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Exchange Transition Plan, Test Opportunities, and Third-Party Identifier Information

IEX Trading Alert #2015 - 030

Please Route To: Trading, Business, Market Data Technology, and Trade Support

What you need to know:

  • Pending SEC approval, IEX will transition the IEX ATS to Investors Exchange using a security-by-security phase-in approach over a two-week period in March 2016.
  • IEX is offering three (3) Saturday test opportunities across February and March 2016.  
    • Additionally, effective Monday, November 23, 2015, the Securities Information Processors ("SIPs") will offer nightly testing opportunities.
  • During the transition period, IEX will disseminate a second temporary TOPS feed to aid market participants in identifying securities that have migrated to Investors Exchange:
    • There will be no change to the existing TOPS feed; the existing TOPS feed will continue to publish the aggregated best quoted bid and offer for all securities on IEX ATS and Investors Exchange.
    • During the transition, IEX will offer a new temporary "Exchange-only" TOPS feed that will publish the aggregated best quoted bid and offer exclusively for securities that have migrated to the Exchange.
  • The SIPs, DTCC, and FINRA will separately communicate details about identifying Investors Exchange in their systems/feeds, testing schedules, and other transition information, however IEX has consolidated that information below for market participants.

When and how will IEX ATS transition to Investors Exchange?

Pending SEC approval, IEX ATS will transition to Investors Exchange using a security-by-security phase-in approach similar to that used by Electronic Communication Networks ("ECNs") who transitioned to national securities exchanges in the past. 

To ensure a smooth transition of trading from IEX ATS (the "ATS") to Investors Exchange (the "Exchange"), there will be a two-week pre-launch period during which participants will be able to enter test orders on the Exchange using test symbols.

Following the launch date there will be a two-week phase-in period during which securities currently trading on IEX ATS will be migrated from the ATS to the Exchange. Once a security is migrated from the ATS to the Exchange, it will no longer be available for trading on the ATS and will only be available for trading on the Exchange. Once the Exchange begins trading its first non-test security, it will operate in conjunction with the ATS until all securities are fully transitioned.

The objective of migrating securities in this manner is to promote a stable, predictable trading experience for market participants and technology partners.  The schedule is as follows:

  • Mar 7 - 17 (M - Th): Test symbols transition (pre-launch period)
  • Mar 18 - 22 (F - Tu): 2 non-test symbols ("Launch Date", phase-in period begins)
  • Mar 23 - 24 (W - Th): 10 non-test symbols
  • Mar 28 - 29 (M - Tu): Y-Z symbol range 
  • Mar 30 -31 (W - Th): V-Z symbol range
  • Apr 1: All symbols (phase-in period ends, ATS ceases operation)

When can I test Exchange functionality, including identifying IEX quotations on the SIP?

IEX will offer the following Saturday testing opportunities in advance of the Exchange launch:

  • Sat, Feb 6: 1st Member Testing Opportunity
  • Sat, Feb 20: 2nd Member Testing Opportunity
  • Sat, Mar 5: 3rd Member Testing Opportunity

Firms can sign-up for testing by emailing IEX Market Operations at MarketOps@iextrading.com.

Test data will become available nightly from the SIPs beginning Monday, November 23, 2015

  • Test data will be disseminated from CQS/CTS on business weekdays from 9:00 – 9:15 p.m. ET from the multicast Playback Test channels (not over Production channels).  
  • A test file will be recorded to be replayed in the evenings from 9:00 p.m. to 10:30 p.m. ET to all UTP data feed subscribers. Evening test data is provided over the production IP services during the designated times. No registration is required to participate in evening testing.

Who can submit orders on the IEX ATS or Investors Exchange during the transition period?

During the pre-launch period, all ATS Subscribers may submit orders to IEX.  During the two-week phase-in period following Exchange launch, only market participants who are Members of Investors Exchange or technology partners who have been approved by IEX will be able to submit orders to either the ATS or the Exchange.  

For additional information about the documentation required to participate on the Exchange, see http://iextrading.com/trading/membership/.

During the transition period, what behaviors should I expect?

During the transition period, the following behaviors will apply for securities that have transitioned from the ATS to the Exchange:

  • Displayed orders are subject to the "price sliding process", pursuant to proposed IEX Rule 11.190(h) (i.e., displayed orders are no longer subject to the Midpoint Price Constraint).
  • Quotes and trades publish to the applicable SIP with the Exchange's Market Center Originator ID (note that trades occurring on the Exchange will not be published to the TRF); see FAQ "How will Investors Exchange be identified on the SIP?" for additional information.
  • The new "Exchange-only" TOPS feed publishes aggregated best quoted bid and offer exclusively for securities that have migrated to the Exchange.
  • Execution reports publish to National Securities Clearing Corporation (NSCC) for clearing and settlement carrying the Exchange's UTC Market Code; see FAQ "How will clearing and settlement work?" for additional information.
  • On OATS Route and Combined Order/Route Reports, firms may continue to identify orders routed to IEX as orders routed to the ATS with a Destination Code of "M", until the last security has been transitioned. Firms may also choose to follow the transition schedule and report routes of transitioned securities with the Exchange's Destination Code; see FAQ "How is Investors Exchange identified for OATS?" for additional information.
    • Please note: firms may not use the Exchange's Destination Code to reflect a route of a non-transitioned security to Investors Exchange. Route Reports reflecting orders in non-transitioned securities routed to IEX ATS must continue to have the Destination Code of "M". In other words, until the last security is transitioned, firms may report orders in transitioned securities with the Destination Code of "M", but may not report non-transitioned securities with the Exchange's Destination Code.
    • IEX reminds firms that non-transitioned securities routed to IEX ATS remain subject to the OATS matching requirements and firms must continue to provide a Routed Order ID to IEX ATS until the security is transitioned.

