82 FR 19763 - Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing of Proposed Rule Change To Modify the Manner in Which the Exchange Opens Trading for Non-IEX-Listed Securities

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 81 (April 28, 2017)

Page Range		19763-19770
FR Document		2017-08575
Federal Register, Volume 82 Issue 81 (Friday, April 28, 2017)
[Federal Register Volume 82, Number 81 (Friday, April 28, 2017)]
[Notices]
[Pages 19763-19770]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-08575]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80514; File No. SR-IEX-2017-11]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing of Proposed Rule Change To Modify the Manner in Which the 
Exchange Opens Trading for Non-IEX-Listed Securities

April 24, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 13, 2017, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''), and Rule 19b-4 thereunder, Investors 
Exchange LLC (``IEX'' or the ``Exchange'') is filing with the 
Securities and Exchange Commission (``Commission'') proposed rule 
changes to (i) amend Rule 11.231 to modify the manner in which the 
Exchange opens trading for non-IEX-listed securities beginning at the 
start of Regular Market Hours and retitle it ``Regular Market Session 
Opening Process for Non-IEX-Listed Securities''; and (ii) amend Rules 
11.190 and 11.220 to specify the order types eligible to participate in 
the proposed Regular Market Session Opening Process for non-IEX listed 
securities (``Opening Process'') described in proposed Rule 11.231 and 
priority thereof.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.iextrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

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

1. Purpose
Background
    The purpose of the proposed rule change is to (i) amend Rule 11.231 
to modify the manner in which the Exchange opens trading for non-IEX-
listed securities beginning at the start of Regular Market Hours and 
retitle it ``Regular Market Session Opening Process for Non-IEX-Listed 
Securities''; (ii) amend Rule 11.190(a)(2)(E) to allow market orders 
with a time-in-force of DAY to be entered in the Pre-Market Session for 
queuing and participation in the Regular Market Session Opening Process 
for non-IEX-listed securities (``Opening Process'') described in 
proposed Rule 11.231; (iii) amend Rule 11.220(a)(2) regarding the 
priority of orders eligible to execute in the proposed Opening Process; 
and (iv) amend Rule 11.190(b)(11) to clarify that orders with a Minimum 
Quantity as defined in Rule 11.190(b)(11) (``Minimum Quantity orders'') 
are not eligible to participate in the Opening Process pursuant to 
proposed Rule 11.231.
    Currently, the Exchange begins accepting limit orders with a time-
in-force of IOC, FOK, SYS, and GTT \3\ for non-IEX-listed securities 
for trading at the beginning of the Pre-Market Session and any such 
orders received by the Exchange are immediately eligible for execution 
in the Pre-Market Session. In addition, limit orders with a time-in-
force of DAY or GTX \4\ and pegged orders with a time-in-force of DAY 
that are entered during the Pre-Market Session are queued in the time 
sequence of their receipt by the System pursuant to Rule 11.220(a)(2), 
until the start of the Regular Market Session, or until the order is 
canceled by the User. Any such queued orders that are in the System at 
the beginning of Regular Market Hours are released to the Order Book as 
incoming orders in their relative time priority pursuant to Rule 
11.220(a)(2) and are immediately eligible for trading in the Regular 
Market Session, subject to the User's instructions and market 
conditions. Pursuant to IEX Rule 11.190(a)(2)(E), market orders may 
only be submitted in the Regular Market Session, and are rejected by 
the System in the Pre-Market Session and Post-Market Session. 
Furthermore, under paragraph (iii) of IEX Rule 11.190(a)(2)(E), market 
orders marked DAY, by default, are rejected. When elected by the User, 
market orders marked DAY submitted by that User are accepted and 
eligible to trade or route during the Regular Market Session. Market 
orders marked DAY are treated by the System as having a TIF of IOC.\5\
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    \3\ See Rules 11.190(c)(1), 11.190(c)(2), 11.190(c)(5), and 
11.190(c)(6), defining the time-in-force of IOC, FOK, SYS, and GTT, 
respectively.
    \4\ See Rules 11.190(c)(3), 11.190(c)(4), defining a time-in-
force of DAY and GTX, respectively.
    \5\ Members that would like to enter market orders with time-in-
force of DAY and have the Exchange accept such orders are required 
to have authorized personnel contact IEX Market Operation 
([email protected]) in writing requesting such port setting 
changes, and must specifically identify the order entry sessions to 
which such port setting will apply.

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[[Page 19764]]

Description of Proposed Rule Change
    The Exchange proposes to amend Rule 11.231 to offer an enhanced 
opening process for non-IEX-listed securities. Specifically, as 
proposed, the Exchange will attempt to perform the Opening Process in 
each non-IEX-listed security pursuant to which all eligible interest 
resting on the Order Book in the Pre-Market Session available for 
continuous trading (i.e., orders on the ``Continuous Book'') or orders 
queued for execution in the Regular Market Session (i.e., orders on the 
``Cross Book'') will be executed at a single price. As proposed, the 
Opening Process offers Users an opportunity to participate in an 
electronic price discovery mechanism that efficiently matches all 
eligible buy and sell orders in each non-IEX-listed security queued for 
the Opening Process along with all eligible orders resting on the 
Continuous Book from the Pre-Market Session at a single price. The 
Opening Process is designed to efficiently maximize the number of 
shares executed at a single price that is reflective of the broader 
market for the security, as described more fully below.
    As proposed, prior to the beginning of Regular Market Hours, Users 
who wish to participate in the Opening Process may enter limit, market, 
and pegged orders designated with a time-in-force of DAY and limit 
orders designated with a time-in-force of GTX, which shall queue in the 
System and are eligible for execution in the Opening Process (orders on 
the Cross Book); interest resting on the Order Book in the Pre-Market 
Session available for continuous trading (i.e., orders on the 
Continuous Book) are also eligible for execution in the Opening Process 
(collectively, ``Cross Eligible Orders''). Minimum Quantity orders are 
not eligible for execution in the Opening Process, and are therefore 
not Cross Eligible Orders. Accordingly, the Exchange is proposing to 
amend Rule 11.190(a)(2)(E) to extend the queuing functionality to 
market orders with a time-in-force of DAY that are entered during the 
Pre-Market Session and are not designated to route pursuant to Rule 
11.230(c), allowing such orders to queue in the System for 
participation in the Opening Process.\6\ Orders with a time-in-force of 
IOC or FOK do not rest on the Order Book and are therefore ineligible 
to participate in the Opening Process. In addition, the Exchange is 
proposing to make a minor conforming change to the language used in 
reference to LULD Price Bands in Rule 11.190(a)(1)(2) [sic] in order to 
conform the reference to the language used throughout the Exchange's 
rules.
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    \6\ Orders canceled before the Opening Process will not 
participate in the Opening Process. Market orders with a time-in-
force of DAY that are entered during the Pre-Market Session and are 
designated to route pursuant to Rule 11.230(c) will be rejected upon 
entry.
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    As proposed, orders on the Continuous Book and orders on the Cross 
Book (collectively, the Order Book) shall be ranked and maintained for 
the Opening Process pursuant to Rule 11.220(a)(2), as follows:
     Midpoint peg orders, as defined in IEX Rule 11.190(b)(9), 
on the Cross Book are ranked and eligible for execution in the Opening 
Process at the less aggressive of the Midpoint Price or the order's 
limit price, if any.
     Primary peg orders, as defined in IEX Rule 11.190(b)(8), 
on the Cross Book are ranked and eligible for execution in the Opening 
Process at the less aggressive of one (1) MPV below (above) the NBB 
(NBO) for buy (sell) orders or the order's limit price, if any, but may 
exercise price discretion up (down) to the Opening Match Price, subject 
to the less aggressive of the NBB (NBO) or the order's limit price, if 
any, except during periods of quote instability, as defined in IEX Rule 
11.190(g). When exercising price discretion, primary peg orders are 
ranked behind any non-displayed interest at the Opening Match Price for 
the duration of the Opening Process. If multiple primary peg orders are 
exercising price discretion during the Opening Process, they maintain 
their relative time priority at the Opening Match Price.
     Discretionary Peg orders, as defined in IEX Rule 
11.190(b)(10), on the Cross Book are ranked and eligible for execution 
in the Opening Process at the less aggressive of the NBB (NBO) for buy 
(sell) orders or the order's limit price, if any, but may exercise 
price discretion up (down) to the Opening Match Price, subject to the 
less aggressive of the Midpoint Price or the order's limit price, if 
any, except during periods of quote instability, as defined in IEX Rule 
11.190(g). When exercising price discretion, Discretionary Peg orders 
are ranked behind any non-displayed interest at the Opening Match Price 
for the duration of the Opening Process. If multiple Discretionary Peg 
orders are exercising price discretion during the Opening Process, they 
maintain their relative time priority at the Opening Match Price.
     Limit orders on the Cross Book are ranked and eligible for 
execution in the Opening Process at their limit price.
     Non-displayed limit orders and non-displayed portions of 
reserve orders on the Continuous Book are ranked and eligible for 
execution in the Opening Process at the less aggressive of the Midpoint 
Price or the order's limit price.
     Displayed limit orders on the Continuous Book are ranked 
and eligible for execution in the Opening Process at their resting 
price.
    As noted above, orders shall be ranked and prioritized for the 
Opening Process in price--display--time priority pursuant to proposed 
Rule 11.220(a)(2). Specifically, the best priced Cross Eligible Order 
(the highest priced resting order to buy or the lowest priced resting 
order to sell) has priority over all other orders to buy (or orders to 
sell) in all cases. Market orders have precedence over limit orders. 
Cross Eligible Orders resting on the Continuous Book are ranked by the 
price at which they are resting on the Continuous Book and Cross 
Eligible Orders resting on the Cross Book are ranked by the limit price 
defined by the User, if any, except in the case of pegged orders, which 
are ranked by their current book price (in each case, the order's 
``resting price''). Equally priced Cross Eligible Orders are ranked by 
display priority, i.e., displayed orders and displayed portions of 
Cross Eligible Orders will have precedence over non-displayed orders 
and non-displayed portions of Cross Eligible Orders at a given price. 
Equally priced Cross Eligible Orders with the same display priority are 
ranked in time priority, i.e., where Cross Eligible Orders to buy (or 
sell) are ranked at the same price with the same display priority, the 
oldest order at such price and display shall have precedence at that 
price and display. Orders are ranked by the time at which they are 
posted to the Order Book at a given price, the first to be posted at a 
given price being the oldest. Cross Eligible Orders maintain their time 
priority once booked until:
     In the case of an order on the Cross Book, the order is: 
(i) Incremented by the User, (ii) re-priced by the User, (iii) the 
Minimum Quantity instruction is removed from an order by the User, and 
therefore becomes a Cross Eligible Order, or (iv) a pegged order is re-
priced by the System in response to changes in the NBBO, at which time 
the order will receive a new timestamp. Pursuant to IEX Rule 
11.231(a)(1)(ii) and (iii), respectively, when exercising price 
discretion, primary peg and Discretionary Peg orders maintain time 
priority at their resting price, however they are prioritized behind 
any non-displayed interest at the Opening Match

[[Page 19765]]

