-time DEEP drives a significant 
portion of IEX's market data costs, and the existence of alternatives 
to real-time TOB market data. These factors operate to limit IEX's 
ability to base real-time TOPS pricing strictly on a proportional cost 
allocation; additionally, charging significantly less for TOPS supports 
IEX's objective to make TOPS broadly available to a range of market 
participants including long-term investors. Therefore, IEX believes 
that it is fair and equitable to charge a higher fee for DEEP than for 
TOPS.
    The Exchange also believes that it is fair and reasonable to not 
charge additional fees to affiliates of a Data Subscriber because that 
approach is agnostic on corporate structure without financially 
penalizing a firm organized into multiple affiliates. Moreover, IEX's 
costs do not materially differ based on how Data Subscribers have 
legally structured their operations.
    The Exchange further believes that the proposed fees are 
reasonable, fair, and equitable, and non-discriminatory because they 
will apply to all Data Subscribers in the same manner based on the type 
of market data needed. All similarly situated market participants are 
subject to the same fees. The fees also do not depend on any 
distinctions between or among Members, customers, broker-dealers, or 
any other entity, because they are solely determined by the individual 
market participant based on its business needs.
    Finally, the Exchange believes that the proposed fee is consistent 
with Section 11A of the Exchange Act in that it is designed to 
facilitate the economically efficient execution of securities 
transactions, fair competition among brokers and dealers, exchange 
markets and markets other than exchange markets, and the practicability 
of brokers executing investors' orders in the best market. 
Specifically, the proposed low, cost-based fee, with the option of 
receiving free data from a third party on at least a fifteen-
millisecond delay \83\ or for absolutely no cost on a T+1 basis using 
HIST, will enable a broad range of market participants to continue to 
receive IEX Data, thereby facilitating the economically efficient 
execution of securities transactions on IEX, fair competition between 
and among such Members, and the practicability of Members that are 
brokers executing investors' orders on IEX when it is the best market.
---------------------------------------------------------------------------

    \83\ Distributors of Delayed IEX Data may charge a fee for the 
data, but that fee is not payable to IEX.
---------------------------------------------------------------------------

    For the foregoing reasons, the Exchange believes that the proposed 
fee is reasonable, equitably allocated, and not unfairly 
discriminatory.

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 intramarket or intermarket 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 proposed 
fees are based on actual costs and are designed to enable the Exchange 
to recoup its applicable costs with the possibility of a reasonable 
profit on its investment as described in the Purpose and Statutory 
Basis sections. Competing equities exchanges are free to adopt 
comparable fee structures subject to the SEC rule filing process.
    The Exchange also does not believe that the proposed fees will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because all 
market participants are entitled to receive IEX Data free of charge 
after at least a fifteen-millisecond delay. Providing a commercially 
viable free data feed to Data Subscribers is designed to avoid creating 
barriers to entry for smaller Members, thereby promoting intramarket 
competition. In addition, even Members subject to relatively higher 
fees, because they are paying up to $3,000 per month for IEX Data, will 
still be subject to a relatively low aggregate fee (and significantly 
less than the fees charged by competing exchanges, as described above) 
and IEX thus believes that the proposed fee will not operate as a 
barrier to entry for such Members or impose a significant business cost 
burden on such Members relative to their levels of business activity. 
Finally, as noted in the Purpose and Statutory Basis sections, IEX 
believes that not requiring any onerous audits for Data Subscribers 
will be of equal benefit to all Data Subscribers.

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) \84\ of the Act.
---------------------------------------------------------------------------

    \84\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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) \85\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \85\ 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:

[[Page 21957]]

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 No. SR-IEX-2022-02 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 No. SR-IEX-2022-02. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange and on its internet 
website at www.iextrading.com. 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 No. SR-IEX-
2022-02, and should be submitted on or before May 4, 2022.
---------------------------------------------------------------------------

    \86\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\86\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07853 Filed 4-12-22; 8:45 am]
BILLING CODE 8011-01-P


