[Federal Register Volume 88, Number 167 (Wednesday, August 30, 2023)]
[Notices]
[Pages 59958-59968]
[FR Doc No: 2023-18677]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98212; File No. SR-FINRA-2022-032]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change Relating to
Alternative Display Facility New Entrant

August 24, 2023.

I. Introduction

    On December 16, 2022, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change (the ``Proposal'') to add
IntelligentCross ATS (``IntelligentCross'') as a new entrant to the
Alternative Display Facility (``ADF''). The proposed rule change was
published for comment in the Federal Register on December 27, 2022.\3\
On February 9, 2023, the Commission extended the time period within
which to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to approve or
disapprove the proposed rule change to March 27, 2023.\4\ On March 24,
2023, the Commission initiated proceedings under Section 19(b)(2)(B) of
the Exchange Act \5\ to determine whether to approve or disapprove the
proposed rule change.\6\ On June 21, 2023, the Commission extended the
time period for Commission action to August 24, 2023.\7\ The Commission
has received comments on the proposed rule change.\8\ This order
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 96550 (December 20,
2022), 87 FR 79401 (``Notice'').
    \4\ See Securities Exchange Act Release No. 96864, 88 FR 9945
(February 15, 2023).
    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ See Securities Exchange Act Release No. 97195, 88 FR 19173
(March 30, 2023).
    \7\ See Securities Exchange Act Release No. 97784, 88 FR 41710
(June 27, 2023).
    \8\ Comments on the proposed rule change are available at:
https://www.sec.gov/comments/sr-finra-2022-032/srfinra2022032.htm.
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II. Description of the Proposed Rule Change

    The ADF is a quotation collection and trade reporting facility that
provides ADF participants (i.e., ADF-registered market makers or
electronic communications networks) \9\ the ability to post quotations,
display orders and report transactions in NMS stocks \10\ for
submission to the securities information processors (``SIP'') for
consolidation and dissemination to vendors and other market
participants.\11\ The ADF is also designed to deliver real-time data to
FINRA for regulatory purposes, including enforcement of requirements
imposed by Regulation NMS.\12\
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    \9\ See FINRA Rule 6220(a)(3).
    \10\ See 17 CFR 242.600.
    \11\ See Notice, supra note 3, at 79401.
    \12\ See 17 CFR 242.600.
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    In particular, Regulation NMS includes an order protection rule
that provides that a trading center ``shall establish, maintain, and
enforce written policies and procedures that are reasonably designed to
prevent trade-throughs on that trading center of protected quotations
in NMS stocks'' that do not fall within one of the exceptions set forth
in the rule.\13\ For quotations to be protected under the rule, they
must be, among other things, executable ``immediately and
automatically'' against an incoming immediate-or-cancel (``IOC'')
order.\14\ In 2016, the Commission interpreted Regulation NMS's
immediacy requirement to allow for ``an intentional access delay that
is de minimis--i.e., a delay so short as to not frustrate the purposes
of Rule 611 by impairing fair and efficient access to an exchange's
quotations.'' \15\ The Commission stated that ``[i]n the context of
Regulation NMS, the term `immediate' does not preclude all intentional
delays regardless of their duration, and such preclusion is not
necessary to achieve the objectives of Rule 611. As long as any
intentional delay is de minimis--i.e., does not impair fair and
efficient access to an exchange's protected quotations--it is
consistent with both the text and purpose of Rule 611.'' \16\
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    \13\ See 17 CFR 242.611 (``Order Protection Rule'' or ``Rule
611'').
    \14\ 17 CFR 242.600(b)(6).
    \15\ Commission Interpretation Regarding Automated Quotations
Under Regulation NMS, Securities Exchange Act Release No. 78102
(June 17, 2016), 81 FR 40785, 40792 (June 23, 2016) (``Commission
Interpretation of Automated Quotations'').
    \16\ See id. at 40789; see also Citadel Secs. LLC v. SEC, 45
F.4th 27, 35 (D.C. Cir. 2022) (finding the Commission's conclusion
that ``mere de minimis delays do not cause an order to violate
Regulation NMS's immediacy requirement'' was reasonable).
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    In addition, Rule 610 of Regulation NMS requires that a trading
center displaying quotations in an NMS stock through a self-regulatory
organization (``SRO'') display-only facility (such as the ADF)
``provide a level and cost of access to such quotations that is
substantially equivalent to the level and cost of access to quotations
displayed by SRO trading facilities in that stock.'' \17\ Rule 610 also
requires that a trading center displaying quotations in an NMS stock
through an SRO display-only facility not impose unfairly discriminatory
terms that prevent or inhibit any person from obtaining efficient
access to such quotations through a member, subscriber, or customer of
the trading center.\18\ In articulating this standard, the Commission
stated that the level and cost of access would ``encompass both (1) the
policies, procedures, and standards that govern access to quotations of
the trading center, and (2) the connectivity through which market
participants can obtain access and the cost of such connectivity.''
\19\ The nature and cost of connections for market participants seeking
to access an ADF participant's quotations would need to be
substantially equivalent to the nature and cost of connections to SRO
trading facilities.\20\
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    \17\ 17 CFR 242.610(b)(1).
    \18\ 17 CFR 242.610(b)(2).
    \19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37549 (June 29, 2005) (``NMS Adopting
Release'').
    \20\ See id.
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    In evaluating whether a prospective ADF participant meets the
access standards under Rule 610, Regulation NMS requires FINRA to
submit a proposed rule change under Section 19(b) of the Exchange Act
in order to add the new ADF participant.\21\ Accordingly, FINRA is
proposing to add IntelligentCross as a new ADF participant.\22\
IntelligentCross is an NMS stock alternative trading system (``ATS'')
operating pursuant to an effective Form ATS-N.\23\ IntelligentCross
currently operates three separate limit order books with optional
display capability distinguished by different fee structures--the ASPEN
fee/fee limit order book (``ASPEN Fee/Fee book''), ASPEN maker/taker
limit order book, and ASPEN taker/maker limit order book (collectively,
``IntelligentCross ASPEN'').\24\ FINRA

states that the ASPEN Fee/Fee book would be the only order book
displaying orders on the ADF.\25\
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    \21\ See Notice, supra note 3, at 79401.
    \22\ According to FINRA, there have been no ADF participants
since the first quarter of 2015. See id.
    \23\ See Form ATS-N Filings and Information page on the
Commission's website, at https://www.sec.gov/divisions/marketreg/form-ats-n-filings.htm.
    \24\ See Notice, supra note 3, at 79402. FINRA states that all
three IntelligentCross ASPEN order books act independently of each
other (i.e., orders resting in one book do not rest on or interact
with orders resting in another book). See id. In addition to
IntelligentCross ASPEN, FINRA states that IntelligentCross also
operates a midpoint book that only accepts non-displayed midpoint
orders, which is distinct from and does not interact with the
IntelligentCross ASPEN. See id. at n.17. All activity on
IntelligentCross is identified and reported under the ``INCR''
market participant identifier (``MPID''). See id. at 79402.
    \25\ See id. at 79402. FINRA states that the ``effective date''
of the Proposal would be the date of the Commission's approval. See
id. at 79404.
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    IntelligentCross provided FINRA with a summary of its policies and
procedures regarding access to its quotations in an NMS stock displayed
on the ADF, and a summary of its proposed fees for such access.\26\
Based on IntelligentCross' representations, FINRA believes that
IntelligentCross' proposed level and cost of access to quotations on
the ASPEN Fee/Fee book is substantially equivalent to the level and
cost of access to quotations displayed by an SRO trading facility, both
in absolute and relative terms.\27\ FINRA also believes that the
quotations displayed on ASPEN Fee/Fee book would meet the definition of
an ``automated quotation'' under Regulation NMS.\28\
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    \26\ See id. at 76341.
    \27\ See id. at 79404, n.37.
    \28\ See id. at 79403.
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    In particular, FINRA states that IntelligentCross only permits
registered broker-dealers to be subscribers to IntelligentCross, and
subscribers can interact with the ASPEN Fee/Fee book using conventional
order types.\29\ The ASPEN Fee/Fee book will accept incoming
intermarket sweep orders (``ISOs'') \30\ once it displays orders on the
ADF.\31\
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    \29\ See id. at 79402. FINRA states that the ASPEN Fee/Fee book
accepts limit orders with optional display instructions, IOC orders,
and pegged orders (which are treated as regular orders with an
automated repricing to the national best bid or offer (``NBBO'')).
See id. Only limit orders and primary peg orders (with or without a
limit price) are eligible to be displayed on the ASPEN Fee/Fee book,
and therefore on the ADF. See id.
    \30\ 17 CFR 242.600(b)(38).
    \31\ See Notice, supra note 3, at 79402. IntelligentCross has
represented to FINRA that the ASPEN Fee/Fee book will be the only
IntelligentCross ASPEN order book that will accept ISOs. See id. at
79402, n.22.
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    FINRA states that the ASPEN Fee/Fee book establishes a matching
schedule \32\ using an overnight optimization process based on
historical performance measurements from prior days' matches across all
three IntelligentCross ASPEN books.\33\ The match event time is
randomized within the time band throughout the course of the trading
day and any order that arrives prior to a match event (and that has not
been cancelled, become unmarketable, or repriced) \34\ is eligible to
participate in the next match event for that security.\35\
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    \32\ See id. at 79402. FINRA states that the ASPEN Fee/Fee book
match schedules are defined by minimum/maximum time bands for each
security, and these bands can have a minimum time of 150
microseconds and a maximum time of 900 microseconds. See id. For
example, on a particular day, the match event band for XYZ stock may
have a minimum time of 450 microseconds and a maximum time of 600
microseconds. See id.
    \33\ See id.
    \34\ See id.
    \35\ See id. at 79402. According to FINRA, IntelligentCross has
represented that both sides of the trade (buyers and sellers) are on
equal footing for the next scheduled match event, while maintaining
full control of their orders, i.e., both sides can cancel or update
their orders at any time prior to the match. See id. at n.24. In
addition, the ASPEN Fee/Fee book automatically updates its
quotations, and all quotation updates, including those due to new or
cancelled orders, are immediate. See id.
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    IntelligentCross has represented to FINRA that, in the following
cases, an incoming order on ASPEN Fee/Fee book may not execute against
a resting order at match event time when: (i) an existing resting order
cancels prior to the next match event; (ii) an incoming order is
cancelled prior to the next match event; (iii) the NBBO moves between
the time an order is received and the next match event takes place,
making either the incoming order or the resting order non-marketable;
or (iv) the NBBO changed before the next match event and pegged orders
were repriced to the new NBBO, making the incoming order or the resting
pegged order non-marketable.\36\
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    \36\ See id. at 79402, n.23. IntelligentCross has represented to
FINRA that non-match events on the ASPEN Fee/Fee book occur in a
minority of cases. See id. at 79403. For a more detailed discussion
of examples regarding situations where an incoming order may not
execute against a resting order at match event time, see id. at
79403.
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    FINRA states that the ASPEN Fee/Fee book's matching engine operates
near-continuously and that, when a new order arrives in the ASPEN Fee/
Fee book, it would participate in the next scheduled match event by
interacting with existing orders in the order book within a maximum
time capped at 900 microseconds.\37\
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    \37\ See id. at 79403. FINRA states that the quotations
displayed on the ASPEN Fee/Fee book are handled on an automated
basis and that there is no human discretion in determining any
action taken with respect to an order after the order is received.
See id.
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    FINRA states that for each match event time, the ASPEN Fee/Fee book
retrieves the NBBO and processes all the orders that have arrived and
have not been cancelled in price-time priority.\38\ No subscriber to
IntelligentCross (or non-subscriber accessing IntelligentCross through
a subscriber) is given any priority through the matching process and
the matching process is blind to the identity of the subscriber.\39\
All matches are reported immediately to subscribers and the SIPs via a
FINRA trade reporting facility and disseminated on IntelligentCross'
market data feed.\40\
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    \38\ See id. FINRA states that IntelligentCross uses a
combination of SIP and proprietary direct feeds from national
securities exchanges to determine the NBBO and protected quotes, and
to price executions. See id. at 79402, n.27.
    \39\ See id.
    \40\ See id.
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    FINRA further states that IntelligentCross utilizes a fee/fee
pricing model for activity on the ASPEN Fee/Fee book where both sides
are charged the same fee \41\ for transactions.\42\ Eligible displayed
orders are published via a free market data feed (``IQX Market Data
Feed'').\43\ IntelligentCross does not charge connectivity fees to its
subscribers.\44\ FINRA states that firms wishing to access liquidity on
the ASPEN Fee/Fee book may connect in a variety of ways.\45\ Firms that
are IntelligentCross subscribers can connect to the ASPEN Fee/Fee book
via a Financial Information Exchange (``FIX'') connection.\46\ Such
access is available to subscribers through an internet protocol address
via communications that are compliant with the FIX application
programming interface (``API'') provided by IntelligentCross.\47\
IntelligentCross does not accept orders via any other forms of
communication (e.g., telephone, email, instant message).\48\
IntelligentCross allows a subscriber to determine its level of
connectivity and