Price for the duration of the Opening Process.
     In the case of an order on the Continuous Book, any one of 
the events specified in IEX Rule 11.220(a)(1)(C) occurs to an order, at 
which time the order will receive a new timestamp.
    Under proposed Rule 11.231(b), beginning at the start of Regular 
Market Hours, Cross Eligible Orders that are eligible to trade at the 
Opening Match Price (as described below) will be processed in 
accordance with price--display--time priority pursuant to proposed Rule 
11.220(a)(2). First, to the extent there is contra side interest 
eligible to trade at the Opening Match Price, market orders will be 
executed at the Opening Match Price in time priority. After the 
execution of all market orders, the remaining Cross Eligible Orders 
priced more aggressively than the Opening Match Price will be executed 
in price--display--time priority at the Opening Match Price. All 
remaining Cross Eligible Orders priced equal to the Opening Match Price 
will execute in display--time priority at the Opening Match Price. 
Executions will occur until there is no remaining volume or there is an 
imbalance of orders (i.e., there are no remaining eligible shares to 
buy (sell), while eligible shares to sell (buy) remain unexecuted) (the 
process described above, collectively, being the ``Opening Match''). 
AGID modifiers, as defined in Rule 11.190(e), will not be supported for 
executions in the Opening Match, but will be enforced on all unexecuted 
shares released to the Order Book following the Opening Match.
    An imbalance of Cross Eligible Orders on the buy side or sell side 
may result in orders that are not executed in whole or in part. 
Unexecuted Cross Eligible Orders to buy (sell) that are priced at or 
above (below) the Cross Price Constraint (but remained unexecuted due 
to an imbalance of Cross Eligible Orders) will price slide pursuant to 
IEX Rule 11.190(h) and all remaining unexecuted Cross Eligible Orders, 
along with any orders that were either ineligible to participate in the 
Opening Process or too passive to be executed in the Opening Process, 
will be released to the Order Book for continuous trading or canceled 
in accordance with the terms of the order. Routable orders that are 
released to the Order Book will be routed in accordance with IEX Rule 
11.230(c)(3) (Re-Sweep Behavior), subject to the order's instructions.
    Proposed Rule 11.231(c)(1) sets forth proposed definitions 
applicable to the Opening Process. As proposed:
     The term ``Away Protected NBB'' or ``Away Protected NBO'' 
shall mean the national best bid or offer, respectively, that is a 
Protected Quotation and not a quotation of the Exchange.
     The term ``Away Protected Bid'' or ``Away Protected 
Offer'' shall mean a Protected Bid or Protected Offer, respectively, 
that is not a quotation of the Exchange.
     The term ``Cross Price Constraint'' shall mean, 
collectively, the upper and lower threshold prices within which the 
Opening Match must occur, inclusive of the boundaries. During a crossed 
market, if the upper threshold price is below the lower threshold price 
when performing the Opening Process, no Opening Match will occur and 
orders eligible to post on the Order Book will price slide in 
accordance with the price sliding process, pursuant to IEX Rule 
11.190(h), and the security will open for trading on IEX in accordance 
with prevailing market session rules.
    [cir] The upper threshold price of the Cross Price Constraint is 
equal to the price of the Away Protected NBO, except in the event that 
an Away Protected Bid is crossing an Away Protected Offer, the upper 
threshold price is equal to the greater of five cents ($0.05) or one 
half of a percent (0.5%) higher than the lowest Away Protected Offer.
    [cir] The lower threshold price of the Cross Price Constraint is 
equal to the price of the Away Protected NBB, except in the event that 
an Away Protected Bid is crossing an Away Protected Offer, the lower 
threshold price is equal to the greater of five cents ($0.05) or one 
half of a percent (0.5%) lower than the highest Away Protected Bid.
     The term ``Cross Tie Breaker'' shall mean the price of the 
most current Order Collar Reference Price pursuant to IEX Rule 
11.190(f).\7\
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    \7\ Rule 11.190(f)(1)(A) defines the Order Collar Reference 
Price as the most current of: (i) The consolidated last sale price 
disseminated during the Regular Market Session on the current trade 
date, (ii) the last trade price disseminated outside of the Regular 
Market Session by the SIP (Form T, as communicated by the relevant 
SIP) on the current trade date, which but for the Form T designation 
would have been considered a valid last sale price, or, (iii) if no 
such trades exist, the previous official closing price. If no Pre-
Market Session trades have occurred that qualify to update the Order 
Collar Reference Price and the previous official closing price for 
the security is not available, in the interest of maintaining a fair 
and orderly market, the Exchange will prevent trading in a security 
pursuant to Rule 11.190(f)(1)(B) by rejecting orders beginning at 
the start of the Pre-Market Session, and will not conduct an Opening 
Match in such security. Accordingly, in such cases, the Opening 
Process will conclude with IEX opening the Regular Market Session 
without an Opening Match, and trading will begin upon receipt of the 
first Order Collar Reference Price for the security.
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    Under proposed Rule 11.231(c)(2), if both an Away Protected Bid and 
Away Protected Offer exists (i.e., a two-sided market) the price of the 
Opening Match (``Opening Match Price'') will be the price that 
maximizes the number of shares of Cross Eligible Orders to be executed. 
If more than one price exists that maximizes the number of shares of 
Cross Eligible Orders to be executed, the Opening Match shall occur at 
the entered price at which shares will remain unexecuted in the match 
(i.e., the price of the most aggressive unexecuted order). If Cross 
Eligible Order shares are maximized and left unexecuted at more than 
one price, the Opening Match shall occur at the price that minimizes 
the distance from the Cross Tie Breaker (i.e., the price at or higher 
than the most aggressive unexecuted buy order and at or lower than the 
most aggressive unexecuted sell order that is closest or equal to the 
Cross Tie Breaker). Lastly, if the Opening Match Price established 
pursuant to the procedures above is below (above) the lower (upper) 
threshold price of the Cross Price Constraint, the Opening Match shall 
occur at the lower (upper) threshold price of the Cross Price 
Constraint.
    The following examples are designed to illustrate the process for 
determining the Opening Match Price in a two-sided market, as described 
above. Each example below assumes the Away Protected NBB is $10.09, the 
Away Protected NBO is $10.11, and the last trade price that qualified 
as an Order Collar Reference Price was $10.10:

 Example 1
    [cir] The Cross Book includes the following orders:
    [ssquf] Limit order to buy 1,500 shares with a limit price of 
$10.10; and
    [ssquf] Limit order to sell 1,000 shares with a limit price of 
$10.10.
    [cir] Shares are maximized at $10.10; therefore
    [ssquf] 1,000 shares would execute at the Opening Match Price of 
$10.10.

 Example 2
    [cir] The Cross Book contains the following orders:
    [ssquf] Limit order to buy 1,500 shares with a limit price of 
$10.10; and
    [ssquf] Market order to sell 1,000 shares.
    [cir] Shares are maximized at each price at and between the lower 
threshold of the Cross Price Constraint (i.e., $10.09) and $10.10;
    [cir] The price at which shares will remain unexecuted in the 
auction is $10.10; \8\ therefore
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    \8\ Note, while shares are maximized at and between the lower 
threshold of the Cross Price Constraint ($10.09) and $10.10, the 
entered price at which shares will remain unexecuted in the auction 
is $10.10, as $10.10 is the resting price of the most aggressive 
order where shares remain unexecuted.

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[[Page 19766]]

    [ssquf] 1,000 shares would execute at the Opening Match Price of 
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$10.10.

 Example 3
    [cir] The Cross Book contains the following orders:
    [ssquf] Limit order to buy 2,000 shares with a limit price of 
$10.11;
    [ssquf] Limit order to sell 2,000 shares with a limit price of 
$10.09.
    [cir] The Continuous Book contains the following orders:
    [ssquf] Displayed limit order to buy 500 shares with a limit price 
of $10.09;
    [ssquf] Displayed limit order to sell 600 shares with a limit price 
of $10.11.
    [cir] Shares are maximized at each price at or between $10.09 and 
$10.11;
    [cir] The range of prices at or between the prices at which shares 
will remain unexecuted in the auction is $10.09 and $10.11;
    [cir] Because a range of prices exist after evaluating the prior 
two conditions (i.e., an auction price range), the price closest to the 
Cross Tie Breaker (i.e., the last trade price that qualified as an 
Order Collar Reference Price) within the auction price range is $10.10; 
therefore
    [ssquf] 2,000 shares would execute at the Opening Match Price of 
$10.10.

 Example 4
    [cir] The Cross Book contains the following orders:
    [ssquf] Limit order to buy 2,000 shares with a limit price of 
$10.08;
    [ssquf] Limit order to sell 2,000 shares with a limit price of 
$10.08.
    [cir] The Continuous Book contains the following orders:
    [ssquf] Displayed limit order to buy 500 shares with a limit price 
of $10.09;
    [ssquf] Displayed limit order to sell 600 shares with a limit price 
of $10.11.
    [cir] Shares are maximized at $10.08, however $10.08 is below the 
lower threshold of the Cross Price Constraint (i.e., $10.09); therefore
    [ssquf] 500 shares would execute at the Opening Match Price of 
$10.09.
    The following examples are designed to illustrate the process for 
determining the Opening Match Price and the proposed execution priority 
including non-displayed orders on the Cross Book in two-sided market, 
as described above. Each example below assumes the Away Protected NBB 
is $20.19, the Away Protected NBO is $20.21, and the last trade price 
that qualified as an Order Collar Reference Price was $20.20:

 Example 1
    [cir] The Cross Book includes the following orders:
    [ssquf] Midpoint Peg order to buy 2,500 shares with a resting price 
of $20.20.
    [ssquf] Limit order to buy 500 shares with a limit price of $20.18; 
and
    [ssquf] Limit order to sell 2,000 shares with a limit price of 
$20.18.
    [cir] For purposes of determining the Opening Match Price, the 
Midpoint Peg order is priced at its resting price ($20.20);
    [cir] Accordingly, shares are maximized between $20.18 and $20.20, 
and the price at which shares are left unexecuted within such range, is 
$20.20; therefore
    [ssquf] 2,000 shares would execute at the Opening Match Price of 
$20.20;
     The Midpoint Peg buy order would receive an execution of 
2,000 shares and the remaining 500 shares remain booked at the midpoint 
of the NBBO;
     The limit sell order would receive an execution of 2,000 
shares, and thus be fully filled; and
     The limit buy order would not receive an execution, 
because the limit sell order is fully filled after matching with the 
Midpoint Peg buy order with superior priority. The entire limit buy 
order is booked at the $20.18.

