90 FR 104 pgs. 23397-23401 - Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend IEX's Fee Schedule To Establish a Supplemental Market Quality Program
Type: NOTICEVolume: 90Number: 104Pages: 23397 - 23401
Pages: 23397, 23398, 23399, 23400, 23401Docket number: [Release No. 34-103131; File No. SR-IEX-2025-07]
FR document: [FR Doc. 2025-09855 Filed 5-30-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103131; File No. SR-IEX-2025-07]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend IEX's Fee Schedule To Establish a Supplemental Market Quality Program
May 27, 2025.
Pursuant to Section 19(b)(1)? 1 of the Securities Exchange Act of 1934 (the "Act"), 2 and Rule 19b-4 thereunder, 3 notice is hereby given that on May 16, 2025, the Investors Exchange LLC ("IEX" or the "Exchange") filed with the Securities and Exchange Commission (the "Commission") the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
Footnotes:
1 ?15 U.S.C. 78s(b)(1).
2 ?15 U.S.C. 78a.
3 ?17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
[top] Pursuant to the provisions of Section 19(b)(1) under the Act, 4 and Rule 19b-4 thereunder, 5 the Exchange is filing with the Commission a proposed rule change to amend the Exchange's fee schedule applicable to Members? 6 (the "Fee Schedule"? 7 ) pursuant to IEX Rule 15.110(a) and (c) to establish an Supplemental Market Quality Program, which is designed to improve displayed
Footnotes:
4 ?15 U.S.C. 78s(b)(1).
5 ?17 CFR 240.19b-4.
6 ? See IEX Rule 1.160(s).
7 ? See Investors Exchange Fee Schedule, available at https://www.iexexchange.io/resources/trading/fee-schedule.
8 ? See IEX Rule 1.160(u).
9 ?15 U.S.C. 78s(b)(3)(A)(ii).
The text of the proposed rule change is available at the Exchange's website at https://www.iexexchange.io/resources/regulation/rule-filings, 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
The Exchange proposes to modify its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c), to establish a Supplemental Market Quality Program ("SMQ" or the "Program"). The Program is intended to increase displayed liquidity and promote order flow to the Exchange by offering a financial incentive for Members to enter displayed orders or quotes ( i.e., displayed trading interest) priced at the NBBO on the Exchange in certain securities designated by the Exchange. As discussed below, the SMQ is designed to reward Members that make a significant contribution to market quality by providing liquidity at the NBBO in a select group of securities for a significant portion of the day ("SMQ Securities"). IEX previously filed a proposal to establish an SMQ on April 28, 2025 ("First SMQ Filing"). 10 The First SMQ Filing was published for comment in the Federal Register on May 7, 2025. 11 The Exchange withdrew the First SMQ Filing on May 16, 2025, and now submits this proposal for immediate effectiveness ("Second SMQ Filing"). The Second SMQ Filing makes no changes to the functionality and fees of the SMQ Program described in the First SMQ Filing, but provides additional detail about the manner in which IEX selects the SMQ Securities.
Footnotes:
10 ? See Securities Exchange Act Release No. 102964 (May 1, 2025), 90 FR 19326 (May 7, 2025) (SR-IEX-2025-06).
11 ? See supra note 10. The Commission has received no comments on the First SMQ Filing.
The Program is designed to incentivize the posting of displayed trading interest in SMQ Securities through incentive payments. In determining which securities to designate as SMQ Securities, IEX applies several objective factors concerning each security's trading characteristics and generally designates the securities that meet certain thresholds with respect to these factors to be SMQ Securities. 12 These factors include IEX's current relative quote presence in each security ( i.e., displayed order volume and time at the NBBO for each security traded on the Exchange), the number of market-wide daily price changes and the average market-wide quote size for each security, and each security's share price and average notional value traded.
Footnotes:
12 ?The Exchange has discussed with Commission staff the thresholds it intends to apply to these objective factors.
IEX uses the above factors to assess which securities are suitable for inclusion in the list of SMQ Securities, with a goal of identifying securities in which increased quoting would be impactful to both IEX and the market, but not unduly burdensome to its Members in meeting the quoting requirements to qualify for the SMQ.
IEX will publish the list of SMQ Securities on its website (on the Fee Schedule), and prior to the start of each month, the Exchange will reevaluate and, as applicable, update its list of SMQ Securities. Any updates to the list of SMQ Securities will be published on IEX's Fee Schedule no later than one day prior to the start of the month (the Exchange will endeavor to update its SMQ Securities up to five trading days before the next month). IEX believes that the incentives created by the SMQ are likely to increase quoting in the SMQ Securities, thereby providing improved trading conditions for all market participants through narrower spreads and increased depth of liquidity available at the NBBO in the SMQ Securities.