does not tier or discriminate among subscribers.\49\
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    \41\ See id. at 79404. FINRA states that the IntelligentCross'
fee schedule is published in the IntelligentCross Form ATS-N and
advance notice is provided to its subscribers prior to a pricing
change. See id.
    \42\ See id. FINRA states that the base rate charged by
IntelligentCross is $0.0008 per share for each side of a transaction
on the ASPEN Fee/Fee book. See id.
    \43\ See id. IntelligentCross has represented to FINRA that
displayed orders from all three IntelligentCross ASPEN order books
are available in the IQX Market Data Feed. See id. at 79402, n.28.
    \44\ See id. at 79404. IntelligentCross has represented to FINRA
that it is not involved in the installation of cross-connects; thus,
subscribers must establish a relationship directly with the network
service provider in NY4. See id. Further, IntelligentCross does not
currently charge connectivity fees to access the ASPEN Fee/Fee book
and has offered to pay for certain of subscribers' cross-connect
fees at NY4. See id. In particular, IntelligentCross currently
covers payment for one primary connection and one back-up
connection, and any direct subscriber is eligible for this payment.
See id. IntelligentCross' network provider and other similar network
providers may charge fees relating to connectivity in NY4. See id.
IntelligentCross has represented to FINRA that any such connectivity
fees would be substantially equivalent to the costs to connect to
any other trading center, such as an exchange. See id.
    \45\ See id.
    \46\ See id.
    \47\ See id.
    \48\ See id.
    \49\ See id.
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    Additionally, FINRA states that IntelligentCross has established
and maintains policies and procedures related to periodic system
capacity reviews and tests to ensure future capacity, as well as
policies and procedures to identify potential weaknesses and reduce the
risks of system failures and threats to system integrity.\50\ FINRA
also states that, for purposes of displaying orders through the ADF,
IntelligentCross' policies and procedures require continuous monitoring
of the ASPEN Fee/Fee book's connections with an SRO display-only
facility and, in the event that the ASPEN Fee/Fee book loses connection
with the ADF, IntelligentCross has contingency plans in place,
including removing (i.e., ``zeroing out'') all quotes previously
published by the system to the ADF and notifying its subscribers of
such interruption.\51\
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    \50\ See id.
    \51\ See id.
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    In the event that IntelligentCross makes a material change to the
policies and procedures governing access to IntelligentCross, including
a change to its fees, IntelligentCross has represented to FINRA that it
will submit the changes made to FINRA, and acknowledges that FINRA will
post on its website an amended description of IntelligentCross'
policies, procedures and fees governing access.\52\
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    \52\ See id. at 79404, n.43.
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    Finally, FINRA states that all members in good standing of an SRO
would be eligible to become a subscriber to the ASPEN Fee/Fee book and
would be subject to eligibility requirements set by
IntelligentCross.\53\
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    \53\ See id. at 79405.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Exchange Act and the
rules and regulations thereunder applicable to a national securities
association.\54\ Specifically, the Commission finds that the proposed
rule change is consistent with the provisions of Section 15A(b)(6) of
the Exchange Act,\55\ which requires, among other things, that FINRA
rules must be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest. The Commission
also finds that the proposed rule change by FINRA to allow
IntelligentCross to operate as an ADF participant is consistent with
Rule 610(b) of Regulation NMS,\56\ which requires that any trading
center that displays quotations in an NMS stock through an SRO display-
only facility (such as the ADF) provide a level and cost of access to
such quotations that is substantially equivalent to the level and cost
of access to quotations displayed by an SRO trading facility in that
stock, and not impose unfairly discriminatory terms that would prevent
or inhibit any person from obtaining efficient access to such
quotations through a member, subscriber, or customer of the trading
center. In addition, the Commission finds that IntelligentCross would
operate as an automated trading center, in compliance with Rule
600(b)(7) of Regulation NMS,\57\ such that its quotations would be
``automated'' under Rule 600(b)(6),\58\ and thus ``protected'' under
Rule 611 of Regulation NMS.\59\
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    \54\ In approving the proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
    \55\ 15 U.S.C. 78o-3(b)(6).
    \56\ See 17 CFR 242.610(b).
    \57\ See 17 CFR 242.600(b)(7).
    \58\ See 17 CFR 242.600(b)(6).
    \59\ See 17 CFR 242.611. Rule 611(a)(1) requires a trading
center to establish, maintain and enforce written policies and
procedures that are reasonably designed to prevent trade-throughs on
the trading center of protection quotations. 17 CFR 242.611(a)(1).
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    The Commission received several comment letters opposing the
Proposal,\60\ a comment letter supporting the Proposal,\61\ and
responses by FINRA and IntelligentCross.\62\ Commenters opposing the
Proposal generally state the Proposal lacks sufficient detail necessary
for the Commission to approve the Proposal and raise concerns about
whether the Proposal: (1) complies with the requirements of Regulation
NMS; (2) should contain additional processes for the ongoing operations
of IntelligentCross while it is an ADF participant; (3) provides a
sufficient implementation period for the industry to adopt changes due
to the addition of IntelligentCross as an ADF participant; and (4) has
provided information that the ADF has appropriate technological
infrastructure.\63\
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    \60\ See Letter from Tyler Gellasch, President and CEO, Healthy
Markets Association, dated January 13, 2023 (``Healthy Markets
Letter''); Letter from Brett Kitt, Associate Vice President &
Principal Associate General Counsel, Nasdaq, Inc., dated January 17,
2023 (``Nasdaq Letter''); Letter from Joanna Mallers, Secretary, FIA
Principal Traders Group, dated January 17, 2023 (``FIA PTG
Letter''); Letter from Stephen John Berger, Managing Director,
Global Head of Government & Regulatory Policy, Citadel Securities,
dated January 23, 2023 (``Citadel Letter''); Letter from Ellen
Greene, Managing Director, Equities & Options Market Structure,
SIFMA, dated February 8, 2023 (``SIFMA Letter''); Letter from Joanna
Mallers, Secretary, FIA Principal Traders Group, dated March 8, 2023
(``FIA PTG Letter II''); Letter from Tyler Gellasch, President and
CEO, Healthy Markets Association, dated March 14, 2023 (``Healthy
Markets Letter II''); Letter from John Ramsay, Chief Market Policy
Officer, Investors Exchange LLC, dated April 14, 2023 (``IEX
Letter''); Letter from Stephen John Berger, Managing Director,
Global Head of Government & Regulatory Policy, Citadel Securities,
dated May 4, 2023 (``Citadel Letter II''); Letter from Stephen John
Berger, Managing Director, Global Head of Government & Regulatory
Policy, Citadel Securities, dated August 3, 2023 (``Citadel Letter
III''); Letter from John Ramsay, Chief Market Policy Officer,
Investors Exchange LLC, dated August 4, 2023 (``IEX Letter II'').
    \61\ See Letter from Nataliya Bershova, Head of Execution
Research, Sanford C. Bernstein & Co., LLC, dated January 17, 2023.
This commenter states that adding IntelligentCross' displayed
liquidity to the public quote would enable market participants to
interact with better prices, enhance price discovery, and minimize
pricing errors. See id.
    \62\ See Letter from Faisal Sheikh, Assistant General Counsel,
FINRA, dated March 13, 2023 (``FINRA Letter''); Letter from Faisal
Sheikh, Assistant General Counsel, FINRA, dated August 22, 2023
(``FINRA Letter II''); Letter from Ari Burstein, General Counsel,
Imperative Execution, dated February 16, 2023 (``IntelligentCross
Letter''); Letter from Ari Burstein, General Counsel, Imperative
Execution, dated July 14, 2023 (``IntelligentCross Letter II'');
Letter from Ari Burstein, General Counsel, Imperative Execution,
dated August 18, 2023 (``IntelligentCross Letter III'').
    \63\ In particular, one commenter states that the Commission
should reconsider and withdraw the Commission Interpretation of
Automated Quotations. See Citadel Letter at 1-4, 8 (stating, among
other things, that the Commission Interpretation of Automated
Quotations is ``inconsistent with the plain text of Regulation NMS
and therefore invalid''); Citadel Letter II at 3; Citadel Letter III
at 2, n.11. Some commenters question the appropriateness of the ADF
in today's market structure, including the need for the ADF given
the number of exchanges and active non-display ATSs in the
marketplace. See Nasdaq Letter at 2; Healthy Markets Letter at 8;
IEX Letter at 10. One commenter recommends that the Commission
should consider ``whether the ADF is still needed or should be
eliminated entirely.'' Nasdaq Letter at 1, 3 (stating that the ADF
``continues to exist in form only, while serving no productive
function''). One commenter raises general questions regarding the
potential impact to competing consolidators of adding
IntelligentCross protected quotes after the implementation of the
Commission's Market Data Infrastructure Rule. See IEX Letter at 9.
Finally, some commenters state that approval of the Proposal may
undermine the recent Commission proposals to modernize equity market
structure. See Healthy Markets Letter at 16; Nasdaq Letter at 2. One
of these commenters also questions how recent proposed reforms to
Rule 605 of Regulation NMS would apply to the Proposal, particularly
in relation to the single MPID that IntelligentCross uses to
identify and report its transaction activity. See Healthy Markets
Letter at 5, 16. These comments raise issues that are beyond the
scope of the Commission's consideration of whether the present
Proposal is consistent with the Exchange Act and the rules and
regulations thereunder.

