Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Make Permanent Rule 11.24, Which Sets Forth the Exchange's Pilot Retail Price Improvement Program, 45575-45601 [2019-18636]
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Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18625 Filed 8–28–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
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Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change To Make
Permanent Rule 11.24, Which Sets
Forth the Exchange’s Pilot Retail Price
Improvement Program
August 23, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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notice is hereby given that on August
22, 2019, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’ or ‘‘SEC’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
during the 2.5 year period reviewed
from January 2016 through June 2018. In
addition, the Exchange’s analysis shows
that the Program has provided these
benefits to retail investors without
having an adverse impact on the broader
market. The proposal provides an
analysis of the economic benefits to
retail investors and the marketplace
flowing from operation of the Program,
which the Exchange believes supports
making the Program permanent.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Background
Cboe BYX Exchange, Inc. (‘‘BYX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to make permanent Rule 11.24,
which sets forth the Exchange’s pilot
Retail Price Improvement Program. The
text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–86742; File No. SR–
CboeBYX–2019–014]
45575
1. Purpose
The purpose of the proposed rule
change is to amend Rule 11.24 to make
permanent the Retail Price Improvement
Program (the ‘‘Program’’), which is
currently offered on a pilot basis. The
Exchange has operated the pilot for a six
year period and believes that it has been
successful in its stated goal of providing
price improvement opportunities to
retail investors. The analysis conducted
by the Exchange shows that retail
investors have been provided a total of
$4.5 million of price improvement
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In November 2012, the Commission
approved the Program on a pilot basis.3
The Program is designed to attract retail
order flow to the Exchange, and allow
such order flow to receive potential
price improvement. The Program is
currently limited to trades occurring at
prices equal to or greater than $1.00 per
share.4 Under the Program, a class of
market participant called a Retail
Member Organization (‘‘RMO’’) is
eligible to submit certain retail order
flow (‘‘Retail Orders’’) to the Exchange.
Users 5 are permitted to provide
potential price improvement for Retail
Orders 6 in the form of non-displayed
interest that is better than the national
best bid that is a Protected Quotation
(‘‘Protected NBB’’) or the national best
offer that is a Protected Quotation
(‘‘Protected NBO’’, and together with the
Protected NBB, the ‘‘Protected NBBO’’).7
The Program was approved by the
Commission on a pilot basis running
3 See Securities Exchange Act Release No. 68303
(November 27, 2012), 77 FR 71652 (December 3,
2012) (‘‘RPI Approval Order’’) (SR–BYX–2012–019).
4 The Exchange will periodically notify the
membership regarding the securities included in
the Program through an information circular.
5 A ‘‘User’’ is defined in Rule 1.5(cc) as any
member or sponsored participant of the Exchange
who is authorized to obtain access to the System.
6 A ‘‘Retail Order’’ is defined in Rule 11.24(a)(2)
as an agency order that originates from a natural
person and is submitted to the Exchange by a RMO,
provided that no change is made to the terms of the
order with respect to price or side of market and
the order does not originate from a trading
algorithm or any computerized methodology. See
Rule 11.24(a)(2).
7 The term Protected Quotation is defined in BYX
Rule 1.5(t) and has the same meaning as is set forth
in Regulation NMS Rule 600(b)(58). The terms
Protected NBB and Protected NBO are defined in
BYX Rule 1.5(s). The Protected NBB is the bestpriced protected bid and the Protected NBO is the
best-priced protected offer. Generally, the Protected
NBB and Protected NBO and the national best bid
(‘‘NBB’’) and national best offer (‘‘NBO’’, together
with the NBB, the ‘‘NBBO’’) will be the same.
However, a market center is not required to route
to the NBB or NBO if that market center is subject
to an exception under Regulation NMS Rule
611(b)(1) or if such NBB or NBO is otherwise not
available for an automatic execution. In such case,
the Protected NBB or Protected NBO would be the
best-priced protected bid or offer to which a market
center must route interest pursuant to Regulation
NMS Rule 611.
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one-year from the date of
implementation.8 The Commission
approved the Program on November 27,
2012.9 The Exchange implemented the
Program on January 11, 2013, and has
extended the pilot period seven times.10
The pilot period for the Program is
scheduled to expire on September 30,
2019. The Exchange believes that the
Program has been successful in its goal
of providing price improvement to
Retail Orders, and is therefore proposing
to amend Rule 11.24 to make this pilot
permanent so that retail investors can
continue to reap the benefits of the
Program.11
The SEC approved the Program on a
pilot basis, in part, because it
concluded, ‘‘the Program is reasonably
designed to benefit retail investors by
providing price improvement to retail
order flow.’’ 12 The Commission also
found that ‘‘while the Program would
treat retail order flow differently from
order flow submitted by other market
participants, such segmentation would
not be inconsistent with Section 6(b)(5)
of the Act, which requires that the rules
of an exchange are not designed to
permit unfair discrimination.’’ 13 As the
SEC acknowledged, the retail order
segmentation was designed to create
greater retail order flow competition and
thereby increase the amount of this flow
to transparent and well-regulated
exchanges. This would help to ensure
that retail investors benefit from
competitive price improvement that
exchange-based liquidity providers
provide. As discussed below, the
Exchange believes that the Program data
supports the conclusion that it provides
valuable price improvement to retail
investors that they may not otherwise
have received, and that it is therefore
appropriate to make the Program
permanent.
Definitions
The Exchange adopted the following
definitions under Rule 11.24(a):
8 See
RPI Approval Order, supra note 3 at 71652.
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9 Id.
10 See Securities Exchange Act Release Nos.
71249 (January 7, 2014), 79 FR 2229 (January 13,
2014) (SR–BYX–2014–001); 74111 (January 22,
2015), 80 FR 4598 (January 28, 2015) (SR–BYX–
2015–05); 76965 (January 22, 2016), 81 FR 4682
(January 27, 2016) (SR–BYX–2016–01); 78180 (June
28, 2016), 81 FR 43306 (July 1, 2016) (SR–BatsBYX–
2016–15); 81368 (August 10, 2017), 82 FR 38960
(August 16, 2017) (SR–BatsBYX–2017–18); 84830
(December 17, 2018), 83 FR 65769 (December 21,
2018) (SR–CboeBYX–2018–025); 86206 (June 26,
2019), 84 FR 31650 (July 2, 2019) (SR–CboeBYX–
2019–010).
11 The Program will continue to only apply to
trades occurring at prices equal to or greater than
$1.00 per share.
12 See RPI Approval Order, supra note 3 at 71655.
13 Id.
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First, the term ‘‘Retail Member
Organization’’ is defined as a Member
(or a division thereof) that has been
approved by the Exchange to submit
Retail Orders.
Second, the term ‘‘Retail Order’’ is
defined as an agency order or riskless
principal that meets the criteria of
FINRA Rule 5320.03 14 that originates
from a natural person and is submitted
to the Exchange by a Retail Member
Organization, provided that no change
is made to the terms of the order with
respect to price or side of market and
the order does not originate from a
trading algorithm or any other
computerized methodology. A Retail
Order is an Immediate or Cancel
(‘‘IOC’’) Order and shall operate in
accordance with Rule 11.24(f). A Retail
Order may be an odd lot, round lot, or
mixed lot.
Finally, the term ‘‘Retail Price
Improvement Order’’ or ‘‘RPI Order’’
consists of non-displayed interest on the
Exchange that is priced better than the
Protected NBB or Protected NBO by at
least $0.001 and that is identified as
such (‘‘RPI interest’’).15 The System 16
will monitor whether RPI buy or sell
interest, adjusted by any offset and
subject to the ceiling or floor price, is
eligible to interact with incoming Retail
Orders. An RPI Order remains nondisplayed in its entirety (the buy or sell
interest, the offset, and the ceiling or
floor). An RPI Order may also be entered
in a sub-penny increment with an
explicit limit price. Any User is
permitted, but not required, to submit
RPI Orders. An RPI Order may be an
odd lot, round lot or mixed lot.
The price of an RPI Order is
determined by a User’s entry of the
14 FINRA Rule 5320.03 clarifies that an RMO may
enter Retail Orders on a riskless principal basis,
provided that (i) the entry of such riskless principal
orders meet the requirements of FINRA Rule
5320.03, including that the RMO maintains
supervisory systems to reconstruct, in a
time-sequenced manner, all Retail Orders that are
entered on a riskless principal basis; and (ii) the
RMO submits a report, contemporaneously with the
execution of the facilitated order, that identifies the
trade as riskless principal.
15 Exchange systems prevent Retail Orders from
interacting with RPI Orders if the RPI Order is not
priced at least $0.001 better than the Protected
NBBO. The Exchange notes, however, that price
improvement of $0.001 would be a minimum
requirement and Users could enter RPI Orders that
better the Protected NBBO by more than $0.001.
Exchange systems will accept RPI Orders without
a minimum price improvement value; however,
such interest will execute at its floor or ceiling price
only if such floor or ceiling price is better than the
Protected NBBO by $0.001 or more.
16 The ‘‘System’’ is defined in BYX Rule 1.5(aa)
as ‘‘the electronic communications and trading
facility designated by the Board through which
securities orders of Users are consolidated for
ranking, execution and, when applicable, routing
away.’’
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following into the Exchange: (1) RPI buy
or sell interest; (2) an offset, if any; and
(3) a ceiling or floor price. RPI Orders
submitted with an offset are similar to
other peg orders available to Users in
that the order is tied or ‘‘pegged’’ to a
certain price, and would have its price
automatically set and adjusted upon
changes in the Protected NBBO, both
upon entry and any time thereafter. RPI
buy or sell interest is typically entered
to track the Protected NBBO, that is, RPI
Orders are typically submitted with an
offset. The offset is a predetermined
amount by which the User is willing to
improve the Protected NBBO, subject to
a ceiling or floor price. The ceiling or
floor price is the amount above or below
which the User does not wish to trade.
RPI Orders in their entirety (the buy or
sell interest, the offset, and the ceiling
or floor) will remain non-displayed. The
Exchange also allows Users to enter RPI
Orders that establish the exact limit
price, which is similar to a nondisplayed limit order currently accepted
by the Exchange except the Exchange
accepts sub-penny limit prices on RPI
Orders in increments of $0.001. The
Exchange monitors whether RPI buy or
sell interest, adjusted by any offset and
subject to the ceiling or floor price, is
eligible to interact with incoming Retail
Orders.
