IEX Crumbling Quote Threshold

• Revised the threshold for imposition of the crumbling quote remove fee (CQRF).
• More narrowly tailor to activity that is indicative of a deliberate trading strategy
  that may adversely affect execution quality on the Exchange, in rulebook.

Current Threshold

• IEX charges CQRF to orders that remove resting liquidity when crumbling quote
  indicator (CQI) is on, if executions is over 5% of firm's volume executed on IEX.
• If at least 1mn shares on monthly basis per market participant identifier (MPID).
• Orders above 5% and 1mn thresholds have $0.0030 fee per incremental share.
• Applied to each share executed at or above $1.00 that exceeds CQRF Threshold.
• Assessed using real time relative quoting activity of certain protected quotations.
• To assess probability of imminent change to current protected national best bid.
• When quote instability factor is greater than threshold, treats quote as unstable.
• Any such determination remains in effect at that price level for two milliseconds.
• Aggressive tactic during quote instability, is detrimental to experience of others.

Pooling Concern

• IEX believe firm may circumvent CQRF threshold by routing orders to IEX in a
  deliberate trading strategy that targets resting liquidity during quote instability.
• Through another firm (using other MPID) not engaged in such a strategy at all.
• Routing would consolidate the executions that take liquidity when the CQI is on.
• Thereby reducing executions that exceed the CQRF threshold and fees for firms.

Amendment

• To address concern, IEX proposes to revise threshold for imposition of the CQRF.
• More narrowly tailor to activity that is indicative of a deliberate trading strategy.
• Where such a strategy may adversely affect execution quality on the Exchange.

Effectiveness

• On Aug. 14, 2018, SEC approved rule in federal register, for immediate effect.