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1. Compliance With Regulation NMS and Ongoing Obligation To File

a. Definition of Automated Quotation and Protected Quote Status
    As discussed above, FINRA believes that the quotations displayed on
the ASPEN Fee/Fee book would meet the definition of an ``automated
quotation'' under Regulation NMS,\64\ and thus ``protected'' under the
Order Protection Rule.\65\
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    \64\ See Notice, supra note 3, at 79403.
    \65\ 17 CFR 242.611. Rule 611(a)(1) requires a trading center to
establish, maintain and enforce written policies and procedures that
are reasonably designed to prevent trade-throughs on the trading
center of protection quotations. 17 CFR 242.611(a)(1).
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    Some commenters raise concern that IntelligentCross' displayed
quotations do not meet the Commission's definition of ``automated
quotations'' due to the intentional delay built into IntelligentCross'
delayed matching process.\66\ In particular, some commenters state that
the Proposal does not demonstrate how the intentionally delayed
matching process is de minimis.\67\ Some commenters state that the
Proposal wrongly assumes that any delay under a millisecond is de
minimis.\68\ One commenter questions whether IntelligentCross' delayed
matching process ``frustrates the purposes of Rule 611 by impairing
fair and efficient access'' as required by the Commission
Interpretation of Automated Quotations.\69\
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    \66\ See Citadel Letter at 1; SIFMA Letter at 3; FIA PTG Letter
at 1-2; FIA PTG Letter II at 1-2; Nasdaq Letter at 2; Healthy
Markets Letter at 13; Citadel Letter II at 1; Citadel Letter III at
1.
    \67\ See Citadel Letter at 1; FIA PTG Letter at 1-2; FIA PTG
Letter II at 1-2; SIFMA Letter at 4; Citadel Letter III at 2.
    \68\ See Citadel Letter at 4; FIA PTG Letter at 2; Citadel
Letter II at 3; Citadel Letter III at 2.
    \69\ See Citadel Letter at 3; Citadel Letter II at 5; Citadel
Letter III at 4.
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    In response, IntelligentCross states that its matching process is
consistent with the Commission Interpretation of Automated
Quotations.\70\ IntelligentCross states that, while the Commission did
not establish a ``bright line de minimis threshold,'' the ASPEN Fee/Fee
book's matching engine ``operates near-continuously and when a new
order arrives in the ASPEN Fee/Fee book, it will participate in the
next scheduled match event by interacting with existing orders in the
order book within a maximum time capped at 900 microseconds.'' \71\ The
Commission also disagrees with commenters who assert that as a result
of IntelligentCross' matching system, quotations displayed on the ASPEN
Fee/Fee book would not meet the definition of an ``automated
quotation'' under Regulation NMS. The Commission issued a final
interpretation that, when determining whether a trading center
maintains an ``automated quotation'' for purposes of Rule 611 of
Regulation NMS, the term ``immediate'' in Rule 600(b)(6) precludes any
coding of automated systems or other type of intentional device that
would delay the action taken with respect to a quotation unless such
delay is de minimis--i.e., so short as to not frustrate the purposes of
Rule 611 by impairing fair and efficient access to an exchange's
quotations.\72\ In accordance with that interpretation, the Commission
does not believe that IntelligentCross' delayed matching functionality
precludes IntelligentCross from maintaining an automated quotation.
Because the delay imposed by IntelligentCross is well within geographic
and technological latencies experienced today that do not impair fair
and efficient access to an exchange's quotations or otherwise frustrate
the objectives of Regulation NMS, the Commission believes that such
intentional delay will not frustrate the purposes of Regulation NMS by
impairing fair and efficient access to IntelligentCross'
quotations.\73\ Accordingly, the delay in IntelligentCross' matching
functionality (a randomized delay of up to 900 microseconds) is de
minimis and thus IntelligentCross can maintain a protected
quotation.\74\
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    \70\ See IntelligentCross Letter at 9.
    \71\ Id. FINRA also highlights the overall record of the
Proposal, including the information and analysis provided by FINRA
in the Notice and the letters by FINRA and IntelligentCross
responding to comments regarding the qualification of
IntelligentCross' quotes as ``protected quotations'' under
Regulation NMS. See FINRA Letter II at 3. Accordingly, FINRA states
that the ``Commission has available detailed information regarding
IntelligentCross' operations and the nature of its quotations that
is sufficient to enable the Commission to make a substantive
determination regarding whether FINRA's rule filing to add
IntelligentCross as an ADF participant is consistent with the
Exchange Act.'' Id. at 3.
    \72\ See Commission Interpretation of Automated Quotations,
supra note 15.
    \73\ See Citadel Secs., 45 F.4th at 37 (upholding Commission's
determination that a 350-millisecond delay was de minimis, noting
that it was ``similar to the delay that traders' communications
already experience when traveling between various other exchanges
across the country'').
    \74\ See Commission Interpretation of Automated Quotations,
supra note 15.
---------------------------------------------------------------------------

    One commenter states that the ``novel features'' of the Proposal
have not been adequately assessed to provide the Commission with
sufficient basis to make an affirmative finding that the Proposal is
consistent with the Exchange Act.\75\ One commenter states that
IntelligentCross should provide additional transparency on the
operation of its matching process.\76\ This commenter states that all
markets, including ATSs and registered exchanges, ``should be subject
to an equivalent level of transparency and review'' regarding ``how
their quotes may be accessed and displayed and how executions involving
those quotes may occur.'' \77\ This commenter also states that market
participants need enough information ``so that those who wish to do so
can replicate how the mechanism will affect results in various market
conditions.'' \78\ Additionally, this commenter states that it is
unclear whether market participants could alter their routing
strategies to account for IntelligentCross' ``randomized delay in the
same way they can account for static

and geographic delays.'' \79\ Similarly, another commenter states that
the randomized nature of the matching process ``creates significant
challenges for best execution for brokers'' and prevents ``predictable
staging of order sending activity by brokers across multiple venues,''
resulting in ``significant risk of material information leakage and
quote fading--leading to materially worse execution quality for
investors.'' \80\
---------------------------------------------------------------------------