Users and RMOs may enter odd lots,
round lots or mixed lots as RPI Orders
and as Retail Orders respectively. As
discussed below, RPI Orders are ranked
and allocated according to price and
time of entry into the System consistent
with Rule 11.12 and therefore without
regard to whether the size entered is an
odd lot, round lot or mixed lot amount.
Similarly, Retail Orders interact with
RPI Orders according to the Priority and
Allocation rules of the Program and
without regard to whether they are odd
lots, round lots or mixed lots. Finally,
Retail Orders are designated as Type 1
or Type 2 without regard to the size of
the order.
RPI Orders interact with Retail Orders
as follows. Assume a User enters RPI
sell interest with an offset of $0.001 and
a floor of $10.10 while the Protected
NBO is $10.11. The RPI Order could
interact with an incoming buy Retail
Order at $10.109. If, however, the
Protected NBO was $10.10, the RPI
Order could not interact with the Retail
Order because the price required to
deliver the minimum $0.001 price
improvement ($10.099) would violate
the User’s floor of $10.10. If a User
otherwise enters an offset greater than
the minimum required price
improvement and the offset would
produce a price that would violate the
User’s floor, the offset would be applied
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only to the extent that it respects the
User’s floor. By way of illustration,
assume RPI buy interest is entered with
an offset of $0.005 and a ceiling of
$10.112 while the Protected NBB is at
$10.11. The RPI Order could interact
with an incoming sell Retail Order at
$10.112, because it would produce the
required price improvement without
violating the User’s ceiling, but it could
not interact above the $10.112 ceiling.
Finally, if a User enters an RPI Order
without an offset (i.e., an explicitly
priced limit order), the RPI Order will
interact with Retail Orders at the level
of the User’s limit price as long as the
minimum required price improvement
is produced. Accordingly, if RPI sell
interest is entered with a limit price of
$10.098 and no offset while the
Protected NBO is $10.11, the RPI Order
could interact with the Retail Order at
$10.098, producing $0.012 of price
improvement. The System will not
cancel RPI interest when it is not
eligible to interact with incoming Retail
Orders; such RPI interest will remain in
the System and may become eligible
again to interact with Retail Orders
depending on the Protected NBBO.
RMO Qualifications and Application
Process
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Under Rule 11.24(b), any Member
may qualify as an RMO if it conducts a
retail business or routes retail orders on
behalf of another broker-dealer. For
purposes of Rule 11.24(b), conducting a
retail business shall include carrying
retail customer accounts on a fully
disclosed basis. Any Member that
wishes to obtain RMO status is required
to submit: (1) An application form; (2)
supporting documentation sufficient to
demonstrate the retail nature and
characteristics of the applicant’s order
flow; and (3) an attestation, in a form
prescribed by the Exchange, that
substantially all orders submitted as
Retail Orders will qualify as such under
Rule 11.24.17 The Exchange shall notify
the applicant of its decision in writing.
An RMO is required to have written
policies and procedures reasonably
designed to assure that it will only
designate orders as Retail Orders if all
requirements of a Retail Order are met.
Such written policies and procedures
must require the Member to (i) exercise
due diligence before entering a Retail
17 For example, a prospective RMO could be
required to provide sample marketing literature,
website screenshots, other publicly disclosed
materials describing the retail nature of their order
flow, and such other documentation and
information as the Exchange may require to obtain
reasonable assurance that the applicant’s order flow
would meet the requirements of the Retail Order
definition.
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Order to assure that entry as a Retail
Order is in compliance with the
requirements of this rule, and (ii)
monitor whether orders entered as
Retail Orders meet the applicable
requirements. If the RMO represents
Retail Orders from another broker-dealer
customer, the RMO’s supervisory
procedures must be reasonably designed
to assure that the orders it receives from
such broker-dealer customer that it
designates as Retail Orders meet the
definition of a Retail Order. The RMO
must (i) obtain an annual written
representation, in a form acceptable to
the Exchange, from each broker-dealer
customer that sends it orders to be
designated as Retail Orders that entry of
such orders as Retail Orders will be in
compliance with the requirements of
this rule, and (ii) monitor whether its
broker-dealer customers’ Retail Order
flow continues to meet the applicable
requirements.18
If the Exchange disapproves the
application, the Exchange provides a
written notice to the Member. The
disapproved applicant could appeal the
disapproval by the Exchange as
provided in Rule 11.24(d), and/or
reapply for RMO status 90 days after the
disapproval notice is issued by the
Exchange. An RMO also could
voluntarily withdraw from such status
at any time by giving written notice to
the Exchange.
Failure of RMO To Abide by Retail
Order Requirements
Rule 11.24(c) addresses an RMO’s
failure to abide by Retail Order
requirements. If an RMO designates
orders submitted to the Exchange as
Retail Orders and the Exchange
determines, in its sole discretion, that
those orders fail to meet any of the
requirements of Retail Orders, the
Exchange may disqualify a Member
from its status as an RMO. When
disqualification determinations are
made, the Exchange provides a written
disqualification notice to the Member. A
disqualified RMO may appeal the
disqualification as provided in Rule
11.24(d) and/or reapply for RMO status
90 days after the disqualification notice
is issued by the Exchange.
Appeal of Disapproval or
Disqualification
Rule 11.24(d) provides appeal rights
to Members. If a Member disputes the
Exchange’s decision to disapprove it as
an RMO under Rule 11.24(b) or
18 The Exchange or another self-regulatory
organization on behalf of the Exchange will review
an RMO’s compliance with these requirements
through an exam-based review of the RMO’s
internal controls.
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45577
disqualify it under Rule 11.24(c), such
Member (‘‘appellant’’) may request,
within five business days after notice of
the decision is issued by the Exchange,
that the Retail Price Improvement
Program Panel (‘‘RPI Panel’’) review the
decision to determine if it was correct.
The RPI Panel consists of the
Exchange’s Chief Regulatory Officer
(‘‘CRO’’), or a designee of the CRO, and
two officers of the Exchange designated
by the Chief Operating Officer (‘‘COO’’).
The RPI Panel reviews the facts and
render a decision within the time frame
prescribed by the Exchange. The RPI
Panel may overturn or modify an action
taken by the Exchange and all
determinations by the RPI Panel
constitute final action by the Exchange
on the matter at issue.
Retail Liquidity Identifier
Under Rule 11.24(e), the Exchange
disseminates an identifier when RPI
interest priced at least $0.001 better
than the Exchange’s Protected Bid or
Protected Offer for a particular security
is available in the System (‘‘Retail
Liquidity Identifier’’). The Retail
Liquidity Identifier is disseminated
through consolidated data streams (i.e.,
pursuant to the Consolidated Tape
Association Plan/Consolidated
Quotation Plan, or CTA/CQ, for Tape A
and Tape B securities, and the Nasdaq
UTP Plan for Tape C securities) as well
as through proprietary Exchange data
feeds.19 The Retail Liquidity Identifier
reflects the symbol and the side (buy or
sell) of the RPI interest, but does not
include the price or size of the RPI
interest. In particular, CQ and UTP
quoting outputs include a field for codes
related to the Retail Liquidity Identifier.
The codes indicate RPI interest that is
priced better than the Exchange’s
Protected Bid or Protected Offer by at
least the minimum level of price
improvement as required by the
Program.
Retail Order Designations
Under Rule 11.24(f), an RMO can
designate how a Retail Order would
interact with available contra-side
interest as follows:
A Type 1-designated Retail Order will
interact with available contra-side RPI
Orders and other price improving
contra-side interest but will not interact
with other available contra-side interest
19 The Exchange notes that the Retail Liquidity
Identifier for Tape A and Tape B securities are
disseminated pursuant to the CTA/CQ Plan. The
identifier is also available through the consolidated
public market data stream for Tape C securities. The
processor for the Nasdaq UTP quotation stream
disseminates the Retail Liquidity Identifier and
analogous identifiers from other market centers that
operate programs similar to the RPI Program.
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in the System that is not offering price
improvement or route to other markets.
The portion of a Type 1-designated
Retail Order that does not execute
against contra-side RPI Orders or other
price improving liquidity will be
immediately and automatically
cancelled.
A Type 2-designated Retail Order will
interact first with available contra-side
RPI Orders and other price improving
liquidity and then any remaining
portion of the Retail Order will be
executed as an Immediate-or-Cancel
(‘‘IOC’’) Order pursuant to Rule
11.9(b)(1). A Type 2-designated Retail
Order can either be submitted as a BYX
Only Order 20 or as an order eligible for
routing pursuant to Rule 11.13(a)(2).
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Priority and Order Allocation
Under Rule 11.24(g), competing RPI
Orders in the same security are ranked
and allocated according to price then
time of entry into the System.
Executions occur in price/time priority
in accordance with Rule 11.12. Any
remaining unexecuted RPI interest
remains available to interact with other
incoming Retail Orders if such interest
is at an eligible price. Any remaining
unexecuted portion of the Retail Order
will cancel or execute in accordance
with Rule 11.24(f). The following
example illustrates this method:
• Protected NBBO for security ABC is
$10.00–$10.05
• User 1 enters an RPI Order to buy
ABC at $10.015 for 500
• User 2 then enters an RPI Order to
buy ABC at $10.02 for 500
• User 3 then enters an RPI Order to
buy ABC at $10.035 for 500
An incoming Retail Order to sell ABC
for 1,000 executes first against User 3’s
bid for 500 at $10.035, because it is the
best priced bid, then against User 2’s bid
for 500 at $10.02, because it is the next
best priced bid. User 1 is not filled
because the entire size of the Retail
Order to sell 1,000 is depleted. The
Retail Order executes against RPI Orders
in price/time priority.
However, assume the same facts
above, except that User 2’s RPI Order to
buy ABC at $10.02 is for 100. The
incoming Retail Order to sell 1,000
executes first against User 3’s bid for
500 at $10.035, because it is the best
priced bid, then against User 2’s bid for
100 at $10.02, because it is the next best
priced bid. User 1 then receives an
execution for 400 of its bid for 500 at
$10.015, at which point the entire size
20 A BYX Only Order is defined in BYX Rule
11.9(c)(4) and includes orders that are not eligible
for routing to other trading centers.