To qualify for the SMQ, a Member must enter displayed trading interest ( i.e., at least one displayed order or quote of at least one round lot size? 13 ) at either the NBB, the NBO, or the NBBO, for at least 40% of time during regular trading hours in at least 50 of the SMQ Securities on average per day during the month (the "Percent Time at NBBO" requirement). On a daily basis, the Exchange will calculate the number of SMQ Securities for which each Member's Percent Time at NBBO was at least 40% ("SMQ Qualifying Activity"). At the end of the month, the Exchange will calculate the monthly average of the Member's SMQ Qualifying Activity. If a Member has SMQ Qualifying Activity in at least 50 of the SMQ Securities during the month, the Exchange will pay the Member the "SMQ Incentive Fee" of $125 per SMQ Security for which the Member satisfied the SMQ requirements. 14
Footnotes:
13 ? See IEX Rule 11.180(a).
14 ?SMQ Payments will be made for all qualified securities if Member had SMQ Qualifying Activity in at least 50 SMQ Securities during the month.
The following example illustrates how the SMQ will work:
Example
Assume that in a particular month, IEX has designated 150 securities as SMQ Securities. There are 21 trading days in that month, and on eleven of those days Member A's Percent Time at NBBO is at least 40% for 100 of the SMQ securities. On the other ten trading days, Member A's Percent Time at NBBO is at least 40% for 50 of the SMQ securities. At the end of the month, IEX calculates the number of SMQ Securities which Member A has at least 40 Percent Time at NBBO to be 76? 15 SMQ Securities. IEX provides a lump sum payment of $9,500 to Member A ($125 times 76 SMQ Securities) (the "SMQ Payment"). In that same month, Member B's monthly average Percent Time at NBBO is at least 40% for 60 SMQ Securities for eleven trading days. On the other ten trading days, Member B's Percent Time at NBBO is at least 40% for 30 SMQ Securities. At the end of the month, IEX calculates Member B's SMQ Qualifying Activity to average out to 46 SMQ Securities. 16 Because Member B's SMQ Qualifying Activity was in less than 50 SMQ Securities, Member B does not receive any lump sum payment pursuant to the Program.
Footnotes:
15 ?As set forth in the proposed changes to the Fee Schedule, the Exchange will calculate the SMQ Qualifying Activity by taking the average of the number of SMQ Securities for which the Member's Percent Time at NBBO was at least 40% and round that number to the nearest whole number. Thus, 76.19 SMQ Securities is rounded to 76.
16 ?45.71 is rounded to 46.
[top] As proposed, the Percent Time at NBBO calculation will exclude days with system disruptions that last for
Footnotes:
17 ? See Securities Exchange Act Release No. 94929 (May 17, 2022), 87 FR 31269 (May 23, 2022) (SR-PEARL-2022-21) (filing establishing a Market Quality program similar to this proposal).
Additionally, as proposed, the Exchange will exclude from its calculations of Percent Time at NBBO for each SMQ Security any portion of regular trading hours when the SMQ Security is subject to a trading halt or Limit Up-Limit Down pause. 18 If an SMQ Security were subject to a trading halt on IEX, Members would be unable to provide displayed trading interest in that security until it resumes trading, and thus not excluding the halted time from the Percent Time at NBBO would be unfair to Members trying to provide displayed trading interest in the SMQ Security. Thus, IEX proposes only to calculate the Percentage Time at NBBO for each SMQ Security during times when trading in the security is not halted. For example, if an SMQ Security was halted for 30 minutes during one trading day, and a Member provided displayed trading interest in that security at the NBBO for 2.4 hours of that trading day, the Member's Percent Time at NBBO for that day would be 40%, because 2.4 hours is 40% of 6 hours. 19
Footnotes:
18 ? See, e.g., IEX Rules 11.271 and 11.280.
19 ?If IEX did not exclude the time a security is halted from its calculation of Percent Time at NBBO, in this example the Member's Percent Time at NBBO would be 37% (2.4 hours divided by the full 6.5 hour trading day), and the Member's trading activity in that security for that day would not count towards its SMQ Qualifying Activity.