    \75\ See Citadel Letter at 4. This commenter states that the
``required assessment of whether or not an intentional delay is de
minimis must consider the impact of the intentional delay on fill
rates and execution quality and whether it operates to frustrate the
purposes of Rule 611 by impairing fair and efficient access to
displayed quotations.'' Id. at 8. The commenter further states that
based on the data presented in the Proposal, ``nearly 9% of
executable transactions do not occur'' because of the reasons
described by the commenter in its letter, which the commenter states
is ``certainly not de minimis.'' Id. The commenter also states that
granting ``protected quotation'' status for the first time to a
matching process that uses discrete match events would treat the
IntelligentCross displayed quote as equivalent to those on other
market centers, even though the matching of counterparties and the
execution of transactions only occurs after the match event is
conducted. Id. at 7. See also Citadel Letter II at 9 (stating that
the Proposal does not contain any analysis as to the whether the
intentional delay may be inconsistent with Exchange Act Section
15A(b)(6) or Rule 610(b)(2) of Regulation NMS); IEX Letter II at 1
(stating that there are ``meaningful differences between the
matching process proposed to be used by IntelligentCross and the
processes used by all other markets with protected quotes today.'').
    \76\ IEX Letter at 2; IEX Letter II at 2. This commenter states
that there should be additional transparency on the ``specific
inputs and the formula(s) applied'' and the ``technology or methods
used to apply the randomized delay within the timebands.'' Id. at 2-
3. One commenter states that ``FINRA must provide all necessary
information and analysis in its own proposal so that the `public
[can] provide meaningful comment' on FINRA's analysis.'' Citadel
Letter III at 3.
    \77\ IEX Letter at 3. See also IEX Letter II at 3-4 (contrasting
the Proposal's level of disclosures on the IntelligentCross matching
process with a recent exchange proposed rule change on a new order
type and noting that a matching process driven by ``artificial
intelligence'' requires further inquiry and disclosure, especially
in the application of displaying and accessing protected
quotations).
    \78\ IEX Letter II at 4 (``Specifically, [market participants]
would not know the amount of time to account for in `staggering' the
routing of their orders to IntelligentCross. If they send individual
orders to arrive on all markets simultaneously, the order to
IntelligentCross will be subject to a maximum delay of 900
microseconds. If the execution of the IntelligentCross order were
delayed substantially longer than the minimum time required to
receive execution reports from other markets, this could allow fast
market participants to cancel resting orders on IntelligentCross
before the execution could occur.'').
    \79\ IEX Letter at 6.
    \80\ See Healthy Markets Letter at 14. This commenter also
states, without identifying specifics, that the delayed randomized
match creates ``some challenges regarding the operation of ISOs.''
See id. at 4. See also Healthy Markets Letter II at 4; Citadel
Letter at 6-7 (stating that market participants could have
difficulty adopting routing strategies to account for
IntelligentCross' randomized intentional delay); Citadel Letter III
at 6-7 (stating that the randomized intentional delay ``makes it
practically impossible for market participants to stagger order
routing such that orders are executed at IntelligentCross and other
venues at precisely the same time''); IEX Letter II at 2 (stating
that the matching process used by IntelligentCross is ``relatively
opaque and unpredictable compared to other markets with protected
quotes'').
---------------------------------------------------------------------------

    One commenter raises concerns about the relative ability of
different market participants to react to market price movements in
deciding whether to cancel after their orders have been accepted by the
IntelligentCross system and during the delay before execution.\81\ This
commenter believes that some ``participants could use their superior
ability to track price changes on other markets within the variable
delay period to determine whether to cancel their orders.'' \82\ This
commenter asserts that this is a unique challenge that market
participants do not face in managing the orders that they send to other
protected quote venues.\83\
---------------------------------------------------------------------------

    \81\ See IEX Letter II at 4.
    \82\ See id. at 5.
    \83\ See id. at 4.
---------------------------------------------------------------------------

    Some commenters state that the ability for liquidity providers to
cancel displayed ADF orders through IntelligentCross' functionality at
any time raises questions about whether its functionality is consistent
with Regulation NMS and prior Commission guidance.\84\ For example,
some commenters state that they are concerned that a resting limit
order could be cancelled at any time (even after the incoming order is
received) prior to the match, including when such incoming orders are
routed to IntelligentCross consistent with regulatory obligations under
the Order Protection Rule.\85\ One commenter states, according to data
it compiled on typical routing latencies using fiber infrastructure
between datacenters, a liquidity provider on IntelligentCross has ample
time to observe the trades executed on other U.S. equities exchanges
before determining whether to cancel its own resting order.\86\ The
commenter states that this option to cancel benefits liquidity
providers on IntelligentCross at the expense of liquidity takers and
hurts market competition across venues.\87\ The commenter further
states that the non-match event data stated in the Proposal is a
``material'' figure that ``likely understates expected cancellation
rates'' if market participants are required to route order flow to
IntelligentCross.\88\ Another commenter states that order posters in
the ASPEN Fee/Fee book have the ability to immediately cancel their
orders, whereas order transmitters seeking to interact with that
interest at the NBBO do not have the same ability to cancel their
orders due to their regulatory obligation to attempt to access the
protected quote.\89\ One commenter asserts that the IntelligentCross
``price-sliding'' mechanism to avoid locking its own market can result
in quotations that may be ``impossible to access'' for incoming
orders.\90\ Another commenter states that the Proposal ``lacks basic
information, such as whether the speed bump is symmetric or asymmetric
and how it operates in practice.'' \91\ One commenter states that it
has concerns about IntelligentCross creating a new protected NBB or NBO
for orders that are pending a match and for which new, incoming orders
will be ``very likely inaccessible.'' \92\ The commenter provides a
hypothetical example to support its assertion where, after a number of
events occur in the markets, the NBBO is made up solely of two 100
share orders on IntelligentCross such that, if another market
participant responded to the quote, the new participant would be
sequentially added to the queue and would not trade.\93\ Another
commenter requests more transparency on how the consolidated market
data feeds would reflect the state of IntelligentCross' protected
quotes.\94\
---------------------------------------------------------------------------

    \84\ See SIFMA Letter at 3-4. See also Citadel Letter II at 6
(stating that ``[t]he displayed quotations on IntelligentCross are
`maybe' quotations that do not provide market participants with
execution certainty. As a result, it would frustrate the purposes of
Rule 611 to provide trade-through protection to these manual
quotations on IntelligentCross.''); Citadel Letter III at 5.
    \85\ See SIFMA Letter at 3-4; Citadel Letter at 4. One of these
commenters discusses prior SRO proposals considered by the
Commission that raised similar concerns related to asymmetrical
``speed bumps'' in which one of the orders and/or messages on one
side of the market are subject to a delay whereas others are not.
See SIFMA Letter at 3. See also Citadel Letter II at 8 (stating that
the IntelligentCross intentional delay resembles an asymmetric delay
and, as a result, the Proposal warrants further scrutiny ``to
determine whether any discrimination is unfair and, therefore,
inconsistent with the Exchange Act''); Citadel Letter III at 4.
    \86\ See Citadel Letter III at 6.
    \87\ See id. at 6. This commenter also states that
``geographical and technological latencies are applicable to all
market participants and do not provide liquidity providers with a
clear structural advantage--namely, the option to cancel a displayed
quote after an incoming order reaches the IntelligentCross matching
engine.'' Id. at 8.
    \88\ See Citadel Letter at 5. This commenter further states that
IntelligentCross fails to consider that the execution experience on
IntelligentCross may be far worse than advertised, and may explain
why more orders are not routed to the venue. See Citadel Letter III
at 7. See also IEX Letter at 6 (requesting more transparency on how
often cancellations might occur if IntelligentCross were to maintain
a protected quote); Citadel Letter III at 8 (stating that the
statistics cited by IntelligentCross are only based on its current
status as a non-protected quotation venue where market participants
are not required to route to IntelligentCross and its unclear the
impact that granting IntelligentCross protected quotation status
would have on those figures).
    \89\ See SIFMA Letter at 3. This commenter states that areas to
explore in addressing its concerns with the Proposal could include
``instituting a delay regarding the ability to cancel a posted order
that mirrors the delay for incoming orders seeking to interact with
that posted order or removing the delay on incoming ISO/IOC orders
attempting to access the ADF protected quote.'' Id. at 4, n.10.
    \90\ Citadel Letter III at 3.
    \91\ FIA PTG Letter at 2.
    \92\ See FIA PTG Letter II at 2; see also Citadel Letter II at
5-6.
    \93\ See FIA PTG Letter II at 2. IntelligentCross responds that
the specific example the commenter illustrates, while possible to
occur, is nonetheless extremely unlikely, according to their most
recent calculations based on observations on the IntelligentCross
platform. Specifically, in June 2023, the daily average incidence of
such a hypothetical was 158 times in the course of 45 million
orders, i.e., 0.00035 percent of the time. See IntelligentCross
Letter II at 7.
    \94\ See IEX Letter at 8; IEX Letter II at 5.
---------------------------------------------------------------------------

    In its response letters, IntelligentCross states that it disagrees
with the characterizations made by commenters of the IntelligentCross
matching process.\95\ Specifically, IntelligentCross states that its
matching process is ``completely symmetric in nature and does not favor
a particular side of the trade; there is no differential treatment of
certain market participants.'' \96\ IntelligentCross states that both
sides--the buyer and the seller--``can cancel or update their orders at
any time prior to a match'' and ``must equally wait for the next
scheduled match event to occur.'' \97\ It states that no information is
provided to any market participant regarding the status (or existence)
of the

matchable state or the match event.\98\ IntelligentCross also
emphasizes that the regulatory obligations attendant to ``protected
quotations'' under Regulation NMS do not provide a guarantee of an
execution.\99\ Accordingly, IntelligentCross states that a market
participant that routes an order to any market with the intention of
matching against a displayed order may not ultimately receive an
execution.\100\ Moreover, IntelligentCross disagrees with a commenter's
statement that non-match events on IntelligentCross are ``material''
\101\ and states that there is no evidence to the effect that non-match
rates would increase if market participants are required to route order
flow to IntelligentCross.\102\ IntelligentCross states that ``it is
just as likely that cancellations will decrease'' as ``the
IntelligentCross order book will be in a matchable state more
frequently.'' \103\
---------------------------------------------------------------------------