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of the Retail Order to sell 1,000 is
depleted.
As a final example, assume the same
facts as above, except that User 3’s order
was not an RPI Order to buy ABC at
$10.035, but rather, a non-displayed
order to buy ABC at $10.03. The result
would be similar to the result
immediately above, in that the incoming
Retail Order to sell 1,000 executes first
against User 3’s bid for 500 at $10.03,
because it is the best priced bid, then
against User 2’s bid for 100 at $10.02,
because it is the next best priced bid.
User 1 then receives an execution for
400 of its bid for 500 at $10.015, at
which point the entire size of the Retail
Order to sell 1,000 is depleted.
Eligible Securities
All Regulation NMS securities traded
on the Exchange are eligible for
inclusion in the RPI Program. The
Exchange limits the Program to trades
occurring at prices equal to or greater
than $1.00 per share. Toward that end,
Exchange trade validation systems
prevent the interaction of RPI buy or sell
interest (adjusted by any offset) and
Retail Orders at a price below $1.00 per
share.21 For example, if there is RPI buy
interest tracking the Protected NBB at
$0.99 with an offset of $0.001 and a
ceiling of $1.02, Exchange trade
validation systems would prevent the
execution of the RPI Order at $0.991
with a sell Retail Order with a limit of
$0.99. However, if the Retail Order was
Type 2 as defined the Program,22 it
would be able to interact at $0.99 with
liquidity outside the Program in the
Exchange’s order book. In addition to
facilitating an orderly 23 and
operationally intuitive program, the
Exchange believes that limiting the
Program to trades equal to or greater
than $1.00 per share enabled it better to
focus its efforts to monitor price
competition and to assess any
21 As discussed above, the price of an RPI is
determined by a User’s entry of buy or sell interest,
an offset (if any) and a ceiling or floor price. RPI
sell or buy interest typically tracks the Protected
NBBO.
22 Type 2 Retail Orders are treated as IOC orders
that execute against displayed and non-displayed
liquidity in the Exchange’s order book where there
is no available liquidity in the Program. Type 2
Retail Orders can either be designated as eligible for
routing or as BYX Only Orders, and thus nonroutable, as described above.
23 Given the limitation, the Program would have
no impact on the minimum pricing increment for
orders priced less than $1.00 and therefore no effect
on the potential of markets executing those orders
to lock or cross. In addition, the non-displayed
nature of the liquidity in the Program simply has
no potential to disrupt displayed, protected quotes.
In any event, the Program would do nothing to
change the obligation of exchanges to avoid and
reconcile locked and crossed markets under NMS
Rule 610(d).
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
indications that data disseminated
under the Program is potentially
disadvantaging retail orders. As part of
that review, the Exchange produced
data throughout the pilot, which
included statistics about participation,
the frequency and level of price
improvement provided by the Program,
and any effects on the broader market
structure.
Rationale for Making the Program Pilot
Permanent
The Exchange established the
Program in an attempt to attract retail
order flow to the Exchange by providing
an opportunity for price improvement to
such order flow. The Exchange believes
that the Program promotes transparent
competition for retail order flow by
allowing Exchange members to submit
RPI Orders to interact with Retail
Orders. As the Commission stated in the
RPI Approval Order, such competition
‘‘promote[s] efficiency by facilitating the
price discovery process’’ and ‘‘may
generate additional investor interest in
trading securities, thereby promoting
capital formation.’’ The Program will
continue to be limited to trades
occurring at prices equal to or greater
than $1.00 per share.
In accordance with its filing
establishing the pilot, the Exchange did
‘‘produce data throughout the pilot,
which will include statistics about
participation, the frequency and level of
price improvement provided by the
Program, and any effects on the broader
market structure.’’ 24 The Exchange has
fulfilled this obligation through the
reports and assessments it has
submitted to the Commission since the
implementation of the pilot Program.
The Exchange believes that its analysis
of data provided to the Commission to
date, as well as the data being provided
in this proposed rule change, support
the continued operation of the Program
on a permanent basis.
The SEC stated in the RPI Approval
Order that the Program could promote
competition for retail order flow among
execution venues, and that this could
benefit retail investors by creating
additional well-regulated and
transparent price improvement
opportunities for marketable retail order
flow, most of which is currently
executed in the Over-the-Counter
24 RPI
Approval Order, 77 FR at 71655.
See also Concept Release on Equity Market
Structure, Securities Exchange Act Release No.
61358 (January 14, 2010), 75 FR 3593, 3600 (January
21, 2010) (File No. S7–02–10) (‘‘A review of the
order routing disclosures required by Rule 606 of
Regulation NMS of eight broker-dealers with
significant retail customer accounts reveals that
nearly 100% of their customer market orders are
routed to OTC market makers.’’).
25 Id.
E:\FR\FM\29AUN1.SGM
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Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
(‘‘OTC’’) markets without ever reaching
a public exchange.25 The Exchange
believes that it has achieved its goal of
attracting retail order flow to the
Exchange. As the Exchange’s analysis of
the Program data below demonstrates,
there has been consistent retail investor
interest in the Program, which has
provided tangible price improvement to
those retail investors through a
competitive pricing process over the
course of the pilot. The data also
demonstrates that the Program had an
overall negligible impact on broader
market quality outside of the Program.
The Exchange has not received any
complaints or negative feedback
concerning the Program.
I. Overall Analysis of the Program
Brokers route retail orders to a wide
range of different trading systems. The
Program offers a transparent and wellregulated option, providing meaningful
competition and price improvement. As
explained above, the purpose of the
Program is to attract retail order flow to
the Exchange by providing an
opportunity for retail investors to
receive price improvement. The
Exchange believes that the Program has
satisfied this goal, having provided a
total of $4.5 million of price
45579
improvement, or approximately
$153,000 per month, in the 2.5 year
period analyzed. Furthermore, to ensure
that the price improvement
opportunities for Retail Orders under
the Program are meaningful, the
Exchange compared the volume
weighted average price improvement in
basis points received in the Program to
the same metric for marketable orders
executed on the BYX Book. As Shown
in Table A, retail investors have
benefited from significantly higher price
improvement by participating in the
Program, including when assessed
across different liquidity groupings.26
TABLE A—RETAIL PRICE IMPROVEMENT COMPARED TO BYX BOOK
[May 2018—Oct. 2018]
CADV 500,000
or more
Volume Weighted Avg. Price Improvement (bps) ...........................................
khammond on DSKBBV9HB2PROD with NOTICES
Furthermore, while the amount of
price improvement provided in the
Program varies month to month, the
amount of price improvement provided
in recent months has generally
increased relative to prior months due
to additional participation in the
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
Retail ..............
BYX Book ......
Program by market participants with
retail order flow. The Exchange believes
that this supports permanent approval
of the pilot as retail investors continue
to reap the benefits afforded by the
Program. The amount of monthly and
cumulative price improvement provided
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
CADV between
50,000 and 500,000
2.947
0.649
Retail ..............
BYX Book ......
4.502
3.574
in the Program is illustrated in Chart 1
below.
26 The two liquidity categories used for this
analysis correspond to the liquidity profiles
described in the Exchange’s analysis of the market
structure impact of the Program.
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29AUN1
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
khammond on DSKBBV9HB2PROD with NOTICES
Furthermore, Retail Order volume
executed in the Program accounted for
between 0.86% and 2.32% of total BYX
volume from January 2017 to June 2018,
as shown in Chart 2 below, and between
0.05% and 0.11% of total consolidated
volume, as shown in Chart 3 below.
Despite its size relative to total volume
executed on the Exchange or the broader
market, the Program has continued to
provide considerable price
improvement each month to retail
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
investors that participated in the
Program. In addition, the Exchange
believes that the relatively modest
volume executed in the Program relative
to total BYX volume and total
consolidated volume limits the potential
impact of the Program on broader
market quality on the Exchange.27 The
Exchange therefore believes that the
Program has demonstrated the
effectiveness of a transparent, onexchange retail order price
improvement functionality,
notwithstanding that the majority of
retail volume is still traded offexchange.28
BILLING CODE 8011–01–P
27 The Exchange has also performed an analysis
of the impact of the Program on other market
quality indicators, which found that the Program
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
did not have a significant impact on market quality
in the broader market. See Section III below.
28 See supra note 25.
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29AUN1
EN29AU19.000</GPH>
45580
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
45581
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
PO 00000
Frm 00119
Fmt 4703
Sfmt 4725
E:\FR\FM\29AUN1.SGM
29AUN1
EN29AU19.001</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
Chart 2: RPI Volume as a Percentage of Total BYX Volume
45582
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
BILLING CODE 8011–01–C
Retail Orders are routed by
sophisticated brokers using systems that
seek the highest fill rates and amounts
of price improvement. These brokers
have many choices of execution venues
for this order flow. When they choose to
route to the Program, they have
determined that it is the best
opportunity for fill rate and price
improvement at that time. As shown in
Table 1 below, Retail Order average
daily volume (‘‘ADV’’) executed in the
Program averaged between 2 and 7
million shares from January 2016 to
June 2018. Increased volatility in
February 2018 likely contributed to the
increased Retail Order shares executed
in the Program that month. Fill rates for
the majority of the period studied
ranged from 11%–19% with fill rates
declining below 10% starting in
December 2017, likely due to additional
participation in the Program that
resulted in a significant increase in the
Retail Order volume entered on the
Exchange. Retail Orders also continue to
receive more than the minimum $0.001
price improvement required of a
liquidity providing RPI Order, with the
monthly average price improvement
provided to Retail Orders ranging from
$0.0011–$0.0014 per share, and the
monthly effective/quoted spread ratio
ranging from 0.77–0.90. The Exchange
believes that this data supports
permanent approval of the Program as
this would allow retail investors to
continue to execute their orders with
price improvement in the Program.
Retail shares
executed ADV
Date
Jan-16
Feb-16
Mar-16
Apr-16
..........................
..........................
..........................
..........................