The Exchange will allow Members to aggregate their Percent Time at NBBO with other Members with which they are affiliated, 20 if Members provide prior notice to the Exchange. As proposed, to the extent that two or more affiliated companies maintain separate memberships with the Exchange and can demonstrate their affiliation by showing they control, are controlled by, or are under common control with each other, the Exchange would permit such Members to aggregate their Percent Time at NBBO. Members will be responsible for having proper internal documentation in their books and records substantiating that the two or more Members seeking to aggregate their Percent Time at NBBO are affiliates of one another. IEX notes that this grouping of Member affiliates is consistent with how IEX allows Member affiliates to group their trading activity to qualify for IEX's Displayed Liquidity Adding Rebate Tiers.
Footnotes:
20 ?As defined in Rule 12b-2 under the Act, 17 CFR 240.12b-2.
The SMQ will be open to all Members and will not impose any two-sided quotation obligations on any Member seeking to qualify for the SMQ. Accordingly, the SMQ is designed to attract liquidity from any firm that is willing to provide liquidity at the NBB or NBO in SMQ Securities. The Exchange is proposing to provide Members an opportunity to earn an SMQ Payment as a means of recognizing the value of market participants that consistently enter displayed trading interest at the NBBO in the SMQ Securities. Through the Program, the Exchange seeks to provide enhanced liquidity for all market participants through more displayed trading interest, narrower bid-ask spreads, and increased depth of liquidity in the SMQ Securities.
The Exchange notes that the proposed Supplemental Market Quality Program is similar to the Enhanced Market Quality Program offered by Nasdaq BX, 21 which also pays a fixed sum to Members that quote exchange-specified securities at the NBBO for at least a minimum percentage time of the day. 22 The proposed SMQ is also similar to the "Market Quality" program offered by MIAX PEARL. 23 In particular, the process by which the Exchange proposes to select SMQ Securities is similar to the process applied by MIAX PEARL in selecting securities to be "MQ Securities."? 24 Additionally, IEX's process for selecting SMQ Securities, which, as described above, is designed to use objective criteria to identify securities in which increased quoting would be impactful to both IEX and the market is analogous to the manner in which Cboe EDGA's new NBBO Setter Program provides a rebate for quoting in "illiquid securities on the Exchange."? 25 Finally, the Exchange notes that its proposed SMQ is also similar to recently discontinued quote revenue sharing program of Nasdaq PSX. 26
Footnotes:
21 ? See Nasdaq BX Equities VII Section 118(g).
22 ?Nasdaq BX's Enhanced Market Quality Program ("EMQP") sets different percentage thresholds depending upon if the security is quoted on Tape A or B (and does not Tape C securities). The EMQP also increases its incentive fees based upon the number of securities quoted at the NBBO for at least the threshold percentage of market hours. Id. These differences between the proposed SMQ and the EMQP reflect different pricing approaches of different exchanges, but the core functionality of the two programs is substantially similar.
23 ? See supra note 17. While MIAX PEARL uses quoting at the NBBO in the "Market Quality Securities" as a means of qualifying for certain rebate tiers (and not to pay a flat sum to qualifying Members like IEX proposes), the Market Quality program is like IEX's proposed SMQ in that it provides financial incentives to Members based upon increased quoting in a subset of securities specified by the exchange. Id.
24 ?MIAX PEARL's original Market Quality program filing described its methodology for selecting "MQ Securities" as an analysis of volume statistics and time at the NBBO. See supra note 17. In subsequent filings, MIAX PEARL stated that the "list of MQ Securities is generally based on the top multi-listed symbols by ADV across all U.S. securities exchanges." See Securities Exchange Act Release No. 101611 (November 13, 2024), 89 FR 91455 (November 19, 2024) (SR-PEARL-2024-50).
25 ? See Securities Exchange Act Release No. 102842 (April 11, 2025), 90 FR 16356 (April 17, 2025) (SR-CboeEDGA-2025-009) (providing a rebate for quoting in approximately 9,700 securities that are not on an excluded securities list, with the excluded securities list being a combination of securities included in the S&P 500 Index, the Nasdaq 100 Index, and "certain ETPs the Exchange believes have a high level of liquidity").
26 ? See Securities Exchange Act Release No. 34-100060 (May 3, 2024), 89 FR 39668 (May 9, 2024) (SR-Phlx-2024-18) (Establishing the quote revenue sharing program) and Securities Exchange Act Release No. 34-102844 (April 11, 2025), 90 FR 16226 (April 17, 2025) (SR-Phlx-2025-19) (terminating the program because it "no longer provides a growth incentive that is aligned with the Exchange's needs").