    \95\ See IntelligentCross Letter at 3; IntelligentCross Letter
II at 3.
    \96\ See IntelligentCross Letter at 4. IntelligentCross further
states that both the taker and maker ``are on equal footing for the
next scheduled match while maintaining full control of their orders,
and both sides of the trade must wait equally for the next scheduled
match event to occur.'' IntelligentCross Letter II at 5.
    \97\ IntelligentCross Letter at 4.
    \98\ IntelligentCross Letter III at 4.
    \99\ IntelligentCross Letter at 4.
    \100\ Id. IntelligentCross also states that, in the case of
ISOs, commenter ``concerns are misplaced as once the ISO is sent to
a trading center displaying a protected quotation, a broker's
obligations under the Rule 611 have been met.'' Id. at 5.
IntelligentCross also states that ``[t]he fact that a market
participant may not receive an execution when routing to a market is
not unique to IntelligentCross and is not indicative of the absence
of fair and efficient access.'' IntelligentCross Letter II at 4.
    \101\ See supra note 88.
    \102\ IntelligentCross Letter at 8.
    \103\ Id.
---------------------------------------------------------------------------

    IntelligentCross also disagrees with commenters \104\ that express
concern regarding the ability for liquidity providers to cancel their
order in IntelligentCross prior to a match event and believe it to be
detrimental to the markets and investors.\105\ IntelligentCross' stated
purpose is to provide a ``venue that optimizes price discovery,
achieves maximum price stability after trades, and provides an
opportunity for market participants to improve performance and achieve
best execution by reducing market impact and adverse selection.'' \106\
IntelligentCross points to its own user experience on the platform, and
data specifying that ``in January 2023, ASPEN Fee/Fee [book] improved
the NBBO over 5.3 million times per day (for orders of round-lot size
or larger on arrival).'' \107\ Additionally, IntelligentCross states
that any ``trade-offs'' due to the manner of IntelligentCross' matching
process ``certainly do not frustrate the purpose of Regulation NMS by
impairing fair and efficient access to IntelligentCross' displayed
quotations.'' \108\ IntelligentCross also states that in the scenario
where the NBBO moves between the time an order is received and the next
match event takes place, depending on the direction the NBBO moves, the
liquidity taker may end up better off not executing at the old
NBBO.\109\ Additionally, the ``price sliding mechanism'' raised by one
commenter \110\ is designed to address Rule 610 requirements to
establish, maintain, and enforce specific written rules that are
generally aimed at limiting the display of quotations that lock or
cross any protected quotations in an NMS stock.\111\ Moreover,
IntelligentCross states that there is no basis for the assumption by a
commenter \112\ that there is a significant risk of information leakage
and quote fading due to an IntelligentCross protected quote.\113\
---------------------------------------------------------------------------

    \104\ See supra notes 84-87 and accompanying text.
    \105\ IntelligentCross Letter at 5.
    \106\ See id. at 1.
    \107\ Id.
    \108\ Id. at 6.
    \109\ See id. at n. 24. See also id. at 7 (stating that ``[t]he
determination of fair and efficient access should not be about
protecting the economic interests of one particular group of market
participants or impeding innovation or the introduction of
competition to protect the exchange status quo''); IntelligentCross
Letter III at 4 (stating that ``[a] point that either has been
misunderstood by commenters or effectively ignored in comments is
that a market participant who sends an order to IntelligentCross
does not know how much time remains before a match event may occur,
and therefore how long they have--whether they are a maker or
taker--to cancel or amend their order'').
    \110\ See supra note 90.
    \111\ See IntelligentCross Letter II at 10 (``In ASPEN, if a
displayed Limit Order or Primary Peg Order would lock or cross
displayed contra-side interest inside the ATS or the NBBO, such
order will be displayed one minimum price variation less aggressive
than the price of the displayed contra-side interest inside the ATS
or as part of the NBBO and ranked at the price of displayed contra-
side interest inside the ATS or as part of the NBBO. In the event
the displayed contra-side interest inside the ATS or the NBBO
updates, such order's displayed price will be updated to the most
aggressive price permissible without locking displayed contra-side
interest inside the ATS or as part of the NBBO, up to the order's
limit price, and such order's ranked price will be updated to the
most aggressive price permissible without crossing displayed contra-
side interest inside the ATS or as part of the NBBO, up to the
order's limit price.''). See also FINRA Rule 6240 (Prohibition from
Locking or Crossing Quotations in NMS Stocks).
    \112\ See supra note 80 and accompanying text.
    \113\ See IntelligentCross Letter at 6. For the proposition that
its system is designed to provide for best execution,
IntelligentCross states that in the past year, it has grown from 70
basis points of the market on average in January 2022 to 110 basis
points during January 2023. See id. In addition, IntelligentCross
reached its highest daily market share versus total consolidated
volume on June 6, 2023 at 146 basis points and has averaged over 124
basis points daily for the first six months of 2023. See
IntelligentCross Letter II at 2. IntelligentCross also states that,
for displayed orders in S&P 500 stocks, quotations in the ASPEN Fee/
Fee book were available strictly inside the NBB/NBO more than 12
percent of the time, with an average improvement of over 2.5 basis
points, and for displayed orders in Russell 3000 stocks and the top
100 ETFs, bids and offers strictly inside the NBB/NBO were available
over 9 percent of the time, with an average improvement of over 10
basis points. See id.
---------------------------------------------------------------------------

    With respect to commenter concerns regarding ``speed'' in the
markets related to the ability to cancel on IntelligentCross,\114\
IntelligentCross states that speed advantages already exist for faster
market participants related to executions on all markets, including
those currently with protected quotations such as exchanges.\115\
Accordingly, Intelligent states that ``it is unrealistic to claim that
there is no speed advantage across all trading markets, including on
continuous exchange markets.'' \116\
---------------------------------------------------------------------------

    \114\ See supra notes 81-83 and accompanying text.
    \115\ See IntelligentCross Letter II at 6.
    \116\ Id.
---------------------------------------------------------------------------

    With respect to commenter concerns regarding ``predictability'' and
the ability for market participants to ``replicate'' the matching
process due to the randomization of the matching delay,\117\
IntelligentCross responds that the randomization of the matching
process ``is what contributes to [the] matching process not
discriminating in favor of a particular market participant or category
of participants, and also makes any would-be manipulation of the
matching process difficult by reducing the potential for `systematical
gaming.' '' \118\
---------------------------------------------------------------------------

    \117\ See supra notes 78 and 80 and accompanying text.
    \118\ IntelligentCross Letter III at 4.
---------------------------------------------------------------------------

    In addressing commenter concerns regarding any difficulties for
market participants to adapt to an IntelligentCross protected
quote,\119\ IntelligentCross states it is already widely used by most
major broker-dealer and electronic trading firms.\120\ IntelligentCross
states that these firms and others ``make routing decisions every day
in response to the numerous order types already in place by exchanges,
as well as implement a plethora of routing strategies to interact with,
and respond to, the displayed liquidity in the markets.'' \121\
IntelligentCross further states that ``brokers must currently consider
and account for technological and geographic differences and latencies
when routing.'' \122\ Additionally,

IntelligentCross points to the ``technological capabilities of order
routers today'' and believes that a market participant ``should not
have difficulties in configuring their routers to adopt to the
IntelligentCross matching process.'' \123\ IntelligentCross states that
market participants already use ``tools to manage order routing and
repricing on the scale of hundreds of microseconds'' such as
``mechanisms that adapt to the changing technology on trading venues,''
including adaptations that address delay periods.\124\ Accordingly,
IntelligentCross believes that any market participants should be able
to account for the IntelligentCross protected quote without significant
or material changes to its technology and without adopting any change
that would frustrate the purposes of Regulation NMS.\125\
---------------------------------------------------------------------------

    \119\ See supra notes 78-80 and accompanying text.
    \120\ See IntelligentCross Letter at 2, 7.
    \121\ IntelligentCross Letter at 7. IntelligentCross also states
that randomizing the match frequency provides benefits to both sides
of a trade by, for example, reducing the potential for ``gaming,''
which can impede the process for achieving best execution. See id.
at n.28.
    \122\ Id. at 7. IntelligentCross states that the ``speed of a
trader's software, telecommunication resources, geography, and the
number of ports purchased from an exchange'' are all factors that
``can affect outcomes as much as (if not more than) any actual delay
mechanism.'' IntelligentCross Letter II at 6.
    \123\ IntelligentCross Letter at 7. For example,
IntelligentCross states that its matching process ``does not prevent
market participants'' from adopting ``staggering'' order routing
strategies or employing ``tools that already exist to assist in the
`predictable staging' of order sending activity across multiple
venues.'' IntelligentCross Letter II at 5-6.
    \124\ See IntelligentCross Letter II at n.23.
    \125\ IntelligentCross Letter at 2, 7. IntelligentCross also
states that none of the commenters identify ``any basis under
current regulations or from a practical standpoint why they would
not be able to adjust and account for the IntelligentCross matching
process.'' Id. at 7-8.
---------------------------------------------------------------------------

    In response to questions regarding how IntelligentCross protected
quotes would be reflected in consolidated market data feeds,\126\
IntelligentCross states that it will provide any quotes or quote
updates to the ADF no later than when it is disseminated via the IQX
Market Data Feed.\127\ In response to commenter questions regarding
additional transparency of the matching process,\128\ IntelligentCross
states that it publicly posts its Form ATS-N disclosures on EDGAR.\129\
IntelligentCross also states that in calculating its matching
schedules, the firm uses an ``overnight optimization process'' that
uses, among other things, historical performance measurements from
prior days' matches, and each security has an individualized matching
schedule.\130\ IntelligentCross further states that it has policies and
procedures in place to oversee and to review the calculation and
application of its matching schedules.\131\ In particular,
IntelligentCross states that it performs reviews on a daily basis to
ensure that its matching parameters are within the correct time
bands,\132\ and, on a weekly basis, reviews performance of its systems
``to ensure that it is accomplishing its objectives and to ensure that
the matching process does not act in a discriminatory manner in favor
of or against any participant or category of participants.'' \133\
---------------------------------------------------------------------------