VerDate Sep<11>2014
17:00 Aug 28, 2019
4,666,052
4,083,670
3,474,997
3,216,923
Jkt 247001
Retail orders
placed ADV
Effective
spread BPS
20,560
18,025
15,103
14,126
PO 00000
Frm 00120
Quoted spread
BPS
Effective/
quoted spread
ratio
22
22
24
21
0.89
0.87
0.90
0.88
19
19
21
18
Fmt 4703
Sfmt 4703
E:\FR\FM\29AUN1.SGM
29AUN1
Price
improvement
$0.0011
0.0011
0.0011
0.0011
Fill rate
(percent)
16.09
16.10
17.50
19.23
EN29AU19.002</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
TABLE 1—SUMMARY STATISTICS ON THE PROGRAM
45583
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
TABLE 1—SUMMARY STATISTICS ON THE PROGRAM—Continued
Retail shares
executed ADV
Date
May-16 .........................
Jun-16 ..........................
Jul-16 ...........................
Aug-16 ..........................
Sep-16 ..........................
Oct-16 ..........................
Nov-16 ..........................
Dec-16 ..........................
Jan-17 ..........................
Feb-17 ..........................
Mar-17 ..........................
Apr-17 ..........................
May-17 .........................
Jun-17 ..........................
Jul-17 ...........................
Aug-17 ..........................
Sep-17 ..........................
Oct-17 ..........................
Nov-17 ..........................
Dec-17 ..........................
Jan-18 ..........................
Feb-18 ..........................
Mar-18 ..........................
Apr-18 ..........................
May-18 .........................
Jun-18 ..........................
Retail orders
placed ADV
2,912,160
3,144,024
4,009,916
3,906,624
4,887,221
3,595,900
2,273,885
3,192,065
3,122,721
3,262,046
3,068,930
2,680,646
3,407,603
7,896,833
5,966,961
6,467,615
5,237,243
5,702,759
4,427,779
5,131,502
6,359,122
7,230,230
5,967,844
4,976,642
4,367,743
5,211,044
Effective
spread BPS
12,980
13,924
17,257
17,135
20,708
15,922
8,972
12,768
16,951
21,151
20,921
18,518
23,437
46,398
36,717
38,608
33,314
33,578
62,352
142,810
167,730
227,980
202,050
178,009
169,085
202,601
II. Analysis of Retail Orders by Order
Size
Tables 2, 3, and 4 show the
distribution of Retail Orders entered and
executed in the Program for the period
from January 2017 to June 2018. As
shown in Table 2, a majority of all Retail
Orders entered to participate in the
Program from January 2016 to June 2018
were for a round lot or fewer shares.
Specifically, Retail Orders of one round
Quoted spread
BPS
Effective/
quoted spread
ratio
21
18
20
21
19
27
33
41
36
35
38
38
33
32
31
26
31
40
40
41
36
27
31
27
28
31
0.87
0.89
0.90
0.90
0.88
0.90
0.88
0.88
0.88
0.88
0.88
0.88
0.87
0.88
0.88
0.88
0.87
0.84
0.83
0.84
0.82
0.79
0.73
0.75
0.83
0.77
18
16
18
19
17
24
29
36
31
31
33
34
29
28
27
23
27
34
33
34
29
21
23
20
23
23
lot or fewer shares accounted for an
average of approximately 56% of the
total number of Retail Orders entered.
More than 73% of Retail Orders entered
were for 300 shares or less. Very large
orders of more than 7,500 shares
accounted for only 1.9% of Retail
Orders submitted to the Program but
accounted for a significant portion
(approximately 40%) of the shares
entered, as shown in Table 3. In
addition, despite lower fill rates, large
Price
improvement
0.0011
0.0011
0.0011
0.0011
0.0011
0.0012
0.0013
0.0013
0.0013
0.0013
0.0014
0.0013
0.0013
0.0013
0.0012
0.0013
0.0013
0.0012
0.0012
0.0012
0.0013
0.0012
0.0011
0.0011
0.0011
0.0011
Fill rate
(percent)
19.73
19.65
19.97
17.66
17.28
17.19
12.71
14.82
16.09
14.71
13.85
13.97
16.88
17.07
16.43
16.24
15.76
16.77
11.61
8.30
7.98
8.29
7.69
7.90
7.02
7.19
orders account for a reasonable portion
(approximately 9%) of the shares
executed in the Program, as shown in
Table 4. The Program also receives a
significantly large number of odd lot
and single lot sized shares, which could
be representative of retail marketable
orders from retail customers. By
providing price improvement to these
orders, retail customers would continue
to benefit from the Program.
TABLE 2—DISTRIBUTION OF RETAIL ORDERS ENTERED BY ORDER SIZE
khammond on DSKBBV9HB2PROD with NOTICES
Date
Jan-17 ...
Feb-17 ...
Mar-17 ...
Apr-17 ....
May-17 ..
Jun-17 ...
Jul-17 .....
Aug-17 ...
Sep-17 ...
Oct-17 ....
Nov-17 ...
Dec-17 ...
Jan-18 ...
Feb-18 ...
Mar-18 ...
Apr-18 ....
May-18 ..
Jun-18 ...
VerDate Sep<11>2014
≤ 100
(percent)
101–300
(percent)
44.90
47.80
47.60
48.82
52.39
55.32
53.18
49.41
49.88
49.92
61.01
61.48
61.20
66.63
66.11
67.41
66.09
66.29
17:00 Aug 28, 2019
18.45
18.04
17.76
17.30
18.69
13.89
15.12
16.53
16.51
16.17
17.66
18.49
17.06
15.79
15.39
15.45
16.12
16.17
Jkt 247001
301–500
(percent)
501–1,000
(percent)
8.60
8.21
8.16
7.88
7.13
6.67
7.32
8.00
7.94
7.73
5.65
6.31
6.54
5.61
5.82
5.40
5.43
5.59
PO 00000
Frm 00121
10.12
9.61
9.67
9.48
8.13
8.08
8.85
9.65
9.50
9.45
6.33
6.65
7.14
5.80
6.22
6.06
6.30
6.14
Fmt 4703
1,001–2,000
(percent)
2,001–4,000
(percent)
6.84
6.27
6.36
6.19
5.21
5.35
5.86
6.33
6.27
6.49
3.86
3.40
3.84
2.98
3.25
3.10
3.41
3.20
Sfmt 4703
4,001–7,500
(percent)
4.90
4.41
4.60
4.61
3.81
4.47
4.12
4.49
4.49
4.67
2.54
1.97
2.25
1.70
1.76
1.43
1.47
1.46
E:\FR\FM\29AUN1.SGM
3.10
2.82
3.01
2.88
2.40
3.24
2.71
2.75
2.71
2.76
1.39
0.93
1.06
0.80
0.78
0.59
0.59
0.59
29AUN1
7,500–15,000
(percent)
1.93
1.75
1.78
1.82
1.41
2.03
1.79
1.76
1.71
1.79
0.98
0.49
0.58
0.43
0.41
0.34
0.35
0.35
>15000
(percent)
1.16
1.09
1.05
1.02
0.83
0.95
1.05
1.08
1.00
1.02
0.59
0.28
0.33
0.25
0.24
0.22
0.24
0.22
45584
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
TABLE 3—DISTRIBUTION OF SHARES ENTERED BY ORDER SIZE
Date
Jan-17 ...
Feb-17 ...
Mar-17 ...
Apr-17 ....
May-17 ..
Jun-17 ...
Jul-17 .....
Aug-17 ...
Sep-17 ...
Oct-17 ....
Nov-17 ...
Dec-17 ...
Jan-18 ...
Feb-18 ...
Mar-18 ...
Apr-18 ....
May-18 ..
Jun-18 ...
≤ 100
(percent)
101–300
(percent)
2.15
2.36
2.25
2.36
3.44
1.89
1.98
1.92
2.15
1.97
6.28
9.96
8.56
11.33
11.06
12.30
12.14
12.39
301–500
(percent)
3.45
3.64
3.55
3.54
4.59
2.89
3.18
3.36
3.49
3.34
5.19
7.34
6.29
7.16
6.96
7.46
7.50
7.77
501–1,000
(percent)
3.27
3.40
3.36
3.32
3.60
2.92
3.22
3.39
3.43
3.30
3.86
5.96
5.64
6.01
6.10
5.95
5.74
6.12
1,001–2,000
(percent)
7.03
7.30
7.32
7.32
7.51
6.64
7.24
7.59
7.55
7.41
7.92
11.51
11.27
11.31
12.00
12.51
12.40
12.60
2,001–4,000
(percent)
9.15
9.16
9.21
9.17
9.25
8.44
9.17
9.57
9.70
9.91
9.53
11.24
11.49
11.12
11.88
12.19
12.76
12.60
4,001–7,500
(percent)
12.48
12.29
12.68
13.00
12.92
13.27
12.23
12.76
13.15
13.48
12.10
12.70
13.17
12.42
12.69
11.17
11.08
11.42
14.61
14.52
15.38
14.92
15.02
17.56
14.73
14.33
14.55
14.54
12.18
11.15
11.61
10.99
10.62
8.89
8.53
8.76
7,500–15,000
(percent)
17.00
16.80
16.92
17.45
16.32
20.05
18.29
17.21
17.27
17.90
16.22
11.31
12.18
11.30
10.82
9.73
9.67
9.89
>15000
(percent)
30.87
30.53
29.33
28.91
27.35
26.34
29.96
29.87
28.70
28.16
26.72
18.83
19.79
18.37
17.88
19.80
20.17
18.45
TABLE 4—DISTRIBUTION OF SHARES EXECUTED BY ORDER SIZE
Date
Jan-17 ...
Feb-17 ...
Mar-17 ...
Apr-17 ....
May-17 ..
Jun-17 ...
Jul-17 .....
Aug-17 ...
Sep-17 ...
Oct-17 ....
Nov-17 ...
Dec-17 ...
Jan-18 ...
Feb-18 ...
Mar-18 ...
Apr-18 ....
May-18 ..
Jun-18 ...
