The Investors Exchange LLC, known as IEX, filed a proposed rule change with the Securities and Exchange Commission on December 8, 2025, to modify the handling of incoming Post Only orders that would lock or cross protected quotations on external markets. Published in the Federal Register on December 19, 2025, this filing became immediately effective as a non-controversial proposal under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. The change amends IEX Rule 11.190(b)(20) to introduce re-pricing for such orders, aiming to better align with member trading strategies and enhance displayed liquidity on the exchange. This development reflects ongoing efforts by exchanges to refine order types in response to market participant feedback, potentially influencing liquidity provision and market quality without introducing novel regulatory issues.
Background on Post Only Orders
Post Only orders on IEX are designed as displayed, non-routable orders that generally do not remove liquidity from the order book. According to IEX Rule 11.190(b)(20), these orders execute against resting liquidity only in specific cases, such as when trading securities priced below $1.00 or when they receive at least $0.01 in price improvement compared to the less aggressive of the order's limit price or the contra-side protected quotation. Otherwise, the order posts to the book unless it interacts with a non-displayed order carrying a Trade Now instruction, in which case the resting order executes against it.
Non-displayed orders, including limit, reserve, and discretionary limit orders, automatically include the Trade Now feature, while certain pegged orders may opt in. If not designated to cancel, Post Only orders are subject to display-price sliding under IEX Rule 11.190(h)(1), where they are ranked and displayed at one minimum price variant below the national best offer for bids or above the national best bid for offers if they would otherwise lock or cross external protected quotations.
This framework supports liquidity addition by incentivizing displayed interest, but member feedback highlighted a preference for minimizing liquidity removal, prompting the proposed adjustment.
Details of the Proposed Rule Change
The core amendment adds a new subparagraph (C) to IEX Rule 11.190(b)(20), stating that a Post Only order not designated to cancel, which at entry would lock or cross a protected quotation, will be ranked and displayed at one minimum price variant below the current national best offer for bids or above the national best bid for offers. This re-pricing occurs before booking, ensuring the order avoids immediate execution unless it locks a resting non-displayed order with Trade Now without also locking an external protected quotation.
For instance, if the national best bid and offer is $10.10 by $10.20, an incoming Post Only buy order at $10.20 would re-price to $10.19 and post, unless a non-displayed sell order at $10.19 with Trade Now exists on IEX, leading to execution at $10.19. Existing subparagraphs (C) through (F) are renumbered to (D) through (G) to accommodate this addition.
IEX designates the change as non-controversial, effective upon filing, with implementation to be announced at least ten days in advance and within 90 days. The filing notes consistency with similar functionalities on Nasdaq and the New York Stock Exchange, where post-only equivalents re-price or cancel in locking scenarios to prioritize displayed liquidity.
Legal and Regulatory Context
The proposal aligns with Section 6(b)(5) of the Securities Exchange Act of 1934, which requires exchange rules to promote just and equitable principles of trade, remove impediments to a free and open market, and protect investors. IEX argues the change furthers these goals by encouraging displayed liquidity provision, based on informal member feedback indicating strategies reliant on adding rather than taking liquidity.
No direct legal precedents are cited, but the filing references Commission approvals of analogous order types on other exchanges. Nasdaq's Rule 4702(b)(4)(A) and NYSE's Rule 7.31(e)(2)(B)(ii) handle post-only orders similarly by re-pricing to avoid locks or crosses, retaining the original limit for working purposes. This consistency suggests the proposal avoids new burdens on competition, as competing exchanges can adopt similar features through the SEC's rule change process.
The filing includes no comments received, and the Commission may suspend it within 60 days if deemed necessary for investor protection or public interest.
Implications and Perspectives
Short-term effects may include increased submission of Post Only orders to IEX, as members gain confidence in avoiding unintended executions. This could enhance the exchange's displayed liquidity pool, benefiting takers through improved price discovery and fill rates. Long-term, the change might contribute to broader market efficiency by standardizing order handling across venues, reducing fragmentation in trading strategies.
From a regulatory perspective, supporters view it as a pro-competitive adjustment that protects investors by fostering transparent markets. Critics, if any emerge, might argue it could complicate order interactions or favor certain participants, though the filing's alignment with existing models mitigates such concerns. Market makers and high-frequency traders may welcome the predictability, while retail investors indirectly benefit from deeper liquidity.
Overall, the proposal balances innovation with regulatory harmony, potentially setting a model for future exchange refinements.
In summary, this rule change refines IEX's Post Only functionality to prioritize re-pricing over execution in locking scenarios, drawing on member input and peer practices. Potential next steps include monitoring implementation for unintended effects, such as shifts in order flow or execution quality. Ongoing debates may center on whether such tweaks sufficiently address broader market structure issues, like the balance between displayed and non-displayed liquidity. Challenges could arise if external market conditions evolve, prompting further adjustments, while the trajectory points toward greater uniformity in order type behaviors across U.S. equities markets.