 Example 2
    [cir] The Cross Book includes the following orders:
    [ssquf] Primary Peg order to buy 2,500 shares with a resting price 
of $20.18, and limit price of $20.20;
    [ssquf] Limit order to buy 500 shares with a limit price of $20.19; 
and
    [ssquf] Displayed limit order to sell 2,000 shares with a limit 
price of 20.19.
    [cir] For purposes of determining the Opening Match Price, the 
Primary Peg order is priced at its resting price ($20.18); the Primary 
Peg order is eligible exercise price discretion up to the Opening Match 
Price, so long as the match price is at or below the less aggressive of 
the NBB or the order's limit price;
    [cir] Accordingly, shares are maximized at $20.19; therefore
    [ssquf] 2,000 shares would execute at the Opening Match Price of 
$20.19;
     The limit buy order would receive an execution of 500 
shares;
     Assuming IEX has determined the quote to be stable 
pursuant to IEX Rule 11.190(g), the Primary Peg buy order would 
exercise discretion up to the Opening Match Price and receive an 
execution of 1,500 shares; the remaining 1,000 shares remain booked at 
$20.18; and
     Assuming IEX has determined the quote to be stable 
pursuant to IEX Rule 11.190(g), the limit sell order would receive an 
execution of 2,000 shares. If IEX has determined the quote to be 
unstable pursuant to IEX Rule 11.190(g), the limit sell order would 
receive an execution of 500 shares and the remaining 1,500 shares would 
post, in accordance with the display-price sliding behavior, 1 MPV 
above the NBB at $20.20.

 Example 3
    [cir] The Cross Book includes the following orders:
    [ssquf] Midpoint Peg order to buy 2,500 shares with a resting price 
of $20.20.
    [ssquf] Displayed limit order to buy 500 shares with a limit price 
of $20.20; and
    [ssquf] Limit order to sell 2,000 shares with a limit price of 
$20.20.
    [cir] For purposes of determining the Opening Match Price, the 
Midpoint Peg order is priced at its resting price ($20.20);
    [cir] Accordingly, shares are maximized at $20.20; therefore
    [ssquf] 2,000 shares would execute at the Opening Match Price of 
$20.20;
     The limit buy order would receive an execution of 500 
shares;
     The Midpoint Peg buy order would receive an execution of 
1,500 shares; and
     The limit sell order would receive an execution of 2,000 
shares.

 Example 4
    [cir] The Cross Book includes the following orders:
    [ssquf] Discretionary Peg order to buy 2,500 shares with a resting 
price of $20.19, and limit price of $20.21;
    [ssquf] Limit order to buy 500 shares with a limit price of $20.20; 
and
    [ssquf] Limit order to sell 2,000 shares with a limit price of 
$20.20.
    [cir] For purposes of determining the Opening Match Price, the 
Discretionary Peg order is priced at its resting price ($20.19); the 
Discretionary Peg order is eligible exercise price discretion up to the 
Opening Match Price, so long as the match price is at or below the less 
aggressive of the midpoint of the NBBO or the order's limit price.
    [cir] Accordingly, shares are maximized at $20.20; therefore
    [ssquf] 2,000 shares would execute at the Opening Match Price of 
$20.20;
     The limit buy order would receive an execution of 500 
shares;
     Assuming IEX has determined the quote to be stable 
pursuant to IEX Rule 11.190(g), the Discretionary Peg buy order would 
exercise discretion up to the Opening Match Price and receive an 
execution of 1,500 shares; and
     Assuming IEX has determined the quote to be stable 
pursuant to IEX Rule 11.190(g), the limit sell order would receive an 
execution of 2,000 shares. If IEX has determined the quote to be 
unstable pursuant to IEX Rule 11.190(g), the limit sell order would 
receive an execution of 500 shares and the

[[Page 19767]]

remaining 1,500 shares would post at $20.20.
    Under proposed Rule 11.231(c)(3), if there is a lack of an Away 
Protected Bid and/or Away Protected Offer (i.e., a one-sided, or zero-
sided market) the Opening Match Price will be the price of the Cross 
Tie Breaker. If the price of the Cross Tie Breaker is below (above) the 
lower (upper) threshold price of the Cross Price Constraint, the 
Opening Match shall occur at the lower (upper) threshold price of the 
Cross Price Constraint.\9\
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    \9\ In a one-sided market where there is no Away Protected NBB 
or no Away Protected NBO, the Cross Tie Breaker is compared to the 
available threshold price of the Cross Price Constraint (i.e., the 
Opening Match Price will be at or above the lower threshold price, 
or at or below the upper threshold price of the Cross Price 
Constraint, as applicable). In a zero-sided market, the Opening 
Match Price will be the Cross Tie Breaker.
---------------------------------------------------------------------------

    The following examples are designed to illustrate the process for 
determining the Opening Match Price in a one-sided or zero-sided market 
as described above. Each example below assumes the last trade price 
that qualified as an Order Collar Reference Price was $10.10:

 Example 1
    [cir] Away Protected NBB is $10.09;
    [cir] The Cross Book includes the following orders:
    [ssquf] Limit order to buy 1,500 shares with a limit price of 
$10.11; and
    [ssquf] Limit order to sell 1,000 shares with a limit price of 
$10.09.
    [cir] The Cross Tie Breaker is $10.10 and such price is above the 
lower threshold of the Cross Price Constraint (i.e., $10.09); \10\ 
therefore
---------------------------------------------------------------------------

    \10\ Note, there is no upper threshold price of the Cross Price 
Constraint because there is no Away Protected NBO, and therefore the 
Cross Tie Breaker of $10.10 is compared to the available lower 
threshold price of the Cross Price Constraint ($10.09).
---------------------------------------------------------------------------

    [ssquf] 1,000 shares would execute at the Opening Match Price of 
$10.10.

 Example 2
    [cir] Away Protected NBB is $10.11;
    [cir] The Cross Book includes the following orders:
    [ssquf] Limit order to buy 1,500 shares with a limit price of 
$10.11; and
    [ssquf] Limit order to sell 1,000 shares with a limit price of 
$10.09.
    [cir] The Cross Tie Breaker is $10.10 however such price is below 
the lower threshold of the Cross Price Constraint (i.e., $10.11); 
therefore
    [ssquf] 1,000 shares would execute at the Opening Match Price of 
$10.11.

 Example 3
    [cir] There is neither an Away Protected NBB nor an Away Protected 
NBO;
    [cir] The Cross Book includes the following orders:
    [ssquf] Limit order to buy 1,500 shares with a limit price of 
$10.11; and
    [ssquf] Limit order to sell 1,000 shares with a limit price of 
$10.09.
    [cir] The Cross Tie Breaker is $10.10; \11\ therefore
---------------------------------------------------------------------------

    \11\ Note, there is neither an upper threshold price nor a lower 
threshold price of the Cross Price Constraint because there are no 
away protected quotations.
---------------------------------------------------------------------------

    [ssquf] 1,000 shares would execute at the Opening Match Price of 
$10.10.
    Proposed Rule 11.231(e) provides that if a security is subject to a 
halt, suspension, or pause in trading during the Pre-Market Session, 
the Exchange will not accept orders in the security for continuous 
trading, or for queuing and participation in the Opening Process. 
Pursuant to IEX Rule 11.271, any order submitted during a halt will be 
rejected by the System. Any orders resting on the Order Book at the 
time of a trading halt will not be canceled by the System, and will be 
unavailable for trading or re-sweep during the trading halt, but will 
be available for cancelation by the submitting User. Orders that were 
submitted prior to the halt, suspension, or pause in trading that 
joined the Cross Book or the Continuous Book will remain on the Cross 
Book or the Continuous Book unless canceled by the User. If the halt, 
suspension, or pause remains in effect at the start of the Regular 
Market Hours, the Opening Process will not occur at the normally 
scheduled time. Instead, once the security resumes trading, the 
Exchange will conduct the Opening Process, as described in proposed 
Rule 11.231(b) and (c), including all Cross Eligible Orders that remain 
on the Cross Book and the Continuous Book. Following the conclusion of 
the Opening Process, the Exchange will accept and execute orders as 
usual in accordance with prevailing market session rules.
    In the event of a disruption that prevents the execution of the 
Opening Process, Rule 11.231(d) provides for Opening Process 
Contingency Procedures designed to allow for timely and orderly opening 
of non-IEX-listed securities. As proposed, rather than matching orders 
at the Opening Match Price as described in Rule 11.231(c), IEX will 
publicly announce that no Opening Process will occur.\12\ All orders on 
the Order Book will be canceled, and IEX will open the security for 
trading without an Opening Match.
---------------------------------------------------------------------------

    \12\ Note, the Exchange intends to disseminate a System Status 
Alert to publicly announce that no Opening Process will occur, which 
automatically publishes an email alert, twitter update, and text 
message to all persons registered to receive such alerts, as well as 
publishing to the IEX public Web site. To register for System Status 
Alerts, visit https://www.iextrading.com/status/#/.
---------------------------------------------------------------------------

    Lastly, proposed Rule 11.231(f) states that for purposes of Rule 
611(b)(3) of Regulation NMS, and section VI(D)(6) of the Plan to 
Implement a Tick Size Pilot Program, orders executed in the Opening 
Process shall constitute a single-priced opening transaction by the 
Exchange and may trade-through or trade-at the price of any other 
Trading Center's Manual or Protected Quotations. Each of the orders 
executed in the Opening Process are by definition a single priced 
opening or re-opening transaction, and therefore meet the letter and 
spirit of Rule 611(B)(3) of Regulation NMS and section VI(D)(6) of the 
plan to Implement a Tick Size Pilot Program, consistent with the 
protection of investors and the public interest.
Implementation
    The Exchange plans to implement the proposed changes during the 
second quarter of 2017 pending completion of necessary technology 
changes and subject to Commission approval. The Exchange will announce 
the implementation date of the proposed changes by Trader Alert at 
least 10 business days in advance of such implementation date and 
within 90 days of approval of this proposed rule change.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with 
Section 6(b) of the Act \13\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\14\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. Specifically, the Exchange 
believes that the proposal is consistent with the protection of 
investors and the public interest in that the price discovery mechanism 
utilized to determine the Opening Match Price under proposed Rule 
11.231(c) will provide the greatest opportunity to match buy and sell 
orders at a price that is reflective of market conditions for the 
security, while also providing for orderly and timely openings of non-
IEX-listed securities.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that constraining the Opening 
Match Price to prices at or between the Away Protected NBB and Away 
Protected NBO is designed to respect the fact that

[[Page 19768]]

much of the liquidity seeking execution at the start of Regular Market 
Hours is aggregated at the primary market center. Therefore, including 
the quotations of the primary market (along with those of all other 
protected markets) for purposes of pricing the Opening Match is 
designed to provide the greatest opportunity to match buy and sell 
orders at a price that is reflective of the market for the security, in 
furtherance of the perfection of a free and open market and a national 
market system, and consistent with the protection of investors and the 
public interest. The Exchange notes that as proposed, the Cross Price 
Constraint will not include IEX's protected quotations when determining 
the upper and lower threshold prices within which the Opening Match 
must occur, because the inclusion of such quotes may unnecessarily 
constrain the prices at which the Opening Match may occur, needlessly 
restricting price discovery in the Opening Process when the Opening 
Match would maximize shares traded at a price beyond the IEX best bid 
(offer) but within the Away Protected NBB (NBO). However, shares that 
comprise protected quotations on IEX would necessarily be included in 
the Opening Process pursuant to proposed Rule 11.220(a)(2) regarding 
priority. Accordingly, the Exchange believes that excluding IEX's 
protected quotations is consistent with the protection of investors and 
the public interest, in that it is designed to allow for robust price 
discovery to occur at or within the prices which best reflect the 
broader market for the security.
    The Exchange believes that not supporting AGID modifiers in the 
Opening Process is consistent with the protection of investors and the 
public interest because within the context of the Opening Match 
process, counterparties are not considered; only the aggregate 
available volume for execution is considered. It is illogical to cancel 
an order that happens to be allocated an execution against an order 
entered using the same MPID, because both orders execute at the exact 
same price to the exact same effect where the orders happen to execute 
against orders of a different MPID. Furthermore, the Exchange believes 
that supporting AGID modifiers and including Minimum Quantity orders in 
the Opening Process would introduce additional technical complexities 
to the Opening Process, and the Exchange believes providing simplicity 
in this regard is in the interest of the protection of investors and 
the public interest.\15\
---------------------------------------------------------------------------