≤ 100
(percent)
101—300
(percent)
11.39
13.96
14.14
14.69
17.86
9.74
10.37
9.39
10.60
9.40
12.42
14.98
14.27
16.74
17.27
17.12
18.24
18.93
301—500
(percent)
14.06
15.27
14.99
14.83
18.10
11.25
12.33
12.34
12.93
12.40
13.48
15.80
14.96
15.75
15.97
15.58
16.29
17.28
501—1,000
(percent)
10.40
10.48
10.15
10.01
9.98
8.91
9.91
10.01
10.22
10.16
9.27
10.29
10.28
10.78
10.58
10.24
10.18
10.59
The Exchange also analyzed fill rates
across the different order size buckets
and found that while fill rates are higher
for smaller orders as expected, large size
orders are still able to access liquidity
and therefore receive price
improvement in the Program. Moreover,
overall fill rates indicate that market
participants that provide liquidity are
1,001—2,000
(percent)
18.41
17.77
17.53
17.80
16.46
16.71
18.84
18.97
18.87
19.36
16.56
16.77
17.53
17.05
16.87
16.30
15.89
16.16
2,001—4,000
(percent)
15.88
14.54
14.74
14.84
13.17
14.58
16.17
16.70
16.28
17.12
15.84
14.92
15.27
14.27
13.81
13.60
12.80
12.96
4,001—7,500
(percent)
12.34
11.44
11.80
11.55
10.48
14.86
12.75
13.36
13.00
13.45
13.24
11.67
11.90
11.08
10.51
10.04
9.80
9.64
responding with quote depth when the
contra side order is looking for a fill.
While fill rates decreased starting in
November 2017, the Exchange believes
that this is due to new Retail Order flow
being routed to the Program, rather than
a decrease in the available liquidity.
Monthly volume executed in the
Program, as shown in Table 1, has
8.41
7.82
8.15
7.85
6.94
12.03
8.96
8.77
8.56
8.58
7.98
6.98
7.12
6.48
6.66
6.71
6.25
5.66
7,500—15,000
(percent)
5.26
5.15
5.02
5.00
4.23
7.97
6.56
6.15
5.74
5.86
6.63
5.04
5.16
4.57
4.63
5.37
5.25
4.95
>15000
(percent)
3.86
3.60
3.48
3.42
2.78
3.95
4.11
4.31
3.79
3.66
4.56
3.55
3.50
3.30
3.70
5.03
5.31
3.84
therefore remained constant or
increased since November 2017 despite
the lower overall fill rates for those
months. The Exchange therefore
believes that the Program is an attractive
option for market participants looking to
fill Retail Orders with price
improvement.
TABLE 5—FILL RATES
khammond on DSKBBV9HB2PROD with NOTICES
Date
Jan-17 ...
Feb-17 ...
Mar-17 ...
Apr-17 ....
May-17 ..
Jun-17 ...
Jul-17 .....
Aug-17 ...
Sep-17 ...
Oct-17 ....
Nov-17 ...
Dec-17 ...
Jan-18 ...
Feb-18 ...
VerDate Sep<11>2014
≤ 100
(percent)
101—300
(percent)
85.19
87.21
87.04
86.90
87.53
87.78
85.99
79.61
77.55
80.19
22.78
12.14
12.84
11.79
17:00 Aug 28, 2019
65.62
61.69
58.53
58.46
66.54
66.50
63.63
59.74
58.32
62.29
29.93
17.37
18.31
17.56
Jkt 247001
301—500
(percent)
501—1,000
(percent)
51.13
45.31
41.87
42.12
46.75
52.07
50.52
48.02
46.98
51.71
27.66
13.96
14.06
14.32
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Frm 00122
1,001—2,000
(percent)
42.16
35.83
33.20
33.97
36.99
42.98
42.77
40.59
39.39
43.82
24.11
11.77
11.98
12.03
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2,001—4,000
(percent)
27.93
23.36
22.18
22.59
24.03
29.48
28.96
28.33
26.44
28.97
19.16
10.72
10.24
10.24
Sfmt 4703
4,001—7,500
(percent)
15.91
13.69
12.89
12.40
13.69
19.12
17.12
17.00
15.58
16.73
12.61
7.42
6.96
7.12
E:\FR\FM\29AUN1.SGM
9.26
7.92
7.34
7.35
7.80
11.70
9.99
9.94
9.27
9.90
7.55
5.05
4.72
4.70
29AUN1
7,500—15,000
(percent)
4.98
4.51
4.11
4.00
4.38
6.78
5.89
5.81
5.24
5.49
4.71
3.60
3.26
3.23
>15000
(percent)
2.01
1.73
1.65
1.65
1.71
2.56
2.25
2.34
2.08
2.18
1.97
1.52
1.36
1.43
45585
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
TABLE 5—FILL RATES—Continued
≤ 100
(percent)
Date
Mar-18 ...
Apr-18 ....
May-18 ..
Jun-18 ...
101—300
(percent)
11.56
10.61
10.11
10.57
301—500
(percent)
17.00
15.91
14.61
15.39
501—1,000
(percent)
12.85
13.11
11.93
11.98
III. Impact of the Program on Broader
Market Quality
As shown in Charts 2 and 3 above,
Retail Order volume executed in the
Program is a small percentage of both
total volume executed on the Exchange
and total consolidated volume. While
the Program has better depth available
for Retail Orders, it does not
significantly affect the market volume of
BYX. The average volume within the
95th percentile is between 1.3% and
1.7%. With the Program volume mostly
below 2.5% of BYX volume, the
Exchange does not believe that it is able
to significantly impact BYX market
quality. Nevertheless, to test the impact
of the Program on broader market
quality, the Exchange: (1) Reviewed the
correlation between metrics that are tied
to overall market quality with relevant
Program metrics over both 2017 and
2018, and (2) performed a difference-in-
1,001—2,000
(percent)
10.42
9.93
8.62
8.88
2,001—4,000
(percent)
8.60
8.50
6.75
7.12
difference analysis to analyze the
potential impact of the Program on a
number of important market quality
indicators. Based on the results of this
analysis, the Exchange does not believe
that the Program has had any significant
impact on broader market quality. The
Exchange therefore believes that the
Program can continue on a permanent
basis—and thereby provide increased
price improvement opportunities to
retail investors on a transparent wellregulated exchange—without degrading
market quality outside of the Program.
Correlation Analysis
As shown in Table 6 below, the
Exchange’s correlation analysis shows
that: (1) Inside size in the broader
market is not correlated with either RPI
effective spreads or the percentage of
volume executed in the Program, which
suggests that market participants are not
4,001—7,500
(percent)
6.13
6.85
5.95
5.84
7,500—15,000
(percent)
4.64
5.76
4.93
4.47
>15000
(percent)
3.17
4.21
3.65
3.46
1.53
1.94
1.77
1.44
moving volume from the regular market
to the Program as effective spreads
narrow or volume executed in the
Program increases; (2) effective spreads
in the broader market are not correlated
with the percentage of volume executed
in the Program, which suggests that
spreads are not widening as a result of
more Retail Order flow being executed
in the Program; (3) midpoint volume
executed is not correlated with effective
spreads in the Program, which suggests
that market participants are not moving
midpoint liquidity from the regular
market to instead receive price
improvement in the Program; and (4)
displayed volume executed is not
correlated with quoted spreads in the
Program, which suggest that market
participants are not entering nondisplayed retail price improving interest
in the Program as an alternative to
displaying interest on an order book.
TABLE 6—BYX MARKET QUALITY CORRELATION ANALYSIS
Date
2017
Correlation
Correlation
Correlation
Correlation
Correlation
of
of
of
of
of
RPI
RPI
RPI
RPI
RPI
Effective Spread to Average Inside Size across all Equities Exchanges 29 .............................
Volume as a Percent of Total Volume to Average Inside Size across all Equities Exchanges
Volume as a Percent of Total Volume to Average Effective Spread across all Venues .........
Effective Spread to Total Midpoint Volume across all Venues .................................................
Quoted Spread to Total Protected Lit Volume across all Equities Exchanges ........................
khammond on DSKBBV9HB2PROD with NOTICES
Difference in DifferenceAnalysis
The aim of this analysis was to
compare the values of a set of general
market metrics prior to the introduction
of the Program to those prevailing after.
The Exchange follows what is
commonly termed the ‘difference-indifference’ approach (‘‘DnD’’). A DnD
analysis involves identifying a group of
subjects (stocks in this case) that receive
a given ‘treatment.’ In this case, the
‘treatment’ is the introduction of the
Program. The Exchange would then
observe the change (difference) in a set
of empirical indicia of market quality,
before and after Program introduction.
The analysis is enhanced by observing
the intertemporal change in the same
indicia for a set of stocks that did not
29 Inside size is the average bid or ask size when
the venue is at the NBB or NBO.
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receive the treatment. The non-treated
stocks would serve as ‘controls.’ The
impact of the Program could therefore
be assessed by comparing the pre/post
changes in the treated stocks with those
from the control stocks, hence the
difference in differences. Observed
changes in the control stocks would
account for environmental effects, such
as changes in general market volatility,
that are unrelated to the introduction of
the Program.
The introduction of the Program
applied to all stocks traded on the
Exchange. Thus, control stocks in the
strict sense are not available. The
Exchange applies therefore a fallback
approach, in which it identifies stocks
with relatively high levels of
participation in the Program and use
these as the ‘treatment’ stocks. Those for
which Program participation was light
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¥0.0145
¥0.0217
0.1175
¥0.1438
¥0.1221
2018
¥0.0096
¥0.0056
0.0134
¥0.1366
¥0.0999
serve as the ‘control’ stocks. The
approach suffers from the limitation that
Program participation is a determined
by endogenous choice. It is possible that
stocks with high levels of participation
are systematically different from those
with low participation. That is, the
controls may be different from the
treated stocks in important ways. With
this caveat in mind, it is nevertheless of
interest to see differences in outcomes
between the two groups of stocks.
While the treatment and control
stocks differ substantially in terms of
participation in the Program, the
validity of the DnD analysis is enhanced
to the extent that the two groups are
otherwise as similar to each other as
possible. To achieve this objective, the
Exchange first breaks its analysis into
two parts: One dealing with active
securities, the other with less active
E:\FR\FM\29AUN1.SGM
29AUN1
45586
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
securities. The Exchange’s set of active
securities are those with consolidated
average daily volume (‘‘CADV’’) of
500,000 shares or more after Program
introduction. The less active group have
CADV between 50,000 and 500,000
shares after Program introduction. Then,
within each volume grouping, the
Exchange conducts a ‘matched pairs’
process to identify a smaller set of
treatment and control groups that are as
close to each other as possible across
three dimensions: Consolidated average
daily share volume, average price, and
average BBO spread across exchanges.