On the last day of the transition period, the following will apply for all securities:

  • On OATS Route and Combined Order/Route Reports, firms must identify orders routed to IEX as orders routed to the Exchange with the Exchange's Destination Code; see FAQ "How is Investors Exchange identified for OATS?" for additional information.

How will IEX handle displayed orders for securities that have transitioned to the Exchange?

Unlike displayed orders for securities on the ATS, displayed orders for securities that have migrated to the Exchange will be subject to the "price sliding process" pursuant to proposed IEX Rule 11.190(h).  Displayed orders for securities that have migrated to the Exchange will no longer be subject to the Midpoint Price Constraint, which will now only apply to non-displayed orders on the Exchange.

An order eligible for display by the Exchange that, at the time of entry, would create a violation of Rule 610(d) of Regulation NMS by locking or crossing a Protected Quotation of an external market will be ranked and displayed by the System at one (1) MPV below the current NBO (for bids) or one (1) MPV above the current NBB (for offers) (“display-price sliding”).  An order subject to display-price sliding will retain its limit price irrespective of the price at which such order is ranked and displayed.  In the event the NBBO changes such that an order subject to display-price sliding would no longer lock or cross the Protected Quotation of an external market, the order will receive a new timestamp, and will be displayed at the most aggressive permissible price.  Such orders may be re-priced once or multiple times, depending on changing market conditions and the order’s limit price.

In the event that the market becomes locked, the System will observe the following practices for displayed orders:

  • Resting orders that are displayed at the price of the locking quotation (“locking price”) as defined in proposed IEX Rule 11.310, and were originally displayed in compliance with rules and regulations of the Exchange and the Act will maintain their displayed price and quantity.
  • Displayable orders posting to the Order Book on the same side as an order which is locked and was originally displayed, as per the above statement, are not permitted to join the locking price.  Such orders will be displayed and ranked by the System pursuant to the Exchange’s display-price sliding practices described above.

In the event that the market becomes crossed, the System will observe the following practices for displayed orders:

  • Resting orders that are displayed at a price which has become crossed and were originally displayed in compliance with rules and regulations of the Exchange and the Act will maintain their displayed price and quantity.
  • Displayable buy (sell) orders being posted to the Order Book during a crossed market will be displayed and ranked by the System one (1) MPV below (above) the lowest Protected Offer (highest Protected Bid).

How will Investors Exchange be identified on the SIP?

The Exchange will be identified in CTA (CQS/CTS feeds) and UTP (UQDF/UTDF feeds) with a Market Center Originator ID of "V". IEX quotes on either the CQS or UQDF feeds are protected under Regulation NMS.

For transitioned securities, how will TOPS provide quotations?

There will be no change to the current TOPS feed; the current TOPS feed will continue to publish the aggregated best quoted bid and offer for all securities, including those trading on the ATS as well as those trading on the Exchange.  The existing TOPS feed will persist throughout the transition process and will remain as the Exchange's TOPS feed source.

For market participants who desire a proprietary feed which exclusively identifies the quotes for securities that have transitioned to the Exchange, IEX will offer a new temporary "Exchange-only" TOPS feed that will publish the aggregated best quoted bid and offer ("top of book") exclusively for securities that have transitioned to the Exchange. Once a security is transitioned from the ATS to the Exchange, the aggregated best quoted bid and offer position for such security will begin publishing on the Exchange-only TOPS feed.  The Exchange-only TOPS feed is optional.  The Exchange-only TOPS feed is a temporary utility to facilitate the Exchange transition: it will be made available in early February 2016, and will be retired on April 15, 2016, two (2) weeks after the phase-in period completes.

IEX will communicate instructions on how to consume the temporary "Exchange-only" TOPS feed in the near future.

IEX will not initially offer a depth of book feed upon Exchange launch.

How will Investors Exchange be identified for OATS and Blue Sheets?

FINRA has assigned the Exchange a Destination Code of "XV". The Blue Sheets exchange code and requestor code is "3".

How will clearing and settlement work?

Trades matched on the Investors Exchange or on away market centers will be disseminated to the National Securities Clearing Corporation (NSCC) via the Depository Trust & Clearing Corporation (DTCC), which will process clearing and settlement.

  • All clearing records sent to the National Securities Clearing Corporation (NSCC) by the Exchange will be submitted in real-time using the Universal Trade Capture (UTC) format.
  • Members and their clearing agent systems should be prepared to handle clearing for the Exchange in UTC format prior to the first day of operation.
  • Client output will carry the Exchange's UTC Market Code of "170".
  • For more information regarding the UTC format, please refer to https://www.dtcclearning.com/learning/clearance/topics/universal-trade-capture.html.

Each Member's Clearing Agent must be a Member of the Investors Exchange and the NSCC, pursuant to proposed IEX Rule 11.250.

Where can I learn more?

About IEX

Dedicated to institutionalizing fairness in the markets, IEX provides a more balanced marketplace via simplified market structure design and cutting-edge technology. IEX operates a fair-access platform accessible by any qualified broker dealer. IEX is driven by a team of cross-industry experts with backgrounds spanning market venues, electronic trading, and broker-dealers. IEX is the first equity trading venue seeded exclusively by a consortium of buy-side investors, including mutual funds, hedge funds, and family offices. Learn more at: iextrading.com.