    \126\ See supra note 94 and accompanying text.
    \127\ IntelligentCross Letter II at 7.
    \128\ See supra note 76 and accompanying text.
    \129\ IntelligentCross Letter II at 11 (additionally reiterating
arguments made in the Proposal).
    \130\ Id. at 11 (``The match event intervals per security are
adjusted overnight after enough data points have been accumulated to
warrant an adjustment, and each match event interval is designed to
achieve two objectives: (1) provide for as many matches as possible
to maximize liquidity; and (2) keep the NBBO as stable as possible
for a period of time after executions occur on the ATS'').
IntelligentCross further states that one commenter misunderstands
its use of ``machine learning/AI'' in the IntelligentCross matching
process, and asserts that such technology is used solely for
calculating the matching schedules using the overnight optimization
process. See IntelligentCross Letter III at 2. IntelligentCross
represents that ``no changes occur to the IntelligentCross matching
process during the trading day due to `machine learning technology'
or AI,'' and the IntelligentCross ``matching process is not reactive
to changing market conditions like other exchange order types or
matching processes, i.e., our trade matching process is not `driven
by AI as characterized by the commenter.'' Id. See also supra note
77 (describing commenter concern on the use of ``machine learning
technology'' in the IntelligentCross matching process).
    \131\ See IntelligentCross Letter III at 4.
    \132\ IntelligentCross states that this review is to ensure
``there are no anomalies outside a tolerance time band before those
matching schedules are utilized during the trading day'' and ``a
principal signs off that such review was performed.'' Id. at 4-5.
    \133\ Id. at 5.
---------------------------------------------------------------------------

    The other concerns related to the IntelligentCross matching process
and the qualification of its displayed quotes as a protected quotation,
have been adequately addressed in the response letters by
IntelligentCross and FINRA, as well as in the Proposal, such that the
Proposal is consistent with the requirements of the Exchange Act and
the rules and regulations applicable to a national securities
association. Specifically, with respect to requests for more
transparency and detail on access to its displayed quotations and the
differential treatment of market participants,\134\ IntelligentCross
has provided more detail, demonstrating that its matching process is
symmetric in nature and does not favor a particular side of the
trade.\135\ Match schedules are defined by minimum/maximum time bands
for each security (between 150 and 900 microseconds) based on an
overnight optimization process that uses historical performance
measurements from prior days' matches. The time of the actual match
event is randomized within the match event band throughout the course
of the trading day. As described by IntelligentCross, the delayed
matching process is calibrated to reduce market impact and adverse
selection for market participants, thereby fostering increased access
to displayed liquidity through the ADF and more competition among
markets to the benefit of all market participants. Both sides--the
buyer and the seller--can cancel their orders at any time prior to a
match and must wait equally for the next scheduled match event to occur
in price-time priority, thus not resembling an asymmetric delay as
supposed by certain commenters.\136\ The IntelligentCross matching
process provides both sides a fair opportunity to manage their orders,
as both sides are blind to the length of the delay once an order is
accepted by the system or where the order sits in the delay mechanism
(e.g., whether there are 5 microseconds or 500 microseconds remaining
before a match event takes place), and neither side knows when
submitting their order which direction the market may move if there are
changes in the NBBO that occur during the delay. Accordingly, depending
on the side of the market the NBBO moves, the buyer or seller may be as
equally likely to attempt to cancel their orders prior to a match event
as there is not a systematized delay on one side of a trade, and thus
the matching process does not impose unfairly discriminatory terms
against efficient access to displayed quotations.
---------------------------------------------------------------------------

    \134\ See supra note 84.
    \135\ See supra note 75 (describing commenter's request to
consider impact of the intentional delay on fill rates and execution
quality on IntelligentCross).
    \136\ See supra note 87 and accompanying text.
---------------------------------------------------------------------------

    With respect to more information on ``fill rates and execution
quality'' on IntelligentCross in assessing protected quotation status
to the market, IntelligentCross provided additional data highlighting
execution quality metrics for the first six months of 2023.\137\
---------------------------------------------------------------------------

    \137\ See IntelligentCross Letter at 2; IntelligentCross Letter
II at 2. See also supra note 113 (describing execution quality
statistics for the first six months of 2023).
---------------------------------------------------------------------------

    The Commission also agrees with IntelligentCross that the
regulatory obligations associated with protected quotations under
Regulation NMS do not provide a guarantee of an execution, which
commenters appear to suppose when highlighting non-match events or
cancellation rates.\138\ While market participants accessing the
IntelligentCross protected quotation would be subject to
IntelligentCross' delayed, randomized matching process, the Commission
believes, as stated above, that the length of

IntelligentCross' specific delay or its randomized nature would not
frustrate the purposes of Regulation NMS by impairing fair and
efficient access to IntelligentCross' displayed quotations.
Furthermore, as described above, the information provided in the
Proposal, the response letters by IntelligentCross and FINRA, and the
availability of further information on IntelligentCross' publicly
posted Form ATS-N and website, have addressed transparency concerns
surrounding the IntelligentCross matching process such that the
information will promote fair and efficient access to its quotations.
---------------------------------------------------------------------------

    \138\ See infra notes 169 and 171 and accompanying text.
---------------------------------------------------------------------------

    The Commission is also unpersuaded by comments regarding the
difficulties for market participants to adapt to an IntelligentCross
protected quote.\139\ With respect to ISOs,\140\ the Commission
believes that market participants can satisfy their obligations under
Regulation NMS by simply routing ISOs to IntelligentCross' protected
quotations, as necessary. While some commenters state that the
IntelligentCross matching mechanism could pose challenges for market
participants to deploy certain order routing strategies or lead to
information leakage,\141\ IntelligentCross is already widely used by
most major broker-dealer and electronic trading firms,\142\ which no
other commenter disputed, and the commenters did not present evidence
that the current considerations that market participants face when
interacting with IntelligentCross' liquidity and displayed liquidity in
other markets would be appreciably affected by the Proposal.
---------------------------------------------------------------------------

    \139\ See supra notes 78-80 and accompanying text.
    \140\ See supra note 80.
    \141\ See id.
    \142\ See IntelligentCross Letter at 2 (in January 2023,
IntelligentCross' daily market share was 110 basis points, and was
consistently third in total shares traded by ATSs of NMS Tier 1 and
Tier 2 stocks in FINRA ATS weekly statistics, averaging $5.9 billion
notional traded per day).
---------------------------------------------------------------------------

b. Compliance With Rule 610 of Regulation NMS and Ongoing Obligations
    As discussed above, FINRA believes that IntelligentCross' proposed
level and cost of access to quotations on the ASPEN Fee/Fee book is
substantially equivalent to the level and cost of access to quotations
displayed by an SRO trading facility, both in absolute and relative
terms.\143\ Two commenters raise questions regarding the regulatory
process in connection with proposed changes to IntelligentCross'
operations and fees associated with displaying protected quotations on
the ADF.\144\ One commenter states that there is currently no
regulatory process for ongoing operational changes at non-exchange
venues with protected quotes and intentional access delays.\145\ This
commenter states that without the exchange notice and comment process
in connection with changes to operations, it seeks additional
information on the regulatory process for managing such changes at
IntelligentCross and the ADF.\146\ One commenter states that even if
IntelligentCross agrees to a method of review for material changes as
an ADF participant, IntelligentCross does not offer suggestions about
how rule filing and review process would work or suggest any
alternatives.\147\ This commenter also states that FINRA has made no
representation in the record to indicate it would be willing to
undertake a rule filing obligation with respect to material changes by
IntelligentCross as an ADF participant.\148\
---------------------------------------------------------------------------

    \143\ See Notice, supra note 3, at 79404, n.37.
    \144\ See Healthy Markets Letter at 2; FIA PTG Letter at 2; FIA
PTG Letter II at 2. See also IEX Letter at 3 (stating that it is
important for there to be a ``clear expectation that material
changes to methods affecting quote display and access'' be subject
to appropriate review, for example, by requiring material changes to
be filed by FINRA through the SEC rule filing process); IEX Letter
II at 6.
    \145\ See FIA PTG Letter at 2; FIA PTG Letter II at 2-3.
    \146\ See FIA PTG Letter at 2; FIA PTG Letter II at 2-3.
    \147\ See IEX Letter II at 6.
    \148\ See id. at 6.
---------------------------------------------------------------------------

    One commenter states that if the Commission chooses to permit any
trading center to disseminate quotations using the ADF, it must
condition approval with limitations that are consistent with
limitations imposed upon other trading venues (i.e., exchanges) whose
quotations have protected quotation status.\149\ In particular, this
commenter states that approval of the Proposal should be conditioned
upon IntelligentCross: (1) continuing to not charge for market data or
connectivity; (2) having fees and rebates (if adopted) that are at or
below those charged by exchanges; (3) notifying the Commission and
FINRA of all changes related to the ASPEN Fee/Fee book; and (4)
describing how any such changes are consistent with the ASPEN Fee/Fee
book quotations continuing to be included as a protected quotation is
consistent with the Exchange Act and protection of investors.\150\ This
commenter also states that both the Commission and FINRA should detail
how they would ``gather, review, analyze, and publish for public
consideration'' any changes to IntelligentCross' policies and
procedures related to the Proposal, as well as describe how they would
intervene to block or disallow any concerning changes in
IntelligentCross' policies and procedures related to the ADF.\151\
Overarching this commenter's concerns with the Proposal are that any
changes to the ASPEN Fee/Fee book rules and operations should be
treated the same for regulatory purposes as if they were changes made
by an exchange, including that they are put out for notice and public
comment, and subject to Commission disapproval.\152\
---------------------------------------------------------------------------