The values of these variables prior to
Program introduction were used.
Data from the pre-treatment period
was obtained from trading during the
three months of October through
December 2012. The Exchange looks at
two post-treatment periods. The first is
based on trading from January through
December 2013. The second is based on
trading from the two years from January
2017 through December 2018.
The overall set of four DnD analyses
can be represented and hereafter labeled
as follows:
Post-period dates
CADV
2013
500,000 or more ......................................................................................................................................................
III
2012 pair
2017–18 pair
IV
2012 pair
2017–18 pair
volume for analysis I, II and III, and top
200 stocks are selected for analysis IV in
order to generate sufficient number of
pairs in the sample set.
4. Pre-period data for the provisional
treatment stocks is obtained. During the
pre-period, the treatment stocks must
also have the appropriate CADV level,
an average price greater than $2,
positive BYX share volume, and listed
during the entire pre-period. This
process will generally result in fewer
than 1000 remaining treatment
candidates.
5. The candidate control stocks are
selected from those with low RPI
Program volume, where the control
stocks were selected from stocks whose
RPI volume was less than one-tenth that
of the lowest RPI volume from the
treatment stocks.
6. The control stocks must also have
similar restrictions to the treatment
stocks in both pre- and post-periods:
CADV in the appropriate range, price
greater than $2, and positive BYX
volume.
7. Each treatment stock was compared
with each candidate control stock.
Using pre-period data, a discrepancy
score was computed as:
In words, the score is the sum of the
absolute value of the percentage
differences in the indicated values. The
lower the score, the closer the match.
8. Each treatment stock was paired
with the best possible match, subject to
the constraint that a given control stock
could be used only once (often termed
‘sampling without replacement’).
9. Finally, only stock pairs with
reasonable discrepancy scores, which
were 2.0 and lower, were retained.
Once a set of matched pairs was
determined for a given analysis, the
Exchange computed the DnD result
using a standard linear regression
framework. A DnD regression model can
be expressed as:
EN29AU19.004</GPH>
For each of the four DnD analyses, the
specific matched-pairs process
employed the following steps:
1. Daily averages for a set of variables
are computed for each stock for the
appropriate pre/post time frames.
2. The initial universe of stocks are
identified as having, in the post period,
the appropriate CADV, an average share
price greater than $2, and positive
average daily BYX share volume.
3. These stocks are ranked on the
percentage of consolidated volume that
was done in the Program (in the post
period). Selection of the treatment
stocks starts with the top 100 stocks in
terms of post-introduction RPI Program
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29AUN1
EN29AU19.003</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
Between 50,000 and 500,000 .................................................................................................................................
I ......................
2012 pair ........
2013 pair ........
II .....................
2012 pair ........
2013 pair ........
2017–2018
45587
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
The Exchange considered ten metrics
of interest, all of which were computed
during standard 9:30 a.m.–4:00 p.m.
(Eastern time) trading hours: (1) Average
BBO spread across exchanges in dollars;
(2) average BBO spread across
exchanges in basis points; (3) average
BYX spread in dollars; (4) average BYX
spread in basis points; (5) average inside
ask size across exchanges in round lots;
(6) average inside bid size across
exchanges in round lots; (7) average
inside ask size on BYX in round lots; (8)
average inside bid size on BYX in round
lots; (9) BYX volume compared to total
consolidated volume (‘‘TCV’’) in basis
points; (10) trade reporting facility
(‘‘TRF’’) volume as a percentage of
Symbol Total Volume.
In assessing the results of the DnD
analysis, certain caveats are worth
bearing in mind. As shown above, BYX
RPI volume represents a very small
fraction of consolidated volume.
Further, the Program was introduced at
a time when similar exchange-based
retail price improvement programs were
introduced by other exchanges. It is also
important to recognize that much, if not
most, marketable retail order flow is
routed to off-exchange market makers.
For example, the Exchange examined
Rule 606 disclosures for the second
quarter of 2019 from four prominent
retail brokerages: E-Trade, TD
Ameritrade, Charles Schwab, and
Fidelity. Only Fidelity reported routing
any market orders to national securities
exchanges, and its total exchange
percentage was less than 2.5% for each
of Tape A, B, and C securities. This
practice of routing retail marketable
orders to off-exchange venues has been
in place for a long time, both before and
after the introduction of the Program.
Considering the smallness of the
Program, the existence of similar
programs on other national securities
exchanges, and the continuing
prevalence of off-exchange trading of
retail orders, the incremental impact of
the Program on market quality generally
would not be expected to be large.
Furthermore, BYX RPI activity is itself
somewhat anomalous in the first place
since the majority of retail market orders
are routed off-exchange for execution.
Why some retail flow reaches exchanges
via the Program (or that of similar
exchange programs), and why it varies
across stocks is not clear. Since
treatment and control stocks are
determined on the basis of observed RPI
usage—resulting from participant
choice—they may be different in
important ways. The DnD study
attempts to take into account differences
in average share volume, price, and
spread in the pre-period. If, however,
the two groups of stocks are
nevertheless still not properly fully
matched, it is possible that results
drawn from the DnD may be spurious.
‘Spurious’ in this context means a result
that is robust statistically, but
nevertheless does not indicate the
impact of the intended factor. In other
words, a spurious result is caused by
some extraneous factor.
Matching Summary
The full set of matched pairs data for
each of the four analyses will be
provided below, but the following table
provides summary information. Shown
are the number of matched pairs, and
sample averages for the three matching
variables. Also shown is the average of
the discrepancy score used in the
matching process.
Treatment
Analysis
Number
of pairs
Score
I ................................
II ...............................
III ..............................
IV ..............................
1.01
0.5
0.87
0.58
58
78
51
34
The table again illustrates the low
level of Program participation, even for
the treatment stocks. The RPI
percentages are especially low for the
higher volume samples (I and III). As
intended, the RPI percentages for the
control stocks are much lower still,
averaging at least an order of magnitude
lower than the treatment stocks.
Price
Post
Period
RPI Pct
$ 44.93
17.70
40.29
12.80
0.034
0.184
0.154
0.328
CADV
8,216,026
186,708
4,820,112
216,895
Control
Spread
38
262
50
530
Other than these differences, the pairs
exhibit strong average similarity in
terms of the values of the pre-period
matching variables.
Regression Results
The following table provides the
estimated coefficients for the DnD
regressions for the indicated market
indicator and sample. In addition to the
Post
Period
RPI Pct
Price
$ 37.76
17.35
34.46
13.42
0.004
0.011
0.020
0.029
CADV
3,608,540
191,422
3,048,311
191,580
Spread
40
233
45
382
estimated coefficient, the p-value is
provided. This value can be used to
gauge the statistical significance of the
coefficient—the confidence that the true
value of the coefficient is different than
zero. The results are accompanied, as
appropriate, with a set of asterisks
indicating the associated level of
significance: * = 10%, ** = 5%, and ***
= 1%.
Spreads
Avg. BBO
spread for
all exchanges
(bps)
Avg. BYX
spread
(bps)
Avg. BBO
spread for
all exchanges
(dollars)
Avg. BYX
spread
(dollars)
khammond on DSKBBV9HB2PROD with NOTICES
I
coef ...........................................................................................................
p value ......................................................................................................
¥2.77
0.823
¥9.63
0.722
¥0.01
0.887
0.03
0.819
coef ...........................................................................................................
p value ......................................................................................................
¥50.87
0.287
¥54.69
0.531
¥0.10
0.212
¥0.04
0.835
coef ...........................................................................................................
p value ......................................................................................................
40.95
0.148
¥11.06
0.781
¥0.03
0.797
* ¥0.27
0.098
II
III
IV
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45588
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
Spreads
Avg. BBO
spread for
all exchanges
(bps)
coef ...........................................................................................................
p value ......................................................................................................
Four measures were analyzed to
assess the potential impact that the
Program had on spreads: Average BBO
spreads across all exchanges and BYX
quoted spreads were both measured in
both basis points and dollar terms. The
table above shows limited impact of the
Program on spreads on BYX and the
broader market. The only statistically
significant changes identified were to
Avg. BYX
spread
(bps)
166.71
0.219
BYX spreads measured in dollar terms
when using a post-period treatment
group from 2017–2018. Specifically, the
Exchange observed a relative narrowing
of average BYX spreads in treatment
securities that is equivalent to: $0.27 for
the more liquid symbols in Sample III,
and $0.42 for the less liquid symbols
contained in Sample IV, indicating an
improvement in market quality on BYX
Avg. BBO
spread for
all exchanges
(dollars)
Avg. BYX
spread
(dollars)
¥2.18
0.207
211.50
0.316
** ¥0.42
0.018
in securities with more volume traded
in the Program. While the Exchange’s
analysis does not prove that the
observed improvements in BYX spreads
could necessarily be attributed to the
Program rather than other factors, this
result supports the overall conclusion
that the Program did not result in
spreads widening.
Depth in Round Lots
Avg. inside
bid size for all
exchanges
Avg. BYX
bid size
Avg. inside
ask size for all
exchanges
Avg. BYX
ask size
I
coef ...........................................................................................................
p value ......................................................................................................
1.30
0.926
¥4.85
0.538
4.66
0.840
1.03
0.948
coef ...........................................................................................................
p value ......................................................................................................
¥2.79
0.505
¥2.10
0.170
0.11
0.984
¥1.40
0.331
coef ...........................................................................................................
p value ......................................................................................................
4.75
0.699
¥3.76
0.556
3.23
0.813
¥7.03
0.406
coef ...........................................................................................................
p value ......................................................................................................
¥15.18
0.105
* ¥16.54
0.052
¥6.19
0.277
* ¥13.22
0.065
II
III
khammond on DSKBBV9HB2PROD with NOTICES
IV
Similar to the analysis of spreads, four
size measures are analyzed, including
inside bid and ask sizes both on BYX
and across all exchanges. Here, the
Exchange found only two statistically
significant changes in the available size.