    \15\ The Exchange notes that Bats BZX Exchange, Inc (``Bats'') 
does not support broker self-match restrictions in their opening 
process for non-listed securities. See Bats Rule 11.24(b), which 
states that all MTP modifiers, as defined in Bats Rule 11.9(f), will 
be ignored as it relates to executions occurring as part of the Bats 
opening match process.
---------------------------------------------------------------------------

    The Exchange notes that the proposed handling of Minimum Quantity 
orders in the Opening Process is distinct from the proposed handling of 
such orders in the Opening Auction for IEX-listed securities pursuant 
to proposed Rule 11.350(c).\16\ Specifically, in the case of an Opening 
Auction for an IEX-listed security pursuant to proposed Rule 
11.350(c)(2)(C), Minimum Quantity orders are eligible for execution in 
the auction, but the minimum quantity instructions will not be 
supported, although it will be enforced on all unexecuted shares 
released for continuous trading following the Opening Auction match. 
Conversely, for the Opening Process for non-IEX-listed securities, 
Minimum Quantity orders are not eligible for execution in the Opening 
Process. The Exchange believes the Opening Process will yield small 
execution sizes in comparison the size of an Opening Auction. 
Accordingly, the Exchange does not believe that including Minimum 
Quantity orders but not supporting the instruction is an effective 
approach for handling such orders because the Opening Match is likely 
to result in more executions that are smaller than an order's minimum 
quantity instruction. Accordingly, the Exchange believes that the 
proposed functionality regarding Minimum Quantity orders is consistent 
with the protection of investors and the public interest.
---------------------------------------------------------------------------

    \16\ See proposed Rule 11.350(c)(2)(C) in SR-IEX-2017-10 
available at https://www.iextrading.com/regulation/rule-filings/.
---------------------------------------------------------------------------

    Furthermore, the Exchange believes that the proposed changes to 
Rule 11.220(a)(2) regarding the priority of orders eligible to execute 
in the proposed Opening Process is consistent with the protection of 
investors and the public interest because the proposed Opening Process 
priority is designed to create continuity between the priority rules 
applied during continuous trading and in the Opening Process. 
Specifically, identical to the Pre-Market, Regular Market, and Post 
Market Sessions, the Exchange is proposing to apply price--display--
time priority for purpose of ranking and maintaining orders eligible to 
execute in the proposed Opening Process. Furthermore, the Exchange 
notes that the proposed priority for the Opening Process is 
substantially similar to the priority of the opening processes for non-
listed securities on NYSE Arca, Inc. (``NYSE Arca'') and the Nasdaq 
Stock Market (``Nasdaq'').\17\
---------------------------------------------------------------------------

    \17\ See, e.g., Nasdaq Rule 4752(d)(3)(A)-(D), and NYSE Arca 
Rule 7.35(a)(6) and 7.35(c)(4), describing priority for the opening 
auction.
---------------------------------------------------------------------------

    The Exchange believes that allowing primary peg, midpoint peg and 
Discretionary Peg orders to participate in the proposed Opening Process 
is designed to promote just and equitable principles of trade, remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system, and protect investors and the public 
interest. Specifically, as proposed, primary peg, midpoint peg, and 
Discretionary Peg orders as set forth in Rules 11.190(b)(8), 
11.190(b)(9), and 11.190(b)(10), respectively, would be ranked and 
eligible for execution in the Opening Process at their resting price. 
As proposed, primary peg and Discretionary Peg orders would have the 
ability to exercise price discretion to execute at the Opening Match 
Price. When primary peg and Discretionary Peg orders exercise 
discretion to execute at the Opening Match Price, such orders are 
prioritized behind all other non-displayed interest at the Opening 
Match Price; if multiple orders exercise discretion, they maintain 
their relative time priority at the Opening Match Price. Primary peg 
orders may exercise price discretion up (down) to the Opening Match 
Price, subject to the less aggressive of the NBB (NBO) or the order's 
limit price, if any, except during periods of quote instability, as 
defined in IEX Rule 11.190(g). Discretionary Peg orders may exercise 
price discretion up (down) to the Opening Match Price, subject to the 
less aggressive of the Midpoint Price or the order's limit price, if 
any, except during periods of quote instability, as defined in IEX Rule 
11.190(g). The Exchange believes that inclusion of such orders is 
designed to maximize the liquidity available for execution in the 
Opening Process, thereby facilitating price discovery and a more 
orderly opening.
    As proposed, primary peg, midpoint peg, and Discretionary Peg 
orders participate in the Opening Process in a manner that is 
fundamentally substantially similar to the behavior of such orders 
during continuous trading. Specifically, the manner in which such 
orders are eligible for execution in the Opening Process are 
functionally identical to their eligibility for execution during 
continuous trading. For example, a resting Discretionary Peg

[[Page 19769]]

order would exercise discretion up (down) to the less aggressive of the 
Midpoint Price or the order's limit price to interact with an incoming 
spread crossing order. Similarly, in the Opening Process, a 
Discretionary Peg order would exercise discretion up (down) to the 
Opening Match Price, subject to the less aggressive of the Midpoint 
Price, or the order's limit price to interact contra-side liquidity in 
the Opening Process. Accordingly, inclusion of such orders would be in 
accord with existing functionality already approved by the Commission 
in connection with its grant of IEX's application for registration as a 
national securities exchange under Sections 6 and 19 of the Act, 
wherein the Commission specifically found IEX's order type rules to be 
consistent with the Act and, in particular, the Section 6(b)(5) 
requirement that the Exchange's rules be designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system, and 
protect investors and the public interest.\18\ Accordingly, the 
Exchange does not believe that allowing these orders to participate in 
the proposed Opening Process in accordance with their current 
functionality raises any new or novel issues that have not already been 
considered by the Commission, and is thus consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 34-78101 at 47 
(June 17, 2016), 81 FR 41142 (June 23, 2016) (File No. 10-222).
---------------------------------------------------------------------------

    The Exchange also believes that the proposal is designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and in general, to protect investors and the 
public interest, because proposed Rule 11.231(d) sets forth an opening 
process contingency procedure, which provides a clear and transparent 
process designed to provide a means for trading in a non-IEX-listed 
security to open in an orderly and timely manner even after a 
disruption has prevented the execution of the Opening Process. 
Furthermore, the Exchange believes that proposed Rule 11.231(e) is 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general to 
protect investors and the public interest in that the Exchange would 
conduct the Opening Process for non-IEX-listed securities that were 
subject to and remained in a halt, suspension, or pause in trading at 
the commencement of the Opening Process, while still allowing Users to 
cancel any queued interest prior to the commencement of the Opening 
Process. Applying the proposed Opening Process for securities that open 
after the start of Regular Market Hours as a result of a halt, 
suspension, or pause in trading provides the greatest opportunity to 
match buy and sell orders at a price that is reflective of market 
conditions for the security, while also providing for orderly and 
timely openings of non-IEX-listed securities, and creating uniformity 
among all non-IEX-listed securities by applying a consistent approach 
to open trading on IEX in such securities.
    In addition, the Exchange believes that allowing market orders with 
a time-in-force of DAY to be entered into the System for queueing in 
the Pre-Market session while also allowing such orders to participate 
in the Opening Process provides Users with greater control and 
flexibility with respect to entering orders, and may simplify the order 
entry process for Users. In this regard, Users are able to enter orders 
that will either queue on the Cross Book for participation in the 
Opening Process, or are eligible for execution in the Pre-Market 
Session prior to participating in the Opening Process, which removes 
impediments to a free and open market and benefits all Users of the 
Exchange. In addition, the Exchange believes that its proposal to make 
a minor conforming change to the language used in reference to the LULD 
Price Bands in Rule 11.190(a)(1)(2) [sic] in order to conform the 
reference to the language used throughout the Exchange's rules is 
consistent with the protection of investors and the public interest 
because it is designed to provide consistency and clarity in the 
Exchange's rules, which benefits all market participants.
    The Exchange is not proposing to disseminate indicative pricing or 
imbalance information relating to the Opening Process. The Exchange is 
not proposing to disseminate indicative pricing or imbalance 
information prior to the Opening Process because the Exchange is not 
trying to establish equilibrium in order to determine the official 
opening price of the security. Rather, the Opening Process is designed 
to efficiently resolve the queue of orders awaiting the Regular Market 
Session at a fair price, that reflects the broader market for the 
security. Accordingly, the Exchange believes that not providing 
indicative pricing or imbalance information related to the Opening 
Process is consistent with the protection of investors and the public 
interest.\19\
---------------------------------------------------------------------------

    \19\ The Exchange notes that Bats does not provide indicative 
pricing or imbalance information for its process for opening non-
listed securities pursuant to Bats Rule 11.24.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
believes that the proposed Opening Process is designed to promote fair 
competition among brokers and dealers and among exchange markets by 
offering an Opening Process that competes with existing opening 
processes for non-listed securities offered by IEX's competitors, 
thereby promoting intermarket competition between exchanges in 
furtherance of the principles of Section 11A(a)(1).\20\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

    With respect to intramarket competition, the proposed Opening 
Process will apply equally to all non-IEX-listed securities, and all 
Members and market participants that send orders to IEX through 
Members. Members are permitted to enter any type of Cross Eligible 
Order and there are no privileged participants who receive enhanced 
priority, or have access to special order types. Consequently, IEX does 
not believe that the proposal will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