    \149\ See Healthy Markets Letter at 2. This commenter states
that if the Commission approves the Proposal, ``it would be
difficult, if not impossible, for the Commission to practically
constrain IntelligentCross' fees and potential limitations for
accessing the newly protected quotations.'' Id. at 9. See also
Healthy Markets Letter II.
    \150\ See Healthy Markets Letter at 2. This commenter also
states that if the Commission approves the Proposal, it should
expressly condition the approval on IntelligentCross being compliant
with Regulation SCI like other trading centers with protected
quotations. See id. at 8, n.29. IntelligentCross states that it
became Regulation SCI compliant as of August 1, 2023. See
IntelligentCross Letter III at 5.
    \151\ See Healthy Markets Letter at 2.
    \152\ See id. at 17. See also IEX Letter at 10; IEX Letter II at
6 (stating that ``approval of the Proposal would result in a double
standard in treatment of exchanges compared to ATSs that have
protected quotes'').
---------------------------------------------------------------------------

    In its response letters, IntelligentCross points to its current
regulatory responsibilities associated with being a registered broker-
dealer and an ATS, as well as the Regulation NMS obligations attached
to being an ADF participant.\153\ FINRA also states that its rules set
forth requirements applicable to an ADF participant and require that
such participants meet the requisite standards on an ongoing
basis.\154\ IntelligentCross states its belief that the level and cost
of access to its quotations complies with Rule 610 as it is
substantially equivalent to the level and cost of access to quotations
displayed by SRO trading facilities and will not impose burdens on
market participants.\155\ Additionally, IntelligentCross states that it
does not impose unfairly discriminatory terms that would prevent or
inhibit any person from accessing its quotations through a subscriber
of the trading

center.\156\ Specifically, IntelligentCross represents that ``it does
not tier or discriminate among subscribers'' and any registered US
broker-dealer in good standing of an SRO may become a subscriber of
IntelligentCross.\157\
---------------------------------------------------------------------------

    \153\ See IntelligentCross Letter at 11; IntelligentCross Letter
II at 8-9.
    \154\ See FINRA Letter II at 3-4.
    \155\ See IntelligentCross Letter II at 8-9 (discussing level
and cost of access to IntelligentCross). IntelligentCross states
that FINRA provides a pre-approved (non-exclusive) list of ADF
connectivity providers to help market participants seeking to access
quotations posted through the ADF, and ADF participants must be
accessible through at least two of the connectivity providers. Id.
at 8.
    \156\ See id. at 9 (discussing fair access to its market by
subscribers). IntelligentCross highlights obligations under FINRA
Rules 6240 (Prohibition from Locking or Crossing Quotations in NMS
Stocks), 6250 (Quote and Order Access Requirements), and 6260
(Review of Direct or Indirect Access Complaints) regarding ADF
access requirements. See id.
    \157\ See id. at 9-10 (also stating that IntelligentCross
creates and maintains records of all decisions granting or denying
access, that IntelligentCross considers a subscriber's regulatory
history in examining a subscriber's application, and that, when the
ASPEN Fee/Fee book displays orders through the ADF, non-subscribers
would access IntelligentCross).
---------------------------------------------------------------------------

    IntelligentCross also states that, while an ATS is not subject to
the same regulatory requirements as exchanges, it also does not share
the same benefits as exchanges.\158\ However, IntelligentCross states
that it does not object to notifying the Commission and FINRA in
advance if changes are made to the level and cost of access to the
ASPEN Fee/Fee book impacting the display of IntelligentCross' protected
quotations on the ADF, or the operation of the ASPEN Fee/Fee book
impacting the provision of the protected quote.\159\ IntelligentCross
also states that it does not object to an ``appropriately structured
process'' to engage the Commission in evaluating and commenting on such
changes.\160\ Further, IntelligentCross acknowledges that it may be
subject to other regulatory obligations in the future depending on
changes to its platform or its volume.\161\ But IntelligentCross
disagrees with the commenter's recommendation to condition
IntelligentCross' approval on ``continuing to not charge for market
data or connectivity'' \162\ given that it believes such a requirement
would not be consistent with the limitations imposed on exchanges and
the ``substantially equivalent'' basis under Rule 610.\163\
---------------------------------------------------------------------------

    \158\ See IntelligentCross Letter at 11.
    \159\ See id. IntelligentCross also states that it would not
object to describing how such changes are consistent with the ASPEN
Fee/Fee book quotations continuing to be included as protected
quotations, consistent with the Exchange Act. See id. In addition,
IntelligentCross states that material changes to its policies and
procedures governing access to IntelligentCross, including a change
to its fees, will be submitted to the Commission under Form ATS-N.
See IntelligentCross Letter II at 11.
    \160\ See IntelligentCross Letter at 11.
    \161\ See Notice, supra note 3, at 79402, n.19. See also
IntelligentCross Letter at 11, n. 41.
    \162\ See supra note 145 and accompanying text.
    \163\ See IntelligentCross Letter at 11-12. IntelligentCross
also states that it currently does not charge for market data and
connectivity. See id. at 12.
---------------------------------------------------------------------------

    FINRA, as the SRO responsible for enforcing compliance by ADF
participants with the requirements of the Exchange Act, must act as the
``gatekeeper'' for the ADF, and, as such, is required to closely
evaluate the extent to which ADF participants, including
IntelligentCross and any future ADF participants, meet the access
standards of Rule 610.\164\ As part of this process, the Commission
stated in the NMS Adopting Release that NASD (now FINRA) would be
required to submit a proposed rule change under Section 19(b) of the
Exchange Act in order to add a new ADF participant.\165\ If an ADF
participant is not complying with the access standards under Rule 610,
FINRA has the responsibility to stop publishing the participant's
quotations until the participant comes into compliance.\166\ The
Commission believes that a reasonable and appropriate method for FINRA
to satisfy its ongoing responsibility for ensuring that an ADF
participant is complying with Rule 610 is to submit material changes
that affect access, including the level and cost of access, to
quotations displayed by the ADF participant as proposed rule changes
under Section 19(b) of the Exchange Act that would be subject to notice
and comment.
---------------------------------------------------------------------------

    \164\ See NMS Adopting Release at 37549.
    \165\ See id.
    \166\ See id.
---------------------------------------------------------------------------

    The fees and the policies and procedures governing access to
protected quotations displayed on the ADF by IntelligentCross as
described above would provide market participants with fair and
efficient access and are not unfairly discriminatory such that they
would prevent a market participant from obtaining efficient access to
such quotations. All members in good standing of an SRO are eligible to
become IntelligentCross subscribers, and both subscribers and non-
subscribers may access IntelligentCross liquidity. IntelligentCross
offers both subscribers and non-subscribers multiple options to access
its liquidity. In addition, IntelligentCross has policies and
procedures that require it to respond to orders by non-subscribers as
promptly as it responds to orders by subscribers and allow for non-
subscribers to be able to automatically execute against quotations
displayed by the system. IntelligentCross does not assess charges that
may be assessed by exchanges, such as membership fees, trading rights
fees, risk gateway fees, and other miscellaneous fees.
IntelligentCross' proposed level and cost of access to quotations on
the ASPEN Fee/Fee book is substantially equivalent to the level and
cost of access to quotations displayed by an SRO trading facility, both
in absolute terms and relative to its trading volume.\167\ Both sides--
the buyer and the seller--can cancel or update their orders at any time
prior to a match and both must equally wait for the next scheduled
match event to occur. In addition, the Commission does not believe that
the level of cancellation during the delay imposes unfairly
discriminatory terms that prevent or inhibit any person from obtaining
efficient access to such quotations as it has been shown that non-match
events occur in a minority of cases, and market participants receive an
execution the majority of the time.\168\ IntelligentCross has policies
and procedures in place to oversee and review the calculation and
application of its matching schedules to help ensure the matching
process does not act in a discriminatory manner in favor of or against
any market participants.\169\ Furthermore, the Commission believes that
the cancellation rate alone does not demonstrate that IntelligentCross
imposes unfairly discriminatory terms given that the ability of any
market participant to successfully execute against any particular
displayed quote is subject to a number of factors and is not guaranteed
on any market, as at any time any market participant can be seeking to
execute against an order that is being repriced, changed, cancelled, or
executed by a different market participant.\170\
---------------------------------------------------------------------------

    \167\ See NMS Adopting Release at 35749, n.449.
    \168\ IntelligentCross states that in January 2023, 3.9 percent
of potential matches on the ASPEN Fee/Fee book did not complete
because a displayed order was cancelled, and 4.5 percent of
potential matches did not complete because the NBBO changed and at
least one of the sides became non-marketable. See IntelligentCross
Letter at 8, n.30.
    \169\ See supra note 133 and accompanying text.
    \170\ See Securities Exchange Act Release No. 89686 (August 26,
2020), 85 FR 54438, 54445 (September 1, 2020) (Order Approving a
Proposed Rule Change to Add a New Discretionary Limit Order Type
Called D Limit).
---------------------------------------------------------------------------