Specifically, the Exchange found a
relative decrease in the average bid and
ask size on BYX in treatment securities
when looking at the results for Sample
IV, which includes less liquid securities
with a post-period treatment group of
2017–2018. For the bid side of the
market, the Exchange found that the
average size on BYX for treatment
securities decreased by 16.54 round lots
(i.e., 1654 shares) relative to the control
group. Similarly, for the offer side of the
market, the Exchange found that the
average size on BYX for treatment
securities decreased by 13.22 round lots
(i.e., 1322 shares) relative to the control
group. While available bid and offer
sizes on BYX in the treatment group
decreased relative to the control group,
the Exchange believes that this change
may have been caused by factors
unrelated to the Program. In fact, the
average BYX bid and ask sizes
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Jkt 247001
materially increased during the duration
of the Program for securities included in
both the treatment and control groups.
For example, the average BYX bid size
for Sample IV increased from 3.49
round lots in the pre-period to 4.91
round lots in the post-period, an
approximately 40% improvement.
Similarly, the average BYX ask size for
Sample IV increased from 3.74 round
lots in the pre-period to 5.16 round lots
in the post-period, an approximately
38% improvement. The Program results
simply indicate a larger increase in size
for the control groups was observed.
The same statistics for the control group
indicate 791% increase in BYX bid size
and a 1014% increase in BYX ask size.
The Exchange therefore believes the
results are largely due to outlier stocks
in the control group that experienced a
significant increase in depth that was
most likely related to outside factors
rather than the lack of Program
participation. Given the significant
increase in depth across stocks in both
the control and treatment groups, the
Exchange believes that the results are
consistent with a finding that the
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Program did not materially harm depth
on BYX.
Volume
BYX volume
as % of TCV
(bps)
TRF volume
as % of
symbol total
volume
I
coef ....
p value
* 0.43
0.051
1.10%
0.522
coef ....
p value
0.38
0.112
1.09%
0.641
coef ....
p value
* ¥1.11
0.051
*** 7.43%
0.002
coef ....
p value
* ¥1.72
0.068
** 7.95%
0.033
II
III
IV
Market Share
To assess the impact of the Program
on market share the Exchange explored
measures related to both BYX volume as
a percentage of TCV and TRF volume as
a percentage of Symbol Total Volume.
The BYX market share coefficients
shown in the table are expressed in
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khammond on DSKBBV9HB2PROD with NOTICES
market share basis point. For example,
a value of 100 means that market share
increased by one point (e.g., 30% to
31%). Many of the results related to
market share are statically significant,
suggesting shifts in both BYX and TRF
market share in the years following the
introduction of the Program. Sample I,
for example, suggests a statistically
significant relative increase in BYX
volume in more liquid treatment
securities immediately following the
introduction of the Program, but
Samples III and IV suggest that any such
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increases were temporary with BYX
volume as a percentage of TCV
decreasing relative to the control group
in both of the later samples. In addition,
Samples III and IV also reflect a large
and statistically significant relative
increase in TRF share for securities with
more volume executed in the Program.
Collectively, it can be safely stated that
the introduction of the Program did not
work towards decreasing TRF share.
More likely what the results tell us is
that the treatment stocks with relatively
high volume executed in the Program
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45589
also had high levels of retail interest
generally. Such retail interest is
executed largely off-exchange, hence the
increase in TRF share.
I. Active Stocks (CADV >500,000) and
Post-Period = 2013
For this sample, there were 58
matched pairs that emerged from this
process. The pairs, along with values of
selected variables, pre- and postProgram introduction, are shown as
follows:
BILLING CODE 8011–01–P
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29AUN1
45590
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
:'
AA
ABX
AGNC
AIG
AMZN
ARIA
DA
BIDC
BKLN
BRCM
c
CLF
CREE
CRM
cscu
cvx
DAL
DOD
DUST
EBAY
EMC
FCX
l'SLR
GDX
GILD
GLW
GRPN
GS
IIIMX
!AU
IB\1
JCP
LINI:
LNKD
MCP
MS
J\1U
NEM
Nl'LX
NQ
NUGT
OPK
khammond on DSKBBV9HB2PROD with NOTICES
p
POT
QCOM
SBUX
SCTY
SDS
SPXU
TNA
TSLA
TZA
lJVXY
VvlT
X
XIV
XOM
YELP
Avg
VerDate Sep<11>2014
..
...
15.460.924
7,031,473
7,114.187
22,573,053
3,084.678
2.393.958
4,242.510
4,759,554
96g,969
6,694,285
36,577,562
7,716,672
1.474.853
1,629,197
35,875.238
5.402.199
10,344.011
1.590.675
947,887
9,256,736
17.419.699
17,727,453
4,629287
IL107.693
6,289.115
13.59L377
17,090.991
3.806.548
259,352
5.785.889
3,597.646
8.798.098
Ll86.502
1,904.735
6,716.181
18.081,192
22,809.534
4.966.157
4,891.890
305.712
5,504.781
1,216.778
4,606,434
3.745.760
10,959.813
7.945,336
218.067
10.084.954
5,029.770
8.931.585
967,259
17391,045
7,906.931
3.562.092
8,340.519
I L815,441
11,270.051
929.218
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
8.65
36.66
31.42
34.21
241.90
21.94
72.68
102.77
24.g6
32.69
36.62
36.79
30.08
153.58
18.59
110.19
10.34
42.75
29.39
49.53
25.06
36.43
25.44
49.24
70.85
12.35
4.07
120.85
2.19
16.77
195.97
20.68
38.91
108.08
9.31
17.43
5.93
49.25
73.77
6.33
12.97
4.46
8.65
40.29
61.35
49.93
11.12
49.47
39.39
57.25
31.22
15.46
25.64
34.34
21.59
17.51
89.48
21.33
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8.216.026
s
44.93
$
17:00 Aug 28, 2019
Jkt 247001
PO 00000
O.Dl
0.03
om
0.02
0.69
0.05
0.09
0.33
o.og
0.03
0.02
0.13
0.08
0.78
O.Dl
0.15
0.02
0.47
0.25
0.06
0.01
0.02
0.12
0.06
0.10
0.01
0.02
0.23
0.04
O.Dl
0.29
0.06
0.23
0.53
0.05
0.01
0.01
0.09
0.29
0.12
0.03
0.02
om
0.03
o.os
0.05
0.45
0.04
0.06
0.07
0.20
0.02
0.10
0.10
0.03
0.03
0.12
0.24
0.13
Frm 00128
12.61
7.33
8.00
6.42
28.28
24.69
12.80
31.94
32.20
8.36
4.68
34.96
27.52
50.20
6.02
13.78
16.70
108.10
81.70
!LSI
5.34
6.53
45.05
12.86
14.44
9.27
43.92
19.08
193.54
7.65
14.85
26.15
59.67
48.68
54.76
7.93
21.89
17.44
37.38
185.14
23.43
48.15
38.24
6.85
7.52
9.61
387.20
7.51
15.37
11.55
64.91
15.57
37.72
30.42
14.26
19.11
13.80
110.44
DElL
XLY
STI
NWSA
IVV
FNF
DIIR
EWW
lJEI
XHB
xu
VRSI\
ROC
SHW
XU(
XRT
AES
EWY
!'RAN
XOP
MIX
XLP
IICA
LYE
ASI'v!L
BSBR
KCG
ORLY
Cl'v!LS
MITD
ALXN
NRG
PI:NN
L'v!CA
MOlD{
UBS
OCT
STT
IWD
SGYP
PBI
MTOR
CPWR
XME
DISH
STJ
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PCAR
GNRC
SEE
lJSG
DLPH
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Fmt 4703
Sfmt 4725
.,
.