[[Page 19770]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-IEX-2017-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-IEX-2017-11. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-IEX-2017-11, and should be 
submitted on or before May 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08575 Filed 4-27-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 81 / Friday, April 28, 2017 / Notices 19763

not conduct or sponsor, and a person is (‘‘Commission’’) the proposed rule ‘‘Regular Market Session Opening
not required to respond to, a collection change as described in Items I, II, and Process for Non-IEX-Listed Securities’’;
of information unless it displays a III below, which Items have been (ii) amend Rule 11.190(a)(2)(E) to allow
currently valid OMB control number. prepared by the self-regulatory market orders with a time-in-force of
PBGC estimates that there are 14 organization. The Commission is DAY to be entered in the Pre-Market
transactions each year for which plan publishing this notice to solicit Session for queuing and participation in
sponsors submit notices and approval comments on the proposed rule change the Regular Market Session Opening
requests under this regulation. The from interested persons. Process for non-IEX-listed securities
estimated annual burden of the (‘‘Opening Process’’) described in
I. Self-Regulatory Organization’s proposed Rule 11.231; (iii) amend Rule
collection of information is 9.50 hours
Statement of the Terms of Substance of 11.220(a)(2) regarding the priority of
and $42,800.
the Proposed Rule Change orders eligible to execute in the
PBGC is soliciting public comments
to— Pursuant to the provisions of Section proposed Opening Process; and (iv)
• Evaluate whether the proposed 19(b)(1) under the Securities Exchange amend Rule 11.190(b)(11) to clarify that
collection of information is necessary Act of 1934 (‘‘Act’’), and Rule 19b–4 orders with a Minimum Quantity as
for the proper performance of the thereunder, Investors Exchange LLC defined in Rule 11.190(b)(11)
functions of the agency, including (‘‘IEX’’ or the ‘‘Exchange’’) is filing with (‘‘Minimum Quantity orders’’) are not
whether the information will have the Securities and Exchange eligible to participate in the Opening
practical utility; Commission (‘‘Commission’’) proposed Process pursuant to proposed Rule
• Evaluate the accuracy of the rule changes to (i) amend Rule 11.231 to 11.231.
agency’s estimate of the burden of the modify the manner in which the Currently, the Exchange begins
proposed collection of information, Exchange opens trading for non-IEX- accepting limit orders with a time-in-
including the validity of the listed securities beginning at the start of force of IOC, FOK, SYS, and GTT 3 for
methodologies and assumptions used; Regular Market Hours and retitle it non-IEX-listed securities for trading at
• Enhance the quality, utility, and ‘‘Regular Market Session Opening the beginning of the Pre-Market Session
clarity of the information to be Process for Non-IEX-Listed Securities’’; and any such orders received by the
collected; and and (ii) amend Rules 11.190 and 11.220 Exchange are immediately eligible for
• Minimize the burden of the to specify the order types eligible to execution in the Pre-Market Session. In
collection of information on those who participate in the proposed Regular addition, limit orders with a time-in-
are to respond, including through the Market Session Opening Process for force of DAY or GTX 4 and pegged
use of appropriate automated, non-IEX listed securities (‘‘Opening orders with a time-in-force of DAY that
electronic, mechanical, or other Process’’) described in proposed Rule are entered during the Pre-Market
technological collection techniques or 11.231 and priority thereof. Session are queued in the time sequence
other forms of information technology, The text of the proposed rule change of their receipt by the System pursuant
e.g., permitting electronic submission of is available at the Exchange’s Web site to Rule 11.220(a)(2), until the start of the
responses. at www.iextrading.com, at the principal Regular Market Session, or until the
office of the Exchange, and at the order is canceled by the User. Any such
Issued in Washington, DC.
Commission’s Public Reference Room. queued orders that are in the System at
Deborah Chase Murphy, the beginning of Regular Market Hours
Assistant General Counsel for Regulatory II. Self-Regulatory Organization’s
are released to the Order Book as
Affairs, Pension Benefit Guaranty Statement of the Purpose of, and
incoming orders in their relative time
Corporation. Statutory Basis for, the Proposed Rule
priority pursuant to Rule 11.220(a)(2)
[FR Doc. 2017–08514 Filed 4–27–17; 8:45 am] Change
and are immediately eligible for trading
BILLING CODE P In its filing with the Commission, the in the Regular Market Session, subject to
self-regulatory organization included the User’s instructions and market
statements concerning the purpose of conditions. Pursuant to IEX Rule
SECURITIES AND EXCHANGE and basis for the proposed rule change 11.190(a)(2)(E), market orders may only
COMMISSION and discussed any comments it received be submitted in the Regular Market
[Release No. 34–80514; File No. SR–IEX–
on the proposed rule change. The text Session, and are rejected by the System
2017–11] of these statements may be examined at in the Pre-Market Session and Post-
the places specified in Item IV below. Market Session. Furthermore, under
Self-Regulatory Organizations; The self-regulatory organization has paragraph (iii) of IEX Rule
Investors Exchange LLC; Notice of prepared summaries, set forth in 11.190(a)(2)(E), market orders marked
Filing of Proposed Rule Change To Sections A, B, and C below, of the most DAY, by default, are rejected. When
Modify the Manner in Which the significant aspects of such statements. elected by the User, market orders
Exchange Opens Trading for Non-IEX- A. Self-Regulatory Organization’s marked DAY submitted by that User are
Listed Securities Statement of the Purpose of, and the accepted and eligible to trade or route
Statutory Basis for, the Proposed Rule during the Regular Market Session.
April 24, 2017.
Change Market orders marked DAY are treated
Pursuant to Section 19(b)(1) of the by the System as having a TIF of IOC.5
asabaliauskas on DSK3SPTVN1PROD with NOTICES

Securities Exchange Act of 1934 1. Purpose
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 3 See Rules 11.190(c)(1), 11.190(c)(2),
Background
notice is hereby given that on April 13, 11.190(c)(5), and 11.190(c)(6), defining the time-in-
2017, the Investors Exchange LLC The purpose of the proposed rule force of IOC, FOK, SYS, and GTT, respectively.
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the change is to (i) amend Rule 11.231 to 4 See Rules 11.190(c)(3), 11.190(c)(4), defining a

modify the manner in which the time-in-force of DAY and GTX, respectively.
Securities and Exchange Commission 5 Members that would like to enter market orders
Exchange opens trading for non-IEX- with time-in-force of DAY and have the Exchange
1 15 U.S.C. 78s(b)(1). listed securities beginning at the start of accept such orders are required to have authorized
2 17 CFR 240.19b–4. Regular Market Hours and retitle it Continued

VerDate Sep<11>2014 17:38 Apr 27, 2017 Jkt 241001 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 E:\FR\FM\28APN1.SGM 28APN1
19764 Federal Register / Vol. 82, No. 81 / Friday, April 28, 2017 / Notices

Description of Proposed Rule Change Orders with a time-in-force of IOC or • Non-displayed limit orders and
The Exchange proposes to amend FOK do not rest on the Order Book and non-displayed portions of reserve orders
Rule 11.231 to offer an enhanced are therefore ineligible to participate in on the Continuous Book are ranked and
opening process for non-IEX-listed the Opening Process. In addition, the eligible for execution in the Opening
securities. Specifically, as proposed, the Exchange is proposing to make a minor Process at the less aggressive of the
Exchange will attempt to perform the conforming change to the language used Midpoint Price or the order’s limit
Opening Process in each non-IEX-listed in reference to LULD Price Bands in price.
security pursuant to which all eligible Rule 11.190(a)(1)(2) [sic] in order to • Displayed limit orders on the
interest resting on the Order Book in the conform the reference to the language Continuous Book are ranked and
Pre-Market Session available for used throughout the Exchange’s rules. eligible for execution in the Opening
continuous trading (i.e., orders on the As proposed, orders on the Process at their resting price.
Continuous Book and orders on the As noted above, orders shall be
‘‘Continuous Book’’) or orders queued
Cross Book (collectively, the Order ranked and prioritized for the Opening
for execution in the Regular Market
Book) shall be ranked and maintained Process in price—display—time priority
Session (i.e., orders on the ‘‘Cross
for the Opening Process pursuant to pursuant to proposed Rule 11.220(a)(2).
Book’’) will be executed at a single
Rule 11.220(a)(2), as follows: Specifically, the best priced Cross
price. As proposed, the Opening Process
• Midpoint peg orders, as defined in Eligible Order (the highest priced
offers Users an opportunity to
IEX Rule 11.190(b)(9), on the Cross Book resting order to buy or the lowest priced
participate in an electronic price are ranked and eligible for execution in resting order to sell) has priority over all
discovery mechanism that efficiently the Opening Process at the less other orders to buy (or orders to sell) in
matches all eligible buy and sell orders aggressive of the Midpoint Price or the all cases. Market orders have
in each non-IEX-listed security queued order’s limit price, if any. precedence over limit orders. Cross
for the Opening Process along with all • Primary peg orders, as defined in Eligible Orders resting on the
eligible orders resting on the IEX Rule 11.190(b)(8), on the Cross Book Continuous Book are ranked by the
Continuous Book from the Pre-Market are ranked and eligible for execution in price at which they are resting on the
Session at a single price. The Opening the Opening Process at the less Continuous Book and Cross Eligible
Process is designed to efficiently aggressive of one (1) MPV below (above) Orders resting on the Cross Book are
maximize the number of shares the NBB (NBO) for buy (sell) orders or ranked by the limit price defined by the
executed at a single price that is the order’s limit price, if any, but may User, if any, except in the case of pegged
reflective of the broader market for the exercise price discretion up (down) to orders, which are ranked by their
security, as described more fully below. the Opening Match Price, subject to the current book price (in each case, the
As proposed, prior to the beginning of less aggressive of the NBB (NBO) or the order’s ‘‘resting price’’). Equally priced
Regular Market Hours, Users who wish order’s limit price, if any, except during Cross Eligible Orders are ranked by
to participate in the Opening Process periods of quote instability, as defined display priority, i.e., displayed orders
may enter limit, market, and pegged in IEX Rule 11.190(g). When exercising and displayed portions of Cross Eligible
orders designated with a time-in-force of price discretion, primary peg orders are Orders will have precedence over non-
DAY and limit orders designated with a ranked behind any non-displayed displayed orders and non-displayed
time-in-force of GTX, which shall queue interest at the Opening Match Price for portions of Cross Eligible Orders at a
in the System and are eligible for the duration of the Opening Process. If given price. Equally priced Cross
execution in the Opening Process multiple primary peg orders are Eligible Orders with the same display
(orders on the Cross Book); interest exercising price discretion during the priority are ranked in time priority, i.e.,
resting on the Order Book in the Pre- Opening Process, they maintain their where Cross Eligible Orders to buy (or
Market Session available for continuous relative time priority at the Opening sell) are ranked at the same price with
trading (i.e., orders on the Continuous Match Price. the same display priority, the oldest
Book) are also eligible for execution in • Discretionary Peg orders, as defined order at such price and display shall
the Opening Process (collectively, in IEX Rule 11.190(b)(10), on the Cross have precedence at that price and
‘‘Cross Eligible Orders’’). Minimum Book are ranked and eligible for display. Orders are ranked by the time
Quantity orders are not eligible for execution in the Opening Process at the at which they are posted to the Order
execution in the Opening Process, and less aggressive of the NBB (NBO) for buy Book at a given price, the first to be
are therefore not Cross Eligible Orders. (sell) orders or the order’s limit price, if posted at a given price being the oldest.
Accordingly, the Exchange is proposing any, but may exercise price discretion Cross Eligible Orders maintain their
to amend Rule 11.190(a)(2)(E) to extend up (down) to the Opening Match Price, time priority once booked until:
the queuing functionality to market subject to the less aggressive of the • In the case of an order on the Cross
orders with a time-in-force of DAY that Midpoint Price or the order’s limit Book, the order is: (i) Incremented by
are entered during the Pre-Market price, if any, except during periods of the User, (ii) re-priced by the User, (iii)
Session and are not designated to route quote instability, as defined in IEX Rule the Minimum Quantity instruction is
pursuant to Rule 11.230(c), allowing 11.190(g). When exercising price removed from an order by the User, and
such orders to queue in the System for discretion, Discretionary Peg orders are therefore becomes a Cross Eligible
participation in the Opening Process.6 ranked behind any non-displayed Order, or (iv) a pegged order is re-priced
interest at the Opening Match Price for by the System in response to changes in
personnel contact IEX Market Operation the duration of the Opening Process. If the NBBO, at which time the order will
asabaliauskas on DSK3SPTVN1PROD with NOTICES