    Further, as discussed above, in the event that IntelligentCross
intends to make a material change to the policies and procedures
governing access to IntelligentCross, including a change to its fees,
it has represented that it will submit the changes made to FINRA, and
acknowledges that FINRA will post on its website an amended description
of IntelligentCross' policies, procedures, and fees governing
access.\171\ In response to comments on the lack of a notice and
comment process in connection with the potential for future material
changes to the operations and

fees of IntelligentCross as an ADF participant,\172\ FINRA has
represented to the Commission that it will file such material changes
as a proposed rule change with the Commission under Section 19(b) of
the Exchange Act.\173\ Under this process, the Commission would review
the proposed rule change and consider any public comments received. In
addition, changes to the operations of IntelligentCross, as well as its
disclosures on its public Form ATS-N, are subject to the requirements
of Rule 304 of Regulation ATS. Accordingly, the Commission believes
that commenter concerns regarding the regulatory process for proposed
changes to IntelligentCross' operations and fees associated with
displaying protected quotations on the ADF have been adequately
addressed by IntelligentCross and FINRA.\174\ FINRA's ongoing
obligation to ensure compliance by IntelligentCross as an ADF
participant with its Regulation NMS obligations, FINRA's commitment to
file proposed rule changes relating IntelligentCross' operations, and
IntelligentCross' regulatory responsibilities as an ATS, appropriately
ensures transparency and ongoing assessment of consistency with the
Exchange Act.
---------------------------------------------------------------------------

    \171\ See supra note 52.
    \172\ See supra notes 145-147.
    \173\ See FINRA Letter II at 4.
    \174\ See supra notes 150-152 and accompanying text.
---------------------------------------------------------------------------

    Finally, in response to one commenter's recommendation that
approval of the Proposal be conditioned on IntelligentCross
``continuing to not charge for market data or connectivity,'' \175\
such a condition is inconsistent with the limitations imposed on an ADF
participant under Rule 610 which requires a level and cost of access
that is substantially equivalent to the level and cost of access to
quotations displayed by SRO trading facilities.\176\
---------------------------------------------------------------------------

    \175\ See supra note 151.
    \176\ See supra note 151 and accompanying text.
---------------------------------------------------------------------------

2. Implementation Period

    FINRA states that the ``effective date'' of the Proposal would be
the date of the Commission's approval.\177\
---------------------------------------------------------------------------

    \177\ See Notice, supra note 3, at 790404.
---------------------------------------------------------------------------

    Two commenters suggest that the proposed implementation period for
the Proposal is too short given the connectivity arrangements that the
industry would need time to establish.\178\ One commenter suggests an
implementation period of no less than 120 days following the date of
Commission approval.\179\ Another commenter recommends an
implementation period of no less than 90 days following the date of
Commission approval.\180\ In one of its response letters,
IntelligentCross states that it has been working with industry
participants to ensure that they have all the information necessary to
prepare for the IntelligentCross protected quote.\181\ IntelligentCross
also states that most major broker-dealers and electronic trading firms
are already connected to, and trading within, IntelligentCross.\182\
Moreover, IntelligentCross believes that a reasonable implementation
timeframe would be to require that industry participants begin treating
IntelligentCross' quotes as a protected quotation no later than 90 days
after the date of the Commission's approval order.\183\ One commenter
states that the 90-day implementation period proposed by
IntelligentCross is in line with previous Commission guidance on
treating new exchange quotes as protected.\184\
---------------------------------------------------------------------------

    \178\ See FIA PTG Letter at 2; FIA PTG Letter II at 3; SIFMA
Letter at 4.
    \179\ See FIA PTG Letter at 2.
    \180\ See SIFMA Letter at 4-5.
    \181\ See IntelligentCross Letter at 10.
    \182\ See id.
    \183\ See id.
    \184\ See FIA PTG Letter II at 3 (citing to Securities Exchange
Act Release Nos. 58375 (August 18, 2008), 73 FR 49498, 49505 (August
21, 2008) (approval of the BATS Exchange), 61698 (March 12, 2010),
75 FR 13151, 13163 (March 28, 2010) (approval of the EDGA and EDGX
exchanges) and 78101 (June 17, 2016), 81 FR 41141 (approval of the
Investors' Exchange)).
---------------------------------------------------------------------------

    Following the issuance of this order and IntelligentCross having
met the conditions to begin operating as an ADF participant, market
participants will be required to have reasonably designed policies and
procedures to treat IntelligentCross' best bid and best offer as a
protected quotation.\185\ At the same time, to meet their regulatory
responsibilities under Rule 611(a) of Regulation NMS, market
participants must have sufficient notice of new protected quotations,
as well as all necessary information (such as final technical
specifications).\186\ Given that the Commission understands
IntelligentCross is already widely used by most major broker-dealer and
electronic trading firms,\187\ and has engaged in market participant
outreach regarding its status as an ADF participant,\188\ the
Commission believes that an implementation period of no less than 90
days following the date of Commission approval is a sufficient
timeframe for market participants to establish connectivity to the
IntelligentCross protected quotation in order to meet their obligations
under Rule 611. Accordingly, the Commission believes that it would be a
reasonable policy and procedure under Rule 611(a) to require that
industry participants to begin treating IntelligentCross' best bid and
best offer as a protected quotation within 90 days after the date of
this order, or such later date as IntelligentCross begins operation as
a new ADF participant.
---------------------------------------------------------------------------

    \185\ See 17 CFR 242.611(a).
    \186\ See Securities Exchange Act Release No. 53829 (May 18,
2006), 71 FR 30038, 30041 (May 24, 2006) (File No. S7-10-04)
(extending the compliance dates for Rule 610 and Rule 611 of
Regulation NMS under the Exchange Act).
    \187\ See supra note 120.
    \188\ See supra note 182.
---------------------------------------------------------------------------

3. ADF Technological Infrastructure

    One commenter states that the Commission and FINRA should consider
whether to ``wind down'' the ADF due to concerns regarding the latency
and technological infrastructure of the ADF.\189\ Specifically, this
commenter states that the Proposal does not provide any details of the
ADF's systems capabilities and questions whether the ``intake,
processing, and dissemination systems [are] up to 2023 speed and
capacity standards.'' \190\ This commenter also expresses concern
regarding the speed at which the ADF disseminates quotation data
compared to the speed at which IntelligentCross' proprietary quotation
feed is disseminated to market participants.\191\ This commenter states
that it is unclear the extent to which ``FINRA has attempted to upgrade
the system'' to address the latency gap.\192\ One commenter requests
more transparency regarding any latency tests conducted by FINRA with
IntelligentCross to determine the latency related to transmission from
IntelligentCross to the ADF and the time for the ADF to process and
publish updates to the SIPs.\193\
---------------------------------------------------------------------------

    \189\ See Healthy Markets Letter at 14-17.
    \190\ See id. at 14. This commenter asserts that it is ``not
aware of any public details regarding the details of [the ADF's]
operations, including systems specifications and latencies.'' Id.
    \191\ See id. at 7.
    \192\ See id. at 8.
    \193\ See IEX Letter at 8. This commenter also raises general
questions regarding latency and the use of consolidated data or
proprietary data for receiving IntelligentCross quotes. See id. at
9. IntelligentCross states that it has committed to providing quote
updates to the ADF no later than when they are disseminated via its
proprietary data feed. See IntelligentCross Letter II at 7.
---------------------------------------------------------------------------

    In its response letter, FINRA states that it has made technological
updates to the ADF infrastructure that make it ``well-equipped to
support use of the ADF by multiple market participants for

quoting and trading purposes.'' \194\ FINRA also states that its recent
technological updates to the ADF have significantly reduced the ADF's
processing latency times as compared to when the ADF was last
operational in 2015.\195\ FINRA also represents that it continues to
conduct capacity requirement testing with IntelligentCross and ``aim[s]
to address any potential areas identified for further improvement prior
to IntelligentCross becoming an ADF [p]articipant and sending quotes to
the ADF (subject to SEC approval).'' \196\ Additionally, based on the
results of FINRA's ADF testing with IntelligentCross, FINRA states that
ADF latency is generally in line with exchange latency to dissemination
by the SIPs.\197\ FINRA also states that it expects the ADF latency in
production to be lower than in the ADF test environment.\198\
Accordingly, FINRA believes that any processing latency for the ADF
would generally be in line with exchange processing latencies once
IntelligentCross begins quoting on the ADF.\199\
---------------------------------------------------------------------------

    \194\ See FINRA Letter at 3. FINRA states that in 2021 it began
a multi-year effort to update the technological infrastructure for
several of its facilities, relevant data vendor feeds, and related
reference data. See id. The ADF's trade reporting and quoting
functionality were migrated onto a new platform in November 2021 and
March 2022, respectively. See id.
    \195\ See id. FINRA states that the ADF supports increments of
nanoseconds for both its quoting and reporting functions. See id.
    \196\ Id.
    \197\ See FINRA Letter II at 6. FINRA states that the ADF
latency tests conducted by FINRA with IntelligentCross were
conducted as stress tests that included processing volumes and
sustained messages rates well in excess of those likely to be
experienced in production. See id. See FINRA Letter II at 5-6 for
additional detailed description of FINRA's ADF latency tests.
    \198\ See id.
    \199\ See id.
---------------------------------------------------------------------------

    The Commission believes that FINRA has demonstrated that, with the
recent technological updates to address latency in the ADF's system
capabilities,\200\ along with recent tests to the ADF application with
IntelligentCross, the ADF technology infrastructure will be consistent
with current speed and capacity standards for processing and
disseminating IntelligentCross' quotations. Moreover, FINRA and
IntelligentCross have represented that they will continue to conduct
testing and explore technological enhancements to further reduce ADF
latency, thus ensuring that the ADF technology infrastructure continues
to be consistent with current processing latencies.\201\
---------------------------------------------------------------------------

    \200\ See supra notes 195 and 196.
    \201\ See Notice, supra note 3, at 79404; FINRA Letter II at 6.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\202\ that the proposed rule change (SR-FINRA-2022-032) is
approved.
---------------------------------------------------------------------------

    \202\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\203\
---------------------------------------------------------------------------

    \203\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18677 Filed 8-29-23; 8:45 am]
BILLING CODE 8011-01-P