2. Statutory Basis
[top] IEX believes that the proposed rule change is consistent with the provisions of Section 6(b)? 27 of the Act in general,
Footnotes:
27 ?15 U.S.C. 78f.
28 ?15 U.S.C. 78f(b)(4).
The Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. IEX has concluded that, in the context of current regulatory requirements governing access fees and rebates, it is able to more effectively compete with other exchanges for order flow by offering Members an additional incentive for posting displayed liquidity on the Exchange in securities that have a relatively lower volume of displayed orders priced at the NBBO on the Exchange compared to other securities. Based upon informal discussions with market participants, IEX believes that Members and other market participants may be more willing to send displayed trading interest to IEX if the proposed fee change is adopted.
Accordingly, IEX has designed the proposed change to further incentivize Members to send displayed quotes at the NBBO in lower displayed volume securities. IEX believes that an increase in displayed liquidity and order flow to the Exchange will, in turn, improve the quality of the IEX market and increase its attractiveness to existing and prospective participants. In addition, the proposal is equitable and not unfairly discriminatory as the proposal would equitably allocate SMQ Payments among Members by paying Members based on their total quoting activity in SMQ Securities in any given month.
Additionally, IEX believes the manner in which it selects securities for inclusion in the SMQ Securities list is consistent with the Act because it is reasonable, equitable, and not unfairly discriminatory (to customers, issuers, brokers or dealers). As discussed in the Purpose section, IEX designates securities to be SMQ Securities by applying several objective factors concerning each security's trading characteristics and generally designating the securities that meet certain thresholds with respect to these factors to be SMQ Securities. These factors are designed to identify securities in which increased quoting would be impactful to both IEX and the market, but not unduly burdensome to its Members in meeting the quoting requirements to qualify for the SMQ. Because the process of selecting SMQ Securities is designed to use objective criteria to create a list of securities for which inclusion in the Program could meaningfully increase displayed liquidity (increasing price improvement opportunities for those securities), it is consistent with the goals of the Act to remove impediments to and perfect the mechanism of a free and open market.
As noted in the Purpose section, the Exchange believes the proposed incentive payments in the Supplemental Market Quality Program will incentivize Members to direct additional displayed liquidity-providing orders to the Exchange in SMQ Securities, thereby promoting price discovery and market quality in the SMQ Securities and more generally on the Exchange, and, further, that the resulting increased displayed liquidity and narrower spreads will benefit all investors by deepening the Exchange's liquidity pool, supporting the quality of price discovery, enhancing quoting competition across all exchanges, and promoting market transparency.
As discussed above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. Within that context, the proposed incentive payments are designed to attract more displayed trading interest to the Exchange. The proposed SMQ is comparable to the MQ Tiers of MIAX PEARL and the Enhanced Market Quality Program of Nasdaq BX, and thus IEX does not believe that the proposal raises any new or novel issues not already considered by the Commission in the context of other exchanges' fees. 29
Footnotes:
29 ? See supra notes 17 and 21.
Finally, to the extent this proposed fee change is successful in incentivizing the entry and execution of displayed trading interest on IEX, such greater liquidity will benefit all market participants by increasing price discovery and price formation as well as market quality and execution opportunities.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive market in which market participants can readily favor competing venues if fee schedules at other venues are viewed as more favorable. Consequently, the Exchange believes that the degree to which IEX fees could impose any burden on competition is extremely limited and does not believe that such fees would burden competition between Members or competing venues. Moreover, as noted in the Statutory Basis section, the Exchange does not believe that the proposed changes raise any new or novel issues not already considered by the Commission.
The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because, while different Members may qualify for different amounts of SMQ Payments, these payments are not based on the type of Member entering the displayed trading interest, but rather on the amount of displayed trading interest each Member submits to the Exchange. Further, the proposed fee changes are intended to incentivize market participants to bring increased order flow to the Exchange, which benefits all market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act? 30 and paragraph (f) of Rule 19b-4? 31 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Footnotes:
30 ?15 U.S.C. 78s(b)(3)(A).
31 ?17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
• Use the Commission's internet comment form ( https://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include file number SR-IEX-2025-07 on the subject line.
Paper Comments
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-IEX-2025-07. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website ( https://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-IEX-2025-07 and should be submitted on or before June 23, 2025.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 32
Footnotes:
32 ?17 CFR 200.30-3(a)(12).
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2025-09855 Filed 5-30-25; 8:45 am]
BILLING CODE 8011-01-P