(marketops@iextrading.com) in writing requesting receive a new timestamp. Pursuant to
such port setting changes, and must specifically
multiple Discretionary Peg orders are
identify the order entry sessions to which such port exercising price discretion during the IEX Rule 11.231(a)(1)(ii) and (iii),
setting will apply. Opening Process, they maintain their respectively, when exercising price
6 Orders canceled before the Opening Process will
relative time priority at the Opening discretion, primary peg and
not participate in the Opening Process. Market Match Price. Discretionary Peg orders maintain time
orders with a time-in-force of DAY that are entered
during the Pre-Market Session and are designated
• Limit orders on the Cross Book are priority at their resting price, however
to route pursuant to Rule 11.230(c) will be rejected ranked and eligible for execution in the they are prioritized behind any non-
upon entry. Opening Process at their limit price. displayed interest at the Opening Match

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Price for the duration of the Opening national best bid or offer, respectively, Protected Offer exists (i.e., a two-sided
Process. that is a Protected Quotation and not a market) the price of the Opening Match
• In the case of an order on the quotation of the Exchange. (‘‘Opening Match Price’’) will be the
Continuous Book, any one of the events • The term ‘‘Away Protected Bid’’ or price that maximizes the number of
specified in IEX Rule 11.220(a)(1)(C) ‘‘Away Protected Offer’’ shall mean a shares of Cross Eligible Orders to be
occurs to an order, at which time the Protected Bid or Protected Offer, executed. If more than one price exists
order will receive a new timestamp. respectively, that is not a quotation of that maximizes the number of shares of
Under proposed Rule 11.231(b), the Exchange. Cross Eligible Orders to be executed, the
beginning at the start of Regular Market • The term ‘‘Cross Price Constraint’’ Opening Match shall occur at the
Hours, Cross Eligible Orders that are shall mean, collectively, the upper and entered price at which shares will
eligible to trade at the Opening Match lower threshold prices within which the remain unexecuted in the match (i.e.,
Price (as described below) will be Opening Match must occur, inclusive of the price of the most aggressive
processed in accordance with price— the boundaries. During a crossed unexecuted order). If Cross Eligible
display—time priority pursuant to market, if the upper threshold price is Order shares are maximized and left
proposed Rule 11.220(a)(2). First, to the below the lower threshold price when unexecuted at more than one price, the
extent there is contra side interest performing the Opening Process, no Opening Match shall occur at the price
eligible to trade at the Opening Match Opening Match will occur and orders that minimizes the distance from the
Price, market orders will be executed at eligible to post on the Order Book will Cross Tie Breaker (i.e., the price at or
the Opening Match Price in time price slide in accordance with the price higher than the most aggressive
priority. After the execution of all sliding process, pursuant to IEX Rule unexecuted buy order and at or lower
market orders, the remaining Cross 11.190(h), and the security will open for than the most aggressive unexecuted
Eligible Orders priced more aggressively trading on IEX in accordance with sell order that is closest or equal to the
than the Opening Match Price will be prevailing market session rules. Cross Tie Breaker). Lastly, if the
executed in price—display—time Æ The upper threshold price of the Opening Match Price established
priority at the Opening Match Price. All Cross Price Constraint is equal to the
pursuant to the procedures above is
remaining Cross Eligible Orders priced price of the Away Protected NBO,
below (above) the lower (upper)
equal to the Opening Match Price will except in the event that an Away
threshold price of the Cross Price
execute in display—time priority at the Protected Bid is crossing an Away
Constraint, the Opening Match shall
Opening Match Price. Executions will Protected Offer, the upper threshold
occur at the lower (upper) threshold
occur until there is no remaining price is equal to the greater of five cents
price of the Cross Price Constraint.
volume or there is an imbalance of ($0.05) or one half of a percent (0.5%)
The following examples are designed
orders (i.e., there are no remaining higher than the lowest Away Protected
to illustrate the process for determining
eligible shares to buy (sell), while Offer.
Æ The lower threshold price of the the Opening Match Price in a two-sided
eligible shares to sell (buy) remain market, as described above. Each
unexecuted) (the process described Cross Price Constraint is equal to the
price of the Away Protected NBB, example below assumes the Away
above, collectively, being the ‘‘Opening
except in the event that an Away Protected NBB is $10.09, the Away
Match’’). AGID modifiers, as defined in
Protected Bid is crossing an Away Protected NBO is $10.11, and the last
Rule 11.190(e), will not be supported for
Protected Offer, the lower threshold trade price that qualified as an Order
executions in the Opening Match, but
price is equal to the greater of five cents Collar Reference Price was $10.10:
will be enforced on all unexecuted
shares released to the Order Book ($0.05) or one half of a percent (0.5%) • Example 1
following the Opening Match. lower than the highest Away Protected Æ The Cross Book includes the
An imbalance of Cross Eligible Orders Bid. following orders:
on the buy side or sell side may result • The term ‘‘Cross Tie Breaker’’ shall D Limit order to buy 1,500 shares with
in orders that are not executed in whole mean the price of the most current a limit price of $10.10; and
or in part. Unexecuted Cross Eligible Order Collar Reference Price pursuant to D Limit order to sell 1,000 shares with
Orders to buy (sell) that are priced at or IEX Rule 11.190(f).7 a limit price of $10.10.
above (below) the Cross Price Constraint Under proposed Rule 11.231(c)(2), if Æ Shares are maximized at $10.10;
(but remained unexecuted due to an both an Away Protected Bid and Away therefore
imbalance of Cross Eligible Orders) will D 1,000 shares would execute at the
price slide pursuant to IEX Rule
7 Rule 11.190(f)(1)(A) defines the Order Collar Opening Match Price of $10.10.
11.190(h) and all remaining unexecuted
Reference Price as the most current of: (i) The
consolidated last sale price disseminated during the
• Example 2
Cross Eligible Orders, along with any Regular Market Session on the current trade date, Æ The Cross Book contains the
orders that were either ineligible to (ii) the last trade price disseminated outside of the following orders:
participate in the Opening Process or Regular Market Session by the SIP (Form T, as D Limit order to buy 1,500 shares with
communicated by the relevant SIP) on the current
too passive to be executed in the trade date, which but for the Form T designation
a limit price of $10.10; and
Opening Process, will be released to the would have been considered a valid last sale price, D Market order to sell 1,000 shares.
Order Book for continuous trading or or, (iii) if no such trades exist, the previous official Æ Shares are maximized at each price
closing price. If no Pre-Market Session trades have at and between the lower threshold of
canceled in accordance with the terms occurred that qualify to update the Order Collar
of the order. Routable orders that are Reference Price and the previous official closing
the Cross Price Constraint (i.e., $10.09)
and $10.10;
asabaliauskas on DSK3SPTVN1PROD with NOTICES

released to the Order Book will be price for the security is not available, in the interest
routed in accordance with IEX Rule of maintaining a fair and orderly market, the Æ The price at which shares will
Exchange will prevent trading in a security remain unexecuted in the auction is
11.230(c)(3) (Re-Sweep Behavior), pursuant to Rule 11.190(f)(1)(B) by rejecting orders
subject to the order’s instructions. beginning at the start of the Pre-Market Session, and
$10.10; 8 therefore
Proposed Rule 11.231(c)(1) sets forth will not conduct an Opening Match in such
security. Accordingly, in such cases, the Opening 8 Note, while shares are maximized at and
proposed definitions applicable to the
Process will conclude with IEX opening the Regular between the lower threshold of the Cross Price
Opening Process. As proposed: Market Session without an Opening Match, and Constraint ($10.09) and $10.10, the entered price at
• The term ‘‘Away Protected NBB’’ or trading will begin upon receipt of the first Order which shares will remain unexecuted in the auction
‘‘Away Protected NBO’’ shall mean the Collar Reference Price for the security. Continued

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D 1,000 shares would execute at the D Limit order to buy 500 shares with execution of 500 shares and the
Opening Match Price of $10.10. a limit price of $20.18; and remaining 1,500 shares would post, in
• Example 3 D Limit order to sell 2,000 shares with accordance with the display-price
Æ The Cross Book contains the a limit price of $20.18. sliding behavior, 1 MPV above the NBB
following orders: Æ For purposes of determining the at $20.20.
D Limit order to buy 2,000 shares with Opening Match Price, the Midpoint Peg • Example 3
a limit price of $10.11; order is priced at its resting price Æ The Cross Book includes the
D Limit order to sell 2,000 shares with ($20.20); following orders:
a limit price of $10.09. Æ Accordingly, shares are maximized D Midpoint Peg order to buy 2,500
Æ The Continuous Book contains the between $20.18 and $20.20, and the shares with a resting price of $20.20.
following orders: price at which shares are left D Displayed limit order to buy 500
D Displayed limit order to buy 500 unexecuted within such range, is shares with a limit price of $20.20; and
shares with a limit price of $10.09; $20.20; therefore D Limit order to sell 2,000 shares with
D Displayed limit order to sell 600 D 2,000 shares would execute at the a limit price of $20.20.
shares with a limit price of $10.11. Opening Match Price of $20.20; Æ For purposes of determining the
Æ Shares are maximized at each price • The Midpoint Peg buy order would Opening Match Price, the Midpoint Peg
at or between $10.09 and $10.11; receive an execution of 2,000 shares and order is priced at its resting price
Æ The range of prices at or between the remaining 500 shares remain booked ($20.20);
the prices at which shares will remain at the midpoint of the NBBO; Æ Accordingly, shares are maximized
unexecuted in the auction is $10.09 and • The limit sell order would receive at $20.20; therefore
$10.11; an execution of 2,000 shares, and thus D 2,000 shares would execute at the
Æ Because a range of prices exist after be fully filled; and Opening Match Price of $20.20;
evaluating the prior two conditions (i.e., • The limit buy order would not • The limit buy order would receive
an auction price range), the price closest receive an execution, because the limit an execution of 500 shares;
to the Cross Tie Breaker (i.e., the last sell order is fully filled after matching • The Midpoint Peg buy order would
trade price that qualified as an Order with the Midpoint Peg buy order with receive an execution of 1,500 shares;
Collar Reference Price) within the superior priority. The entire limit buy and
auction price range is $10.10; therefore order is booked at the $20.18. • The limit sell order would receive
D 2,000 shares would execute at the • Example 2 an execution of 2,000 shares.
Opening Match Price of $10.10. Æ The Cross Book includes the • Example 4
• Example 4 following orders: Æ The Cross Book includes the
Æ The Cross Book contains the D Primary Peg order to buy 2,500 following orders:
following orders: shares with a resting price of $20.18, D Discretionary Peg order to buy 2,500
D Limit order to buy 2,000 shares with and limit price of $20.20; shares with a resting price of $20.19,
a limit price of $10.08; D Limit order to buy 500 shares with and limit price of $20.21;
D Limit order to sell 2,000 shares with a limit price of $20.19; and D Limit order to buy 500 shares with
a limit price of $10.08. D Displayed limit order to sell 2,000 a limit price of $20.20; and
Æ The Continuous Book contains the shares with a limit price of 20.19. D Limit order to sell 2,000 shares with
following orders: Æ For purposes of determining the a limit price of $20.20.
D Displayed limit order to buy 500 Opening Match Price, the Primary Peg Æ For purposes of determining the
shares with a limit price of $10.09; order is priced at its resting price Opening Match Price, the Discretionary
D Displayed limit order to sell 600 ($20.18); the Primary Peg order is Peg order is priced at its resting price
shares with a limit price of $10.11. eligible exercise price discretion up to ($20.19); the Discretionary Peg order is
Æ Shares are maximized at $10.08, the Opening Match Price, so long as the eligible exercise price discretion up to
however $10.08 is below the lower match price is at or below the less the Opening Match Price, so long as the
threshold of the Cross Price Constraint aggressive of the NBB or the order’s match price is at or below the less
(i.e., $10.09); therefore limit price; aggressive of the midpoint of the NBBO
D 500 shares would execute at the Æ Accordingly, shares are maximized or the order’s limit price.
Opening Match Price of $10.09. at $20.19; therefore Æ Accordingly, shares are maximized
The following examples are designed D 2,000 shares would execute at the at $20.20; therefore
to illustrate the process for determining Opening Match Price of $20.19; D 2,000 shares would execute at the
the Opening Match Price and the • The limit buy order would receive Opening Match Price of $20.20;
proposed execution priority including an execution of 500 shares; • The limit buy order would receive
non-displayed orders on the Cross Book • Assuming IEX has determined the an execution of 500 shares;
in two-sided market, as described above. quote to be stable pursuant to IEX Rule • Assuming IEX has determined the
Each example below assumes the Away 11.190(g), the Primary Peg buy order quote to be stable pursuant to IEX Rule
Protected NBB is $20.19, the Away would exercise discretion up to the 11.190(g), the Discretionary Peg buy
Protected NBO is $20.21, and the last Opening Match Price and receive an order would exercise discretion up to
trade price that qualified as an Order execution of 1,500 shares; the remaining the Opening Match Price and receive an
Collar Reference Price was $20.20: 1,000 shares remain booked at $20.18; execution of 1,500 shares; and
asabaliauskas on DSK3SPTVN1PROD with NOTICES

• Example 1 and • Assuming IEX has determined the
Æ The Cross Book includes the • Assuming IEX has determined the quote to be stable pursuant to IEX Rule
following orders: quote to be stable pursuant to IEX Rule 11.190(g), the limit sell order would
D Midpoint Peg order to buy 2,500 11.190(g), the limit sell order would receive an execution of 2,000 shares. If
shares with a resting price of $20.20. receive an execution of 2,000 shares. If IEX has determined the quote to be
IEX has determined the quote to be unstable pursuant to IEX Rule 11.190(g),
is $10.10, as $10.10 is the resting price of the most unstable pursuant to IEX Rule 11.190(g), the limit sell order would receive an
aggressive order where shares remain unexecuted. the limit sell order would receive an execution of 500 shares and the

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19768 Federal Register / Vol. 82, No. 81 / Friday, April 28, 2017 / Notices

much of the liquidity seeking execution interest of the protection of investors Process is substantially similar to the
at the start of Regular Market Hours is and the public interest.15 priority of the opening processes for
aggregated at the primary market center. The Exchange notes that the proposed non-listed securities on NYSE Arca, Inc.
Therefore, including the quotations of handling of Minimum Quantity orders (‘‘NYSE Arca’’) and the Nasdaq Stock
the primary market (along with those of in the Opening Process is distinct from Market (‘‘Nasdaq’’).17
all other protected markets) for purposes the proposed handling of such orders in The Exchange believes that allowing
of pricing the Opening Match is the Opening Auction for IEX-listed primary peg, midpoint peg and
designed to provide the greatest securities pursuant to proposed Rule Discretionary Peg orders to participate
11.350(c).16 Specifically, in the case of in the proposed Opening Process is
opportunity to match buy and sell
an Opening Auction for an IEX-listed designed to promote just and equitable
orders at a price that is reflective of the
security pursuant to proposed Rule principles of trade, remove
market for the security, in furtherance of impediments to and perfect the
the perfection of a free and open market 11.350(c)(2)(C), Minimum Quantity
orders are eligible for execution in the mechanisms of a free and open market
and a national market system, and and a national market system, and
auction, but the minimum quantity
consistent with the protection of protect investors and the public interest.
instructions will not be supported,
investors and the public interest. The although it will be enforced on all Specifically, as proposed, primary peg,
Exchange notes that as proposed, the unexecuted shares released for midpoint peg, and Discretionary Peg
Cross Price Constraint will not include continuous trading following the orders as set forth in Rules 11.190(b)(8),
IEX’s protected quotations when Opening Auction match. Conversely, for 11.190(b)(9), and 11.190(b)(10),
determining the upper and lower the Opening Process for non-IEX-listed respectively, would be ranked and
threshold prices within which the securities, Minimum Quantity orders eligible for execution in the Opening
Opening Match must occur, because the are not eligible for execution in the Process at their resting price. As
inclusion of such quotes may Opening Process. The Exchange believes proposed, primary peg and
unnecessarily constrain the prices at the Opening Process will yield small Discretionary Peg orders would have the
which the Opening Match may occur, execution sizes in comparison the size ability to exercise price discretion to
needlessly restricting price discovery in of an Opening Auction. Accordingly, execute at the Opening Match Price.
the Opening Process when the Opening the Exchange does not believe that When primary peg and Discretionary
Match would maximize shares traded at including Minimum Quantity orders but Peg orders exercise discretion to execute
a price beyond the IEX best bid (offer) not supporting the instruction is an at the Opening Match Price, such orders
but within the Away Protected NBB effective approach for handling such are prioritized behind all other non-
(NBO). However, shares that comprise orders because the Opening Match is displayed interest at the Opening Match
likely to result in more executions that Price; if multiple orders exercise
protected quotations on IEX would
are smaller than an order’s minimum discretion, they maintain their relative
necessarily be included in the Opening
quantity instruction. Accordingly, the time priority at the Opening Match
Process pursuant to proposed Rule Price. Primary peg orders may exercise
11.220(a)(2) regarding priority. Exchange believes that the proposed
functionality regarding Minimum price discretion up (down) to the
Accordingly, the Exchange believes that Opening Match Price, subject to the less
excluding IEX’s protected quotations is Quantity orders is consistent with the
protection of investors and the public aggressive of the NBB (NBO) or the
consistent with the protection of order’s limit price, if any, except during
interest.
investors and the public interest, in that periods of quote instability, as defined
Furthermore, the Exchange believes
it is designed to allow for robust price in IEX Rule 11.190(g). Discretionary Peg
that the proposed changes to Rule
discovery to occur at or within the 11.220(a)(2) regarding the priority of orders may exercise price discretion up
prices which best reflect the broader orders eligible to execute in the (down) to the Opening Match Price,
market for the security. proposed Opening Process is consistent subject to the less aggressive of the
The Exchange believes that not with the protection of investors and the Midpoint Price or the order’s limit
supporting AGID modifiers in the public interest because the proposed price, if any, except during periods of
Opening Process is consistent with the Opening Process priority is designed to quote instability, as defined in IEX Rule
protection of investors and the public create continuity between the priority 11.190(g). The Exchange believes that
interest because within the context of rules applied during continuous trading inclusion of such orders is designed to
and in the Opening Process. maximize the liquidity available for
the Opening Match process,
Specifically, identical to the Pre-Market, execution in the Opening Process,
counterparties are not considered; only
Regular Market, and Post Market thereby facilitating price discovery and
the aggregate available volume for
Sessions, the Exchange is proposing to a more orderly opening.
execution is considered. It is illogical to As proposed, primary peg, midpoint
cancel an order that happens to be apply price—display—time priority for
purpose of ranking and maintaining peg, and Discretionary Peg orders
allocated an execution against an order participate in the Opening Process in a
entered using the same MPID, because orders eligible to execute in the
proposed Opening Process. manner that is fundamentally
both orders execute at the exact same substantially similar to the behavior of
Furthermore, the Exchange notes that
price to the exact same effect where the such orders during continuous trading.
the proposed priority for the Opening
orders happen to execute against orders Specifically, the manner in which such
asabaliauskas on DSK3SPTVN1PROD with NOTICES

of a different MPID. Furthermore, the 15 The Exchange notes that Bats BZX Exchange, orders are eligible for execution in the
Exchange believes that supporting AGID Inc (‘‘Bats’’) does not support broker self-match Opening Process are functionally
modifiers and including Minimum restrictions in their opening process for non-listed identical to their eligibility for
securities. See Bats Rule 11.24(b), which states that
Quantity orders in the Opening Process all MTP modifiers, as defined in Bats Rule 11.9(f),
execution during continuous trading.
would introduce additional technical will be ignored as it relates to executions occurring For example, a resting Discretionary Peg
complexities to the Opening Process, as part of the Bats opening match process.
16 See proposed Rule 11.350(c)(2)(C) in SR–IEX– 17 See, e.g., Nasdaq Rule 4752(d)(3)(A)–(D), and
and the Exchange believes providing
2017–10 available at https://www.iextrading.com/ NYSE Arca Rule 7.35(a)(6) and 7.35(c)(4),
simplicity in this regard is in the regulation/rule-filings/. describing priority for the opening auction.

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order would exercise discretion up commencement of the Opening Process, Process is consistent with the protection
(down) to the less aggressive of the while still allowing Users to cancel any of investors and the public interest.19
Midpoint Price or the order’s limit price queued interest prior to the B. Self-Regulatory Organization’s
to interact with an incoming spread commencement of the Opening Process. Statement on Burden on Competition
crossing order. Similarly, in the Applying the proposed Opening Process
Opening Process, a Discretionary Peg for securities that open after the start of IEX does not believe that the
order would exercise discretion up Regular Market Hours as a result of a proposed rule change will result in any
(down) to the Opening Match Price, halt, suspension, or pause in trading burden on competition that is not
subject to the less aggressive of the provides the greatest opportunity to necessary or appropriate in furtherance
Midpoint Price, or the order’s limit match buy and sell orders at a price that of the purposes of the Act. To the
price to interact contra-side liquidity in is reflective of market conditions for the contrary, the Exchange believes that the
the Opening Process. Accordingly, security, while also providing for proposed Opening Process is designed
inclusion of such orders would be in to promote fair competition among
orderly and timely openings of non-IEX-
accord with existing functionality brokers and dealers and among
listed securities, and creating uniformity
already approved by the Commission in exchange markets by offering an
among all non-IEX-listed securities by
connection with its grant of IEX’s Opening Process that competes with
application for registration as a national applying a consistent approach to open
trading on IEX in such securities. existing opening processes for non-
securities exchange under Sections 6 listed securities offered by IEX’s
and 19 of the Act, wherein the In addition, the Exchange believes competitors, thereby promoting
Commission specifically found IEX’s that allowing market orders with a time- intermarket competition between
order type rules to be consistent with in-force of DAY to be entered into the exchanges in furtherance of the
the Act and, in particular, the Section System for queueing in the Pre-Market principles of Section 11A(a)(1).20
6(b)(5) requirement that the Exchange’s session while also allowing such orders
rules be designed to promote just and to participate in the Opening Process With respect to intramarket
equitable principles of trade, remove provides Users with greater control and competition, the proposed Opening
impediments to and perfect the flexibility with respect to entering Process will apply equally to all non-
mechanisms of a free and open market orders, and may simplify the order entry IEX-listed securities, and all Members
and a national market system, and process for Users. In this regard, Users and market participants that send orders
protect investors and the public to IEX through Members. Members are
are able to enter orders that will either
interest.18 Accordingly, the Exchange permitted to enter any type of Cross
queue on the Cross Book for
does not believe that allowing these Eligible Order and there are no
participation in the Opening Process, or
orders to participate in the proposed privileged participants who receive
are eligible for execution in the Pre-
Opening Process in accordance with enhanced priority, or have access to
Market Session prior to participating in
their current functionality raises any special order types. Consequently, IEX
the Opening Process, which removes does not believe that the proposal will
new or novel issues that have not impediments to a free and open market
already been considered by the impose any burden on intramarket
and benefits all Users of the Exchange. competition that is not necessary or
Commission, and is thus consistent with In addition, the Exchange believes that
the protection of investors and the appropriate in furtherance of the
its proposal to make a minor conforming purposes of the Act.
public interest. change to the language used in reference
The Exchange also believes that the C. Self-Regulatory Organization’s
to the LULD Price Bands in Rule
proposal is designed to remove Statement on Comments on the
11.190(a)(1)(2) [sic] in order to conform
impediments to and perfect the Proposed Rule Change Received From
the reference to the language used
mechanism of a free and open market Members, Participants, or Others
and a national market system, and in throughout the Exchange’s rules is
general, to protect investors and the consistent with the protection of Written comments were neither
public interest, because proposed Rule investors and the public interest solicited nor received.
11.231(d) sets forth an opening process because it is designed to provide
consistency and clarity in the III. Date of Effectiveness of the
contingency procedure, which provides
Exchange’s rules, which benefits all Proposed Rule Change and Timing for
a clear and transparent process designed
market participants. Commission Action
to provide a means for trading in a non-
IEX-listed security to open in an orderly The Exchange is not proposing to Within 45 days of the date of
and timely manner even after a disseminate indicative pricing or publication of this notice in the Federal
disruption has prevented the execution imbalance information relating to the Register or within such longer period (i)
of the Opening Process. Furthermore, Opening Process. The Exchange is not as the Commission may designate up to
the Exchange believes that proposed proposing to disseminate indicative 90 days of such date if it finds such
Rule 11.231(e) is designed to remove pricing or imbalance information prior longer period to be appropriate and
impediments to and perfect the to the Opening Process because the publishes its reasons for so finding or
mechanism of a free and open market Exchange is not trying to establish (ii) as to which the Exchange consents,
and a national market system, and, in equilibrium in order to determine the the Commission shall: (a) By order
general to protect investors and the official opening price of the security. approve or disapprove such proposed
asabaliauskas on DSK3SPTVN1PROD with NOTICES

public interest in that the Exchange Rather, the Opening Process is designed rule change, or (b) institute proceedings
would conduct the Opening Process for to efficiently resolve the queue of orders to determine whether the proposed rule
non-IEX-listed securities that were awaiting the Regular Market Session at change should be disapproved.
subject to and remained in a halt, a fair price, that reflects the broader
suspension, or pause in trading at the market for the security. Accordingly, the 19 The Exchange notes that Bats does not provide

Exchange believes that not providing indicative pricing or imbalance information for its
18 See Securities Exchange Act Release No. 34– process for opening non-listed securities pursuant
78101 at 47 (June 17, 2016), 81 FR 41142 (June 23,
indicative pricing or imbalance to Bats Rule 11.24.
2016) (File No. 10–222). information related to the Opening 20 15 U.S.C. 78k–1(a)(1).

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19770 Federal Register / Vol. 82, No. 81 / Friday, April 28, 2017 / Notices

IV. Solicitation of Comments For the Commission, by the Division of 2017, the Commission designated a
Trading and Markets, pursuant to delegated longer period for Commission action on
Interested persons are invited to authority.21 the proposed rule change.7 After
submit written data, views, and Eduardo A. Aleman, consideration of the record in the
arguments concerning the foregoing, Assistant Secretary. proposed rule change, the Division of
including whether the proposed rule [FR Doc. 2017–08575 Filed 4–27–17; 8:45 am] Trading and Markets (‘‘Division’’),
change is consistent with the Act. BILLING CODE 8011–01–P pursuant to delegated authority,8 issued
Comments may be submitted by any of an order disapproving the proposed rule
the following methods: change (‘‘Disapproval Order’’) on March
SECURITIES AND EXCHANGE 10, 2017.9
Electronic Comments COMMISSION On March 24, 2017, pursuant to Rule
• Use the Commission’s Internet 430 of the Rules of Practice,10 BZX filed
[Release No. 34–80511]
a petition for review of the Disapproval
comment form (http://www.sec.gov/
Order Granting Petition for Review and Order. Pursuant to Rule 431 of the Rules
rules/sro.shtml); or of Practice,11 BZX’s petition for review
Scheduling Filing of Statements; in the
• Send an email to rule-comments@ of the Disapproval Order is granted.
Matter of Bats BZX Exchange, Inc.;
sec.gov. Please include File Number SR– Further, the Commission hereby
Regarding an Order Disapproving a
IEX–2017–11 on the subject line. establishes that any party to the action
Proposed Rule Change, as Modified by
Amendments No. 1 and 2, to BZX Rule or other person may file a written
Paper Comments statement in support of or in opposition
14.11(e)(4), Commodity-Based Trust
• Send paper comments in triplicate to the Disapproval Order on or before
Shares, To List and Trade Shares
to Brent J. Fields, Secretary, Securities May 15, 2017.
Issued by the Winklevoss Bitcoin Trust For the reasons stated above, it is
and Exchange Commission, 100 F Street
April 24, 2017. hereby:
NE., Washington, DC 20549–1090. Ordered that the petition of BZX for
This matter comes before the
All submissions should refer to File Securities and Exchange Commission review of the Division’s action to
Number SR–IEX–2017–11. This file (‘‘Commission’’) on petition to review disapprove the proposed rule change by
number should be included on the the disapproval, through delegated delegated authority be granted; and
subject line if email is used. To help the It is further ordered that any party or
authority, of the Bats BZX Exchange,
Commission process and review your other person may file a statement in
Inc. (‘‘BZX’’) proposed rule change to
support of or in opposition to the action
comments more efficiently, please use list and trade shares of the Winklevoss
made pursuant to delegated authority on
only one method. The Commission will Bitcoin Trust as Commodity-Based
or before May 15, 2017.
post all comments on the Commission’s Trust Shares under BZX Rule The order disapproving such
Internet Web site (http://www.sec.gov/ 14.11(e)(4). proposed rule change shall remain in
rules/sro.shtml). Copies of the On July 8, 2016, the Commission effect.
submission, all subsequent issued a notice of filing of the proposed
rule change filed with the Commission By the Commission.
amendments, all written statements
pursuant to Section 19(b)(1) of the Eduardo A. Aleman,
with respect to the proposed rule
Securities Exchange Act of 1934 Assistant Secretary.
change that are filed with the
Commission, and all written (‘‘Exchange Act’’) 1 and Rule 19b–4 2 [FR Doc. 2017–08565 Filed 4–27–17; 8:45 am]

communications relating to the thereunder.3 On August 23, 2016, the BILLING CODE 8011–01–P

proposed rule change between the Commission designated a longer time
period within which to act on the Securities Exchange Act of 1934, Release No. 79084
Commission and any person, other than (October 12, 2016), 81 FR 71778 (October 18, 2016).
proposed rule change.4 On October 12,
those that may be withheld from the On October 20, 2016, BZX filed Amendment No. 1
2016, the Commission instituted to the proposed rule change, replacing the original
public in accordance with the proceedings under Section 19(b)(2)(B) of filing in its entirety. See Exchange Act Release No.
provisions of 5 U.S.C. 552, will be the Exchange Act 5 to determine 79183 (October 28, 2016), 81 FR 76650 (November
available for Web site viewing and whether to approve or disapprove the 3, 2016).
printing in the Commission’s Public proposed rule change.6 On January 4,
7 Notice of Designation of a Longer Period for

Reference Room, 100 F Street NE., Commission Action on Proceedings to Determine
Whether to Approve or Disapprove a Proposed Rule
Washington, DC 20549 on official 21 17 CFR 200.30–3(a)(12). Change, as Modified by Amendment No. 1, to BZX
business days between the hours of 1 15 U.S.C. 78s(b)(1). Rule 14.11(e)(4), Commodity-Based Trust Shares, to
10:00 a.m. and 3:00 p.m. Copies of such 2 17 CFR 240.19b–4. List and Trade Winklevoss Bitcoin Shares Issued by
3 Notice of Filing of a Proposed Rule Change to the Winklevoss Bitcoin Trust, Securities Exchange
filing also will be available for Act of 1934, Release No. 79725 (January 4, 2017),
BZX Rule 14.11(e)(4), Commodity-Based Trust
inspection and copying at the principal Shares, to List and Trade Winklevoss Bitcoin Shares 82 FR 2425 (January 9, 2017). On February 22, 2017,
office of the Exchange. All comments Issued by the Winklevoss Bitcoin Trust, Securities BZX filed Amendment No. 2 to the proposed rule
received will be posted without change; Exchange Act of 1934, Release No. 78262 (July 8, change, which did not materially alter the
2016), 81 FR 45554 (July 14, 2016). substance of the proposed rule change. Amendment
the Commission does not edit personal 4 Notice of Designation of a Longer Period for No. 2 is available on the Commission’s Web site at
identifying information from Commission Action on Proposed Rule Change to https://www.sec.gov/comments/sr-batsbzx-2016-30/
submissions. You should submit only BZX Rule 14.11(e)(4), Commodity-Based Trust batsbzx201630-1594698-132357.pdf.
asabaliauskas on DSK3SPTVN1PROD with NOTICES

8 17 CFR 200.30–3(a)(12).
information that you wish to make Shares, to List and Trade Winklevoss Bitcoin Shares
Issued by the Winklevoss Bitcoin Trust, Securities 9 Order Disapproving a Proposed Rule Change, as
available publicly. All submissions Exchange Act of 1934, Release No. 78653 (August Modified by Amendments No. 1 and 2, to BZX Rule
should refer to File Number SR–IEX– 23, 2016), 81 FR 59256 (August 29, 2016). 14.1(e)(4), Commodity-Based Trust Shares, to List
2017–11, and should be submitted on or 5 15 U.S.C. 78s(b)(2)(B). and Trade Shares Issued by the Winklevoss Bitcoin
6 Order Instituting Proceedings to Determine Trust, Securities Exchange Act of 1934, Release No.
before May 19, 2017. 80206 (March 10, 2017), 82 FR 14076 (March 16,
Whether to Approve or Disapprove a Proposed Rule
Change to BZX Rule 14.11(e)(4), Commodity-Based 2017).
10 17 CFR 201.430.
Trust Shares, to List and Trade Winklevoss Bitcoin
Shares Issued by the Winklevoss Bitcoin Trust, 11 17 CFR 201.431.

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Document Created: 2017-04-28 03:03:00
Document Modified: 2017-04-28 03:03:00
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 19763