20,372,498
5,528.936
5,411,184
14.348.224
3,677,223
2,265,083
3,498,381
2.221,452
939,939
6.260.362
10,044,466
4.299.024
1,474,746
987,435
9,377,430
3,667,753
4,729,487
1,703,520
1,050,577
3.989.057
7,078,514
5.944.396
3,903,420
4.161,826
2,912,489
4,807,311
3,710,317
1,395,072
196,177
3,326,056
1,246,135
4,330,499
956,439
1,001,163
3,888,106
2,949,981
3,656,749
3,676,928
1,912,933
322,816
4,042,584
1,083,068
3,269,062
3,208,814
3,010,583
3,929,838
187,841
1,872,458
2,220,388
2,300,080
886,092
2,732,827
1,989,789
2,594,898
2,815,829
2,788,370
2,284,000
854,677
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
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$
$
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$
$
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$
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$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
9.77
46.78
28.00
24.47
142.73
22.80
53.73
67.25
23 2g
25.77
36.88
39.74
32.31
149.98
29.20
62.34
10.53
59.20
26.74
54.16
24.48
35.46
31.67
52.08
55.72
7.05
3.17
86.43
2.48
16.05
97.69
22.01
46.23
109.44
11.65
14.89
6.36
44.18
72.07
4.79
11.91
4.44
9.20
44.08
35.35
36.32
14.53
37.07
41.18
42.77
32.28
16.50
25.00
34.09
20.89
17.73
60.53
16.52
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.01
0.03
0.02
0.02
0.31
0.05
0.11
0.34
o og
0.02
0.02
0.11
0.09
0.64
0.01
0.15
0.01
0.52
0.25
0.06
0.02
0.02
0.08
0.07
0.11
0.01
0.02
0.22
007
0.02
0.26
0.06
0.22
0.52
0.04
0.01
001
0.06
0.40
0.12
0.03
0.02
0.02
0.05
0.05
007
0.38
0.04
0.06
0.07
0.18
0.02
0.10
0.11
0.04
0.03
0.12
0.24
1156
5.52
9.00
6.95
21.73
23.27
20.06
51.45
3Hl
8.34
4.63
27.69
26.55
42.03
4.60
24.06
13.99
88.29
94 03
11.74
7.97
4.29
24.21
13.34
19.94
17.65
54.59
24.83
279.21
9.67
26.97
26.70
49.50
47.27
31.40
9.55
19.92
14.37
55.25
262.18
24.32
51.16
2:l89
12.02
1:l85
17.51
219.77
10.38
14.05
17.36
57.29
14.46
40.02
34.01
18.57
3,608,540
$
37.76
$
0.12
39.51
E:\FR\FM\29AUN1.SGM
29AUN1
jj)~j
20.23
154.83
EN29AU19.005</GPH>
Symbol
Table lA: Retail Program Matched Sample L'ADV >SOU 000 (Oct-Nov 2012)
Treatment Stocl.s
Control Stocks
Avg. Price Avg. Quoted Avg. Quoted
CADV
Symbol
CADV
Avg. Price Avg. Quoted Avg. Quoted
Spread
Spread
Spread
SJD·ead
Across
Across
Across
Across
Exchanges Exchanges
Exchanges Exchanges
($)
($)
w
(bps) •.•
(bps) i·
'
45591
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
Table 1B: Retail Proeram Matched Samole CADV > 500 000 (2013
Symbol
AA
CADV
POT
COM
SBUX
SCTY
SDS
SPXU
TNA
TSLA
TZA
UVXY
WLT
X
XIV
XOM
YELP
5 089
1,557
I 385
1,369
2 114
2 629
I 617
I 525
I 406
I 376
5,212
I 630
1,237
I 504
4 176
I 275
I 598
2,108
I 288
2,159
I 510
I 315
I 569
2 902
2 234
I 603
2,182
I 752
2,788
2 450
I 804
5 901
I 437
I 410
I 707
1,542
7 688
1,277
2 741
I 979
3 955
I 345
2 279
I 339
1,660
I 674
1,407
3 036
I 480
4 341
6 713
7 311
I 836
3,012
I 289
1,630
2 026
I 344
19 327 285
15,953,498
7041473
12,833,957
2 723 141
8 386 567
4814559
3 882 586
2 646 507
7 939 915
25,337,493
9 016 378
2,201,209
4 086 334
35 628 973
4874429
12 649 874
4,087,704
2 033 045
9,990,357
20 094 594
12 770 837
5 399 123
24 062 085
8 738 215
11891093
17,468,620
3 263 149
6,274,131
6 211 410
3 759 508
21 590 936
2 520 248
2 050 887
7381103
15,789,813
36337447
8,076,015
3 755 666
2 701 609
10 874 913
2 948 125
7 375 842
7014303
10,562,162
4 272 242
2,573,357
9 854 917
5 426 773
8 453 861
8 081 710
12 648 252
14172 673
6,675,126
7 221 072
13,271,663
II 009 725
2 222 779
Avg
2 374
9 659 505
ABX
AGNC
AIG
AMZN
ARIA
BA
BIDU
BKLN
BRCM
c
CLF
CREE
CRM
csco
cvx
DAL
DDD
DUST
EBAY
EMC
FCX
FSLR
GDX
GILD
GLW
GRPN
GS
HIMX
!AU
IBM
JCP
LINE
LNKD
MCP
MS
MU
NEM
NFLX
NQ
NUGT
OPK
p
khammond on DSKBBV9HB2PROD with NOTICES
RPIADV
VerDate Sep<11>2014
17:49 Aug 28, 2019
Control Stocks
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
as 0/(lof
Spread
Spread
Symbol
Across
Across
CADV
Exchanges Exchanges
($)
(bps)
0.026%
0.010%
0.020%
0.011%
0.078%
0.031%
0.034%
0.039%
0.053%
0.017%
0.021%
0.018%
0.056%
0.037%
0.012%
0.026%
0.013%
0.052%
0.063%
0.022%
0.008%
0.010%
0.029%
0.012%
0.026%
0.013%
0.012%
0.054%
0.044%
0.039%
0.048%
0.027%
0.057%
0.069%
0.023%
0.010%
0.021%
0.016%
0.073%
0.073%
0.036%
0.046%
0.031%
0.019%
0.016%
0.039%
0.055%
0.031%
0.027%
0.051%
0.083%
0.058%
0.013%
0.045%
0.018%
0.012%
0.018%
0.060%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8.61
20.06
25.97
42.64
295.67
8.97
98.12
118.43
24.91
30.47
47.55
23.99
56.62
63.48
22.46
119.26
19.20
55.88
39.23
53.07
24.38
32.42
43.90
27.60
59.18
14.46
8.17
156.61
7.94
14.40
192.21
12.37
31.13
197.34
6.51
24.78
12.91
32.17
248.87
13.71
13.53
8.38
19.68
35.47
65.91
65.36
44.99
38.97
23.25
57.66
129.90
23.26
17.58
17.78
21.41
25.25
90.32
48.92
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.01
0.02
0.03
0.04
0.73
0.06
0.15
0.41
0.01
0.04
0.03
0.05
0.18
0.28
0.01
0.14
0.03
0.31
0.64
0.08
0.02
0.03
0.16
0.03
0.15
0.01
0.03
0.26
0.04
0.01
0.25
0.03
0.24
0.95
0.02
0.02
0.02
0.04
0.85
0.19
0.09
0.03
0.05
0.02
0.06
0.08
0.48
0.02
0.02
0.06
0.59
0.02
0.08
0.07
0.03
0.05
0.10
0.30
0.034% $
53.16
$
0.15
Jkt 247001
PO 00000
Frm 00129
14.40
9.46
13.93
8.05
24.11
43.16
14.43
32.32
5.78
12.37
5.42
22.86
31.50
26.71
6.05
11.88
15.51
63.22
95.66
15.11
6.16
7.68
36.28
9.14
21.61
9.90
33.84
16.47
68.82
8.43
13.01
20.25
74.83
46.49
35.30
6.66
13.97
13.96
33.10
171.57
35.64
35.91
26.90
6.98
9.60
10.74
159.00
5.32
9.63
8.95
56.68
10.23
28.95
35.25
15.73
22.36
10.65
72.17
Symbol
CADV
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
as 0/oof
Spread
Spread
Symbol
Across
Across
CADV
Exchanges Exchanges
($)
DELL
XLY
STI
NWSA
IVV
FNF
DHR
EWW
DEI
XHB
XLI
VRSN
RDC
SHW
XLK
XRT
AES
EWY
FRAN
XOP
AMX
XLP
HCA
LYE
ASML
BSBR
KCG
ORLY
CMLS
AMTD
ALXN
NRG
PENN
LMCA
MDRX
UBS
DCT
STT
IWD
SGYP
PBI
MTOR
CPWR
XME
DISH
STJ
RPRX
UN
ABC
PCAR
GNRC
SEE
USG
DLPH
NWL
GCI
ITW
WWAV
28.97 Avg
Fmt 4703
RPIADV
Sfmt 4725
116
107
120
95
113
52
101
97
II
90
109
57
69
79
121
50
80
100
108
52
69
62
104
121
33
85
3
39
106
66
104
10
84
32
100
24
41
86
53
46
114
Ill
29
47
93
56
51
70
123
59
77
103
Ill
50
29
105
119
104
19 152 126
5,154,772
4 006 496
10,512,361
3 929 837
2 495 225
2 430 560
3 015 333
829 626
5 568 958
9,303,679
I 553 443
1,065,938
689 924
7 022 095
3708101
4919917
2,154,060
I 132 272
4,168,354
7 803 820
8074577
3 440 450
3 467 854
I 223 661
4 735 874
904,126
702 515
769,675
2 911 901
I 327 646
3 194 624
I 013 611
559 391
2 165 684
2,304,735
4 284 970
2,600,981
I 469 139
585 711
3 876 529
I 359 251
I 666 679
2 939 668
2,437,809
2 095 989
605,702
I 580 186
I 838 !51
I 407 077
783 683
I 942 673
I 705 248
1,890,092
2179 887
2,536,184
I 790 165
I 247 342
77
3 107 523
E:\FR\FM\29AUN1.SGM
0.001%
0.002%
0.003%
0.001%
0.003%
0.002%
0.004%
0.003%
0.001%
0.002%
0.001%
0.004%
0.006%
0.011%
0.002%
0.001%
0.002%
0.005%
0.009%
0.001%
0.001%
0.001%
0.003%
0.003%
0.003%
0.002%
0.000%
0.006%
0.014%
0.002%
0.008%
0.000%
0.008%
0.006%
0.005%
0.001%
0.001%
0.003%
0.004%
0.008%
0.003%
0.008%
0.002%
0.002%
0.004%
0.003%
0.008%
0.004%
0.007%
0.004%
0.010%
0.005%
0.007%
0.003%
0.001%
0.004%
0.007%
0.008%
(bps)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
13.38
57.53
31.01
27.19
166.41
26.17
64.45
67.58
24.36
29.77
44.29
46.18
34.97
174.90
31.51
74.92
12.66
59.81
24.15
62.89
21.41
40.50
39.28
65.32
77.06
6.83
4.19
112.00
5.31
22.50
101.58
26.25
39.73
131.63
12.94
17.80
7.29
61.70
82.04
5.03
16.62
6.58
11.13
38.51
42.20
45.53
17.59
39.57
54.52
51.62
41.73
24.81
27.01
47.89
25.99
23.49
68.25
18.81
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.01
0.05
0.03
0.02
0.19
0.06
0.12
0.49
0.06
0.03
0.02
0.09
0.07
0.99
0.01
0.17
0.02
0.43
0.20
0.12
0.02
0.02
0.08
0.15
0.24
0.01
0.10
0.35
0.03
0.04
0.50
0.05
0.21
1.21
0.03
0.02
0.01
0.10
0.48
0.07
0.03
0.03
0.04
0.04
0.13
0.08
0.27
0.05
0.11
0.11
0.19
0.04
0.08
0.14
0.05
0.11
0.14
0.18
8.61
8.55
8.60
10.85
12.07
22.51
18.42
71.11
22.10
9.58
4.05
18.76
21.42
56.39
4.34
22.93
13.20
73.77
77.58
17.96
9.78
4.15
20.38
22.90
28.88
18.79
76.25
30.75
83.10
14.80
46.65
20.16
43.01
92.15
23.26
9.39
17.97
16.11
56.58
128.16
16.88
43.48
40.21
11.04
29.63
15.70
153.41
11.77
20.08
20.31
47.36
16.74
31.39
28.05
18.27
17.79
20.42
102.67
0.004% $
44.08
$
0.15
32.95
29AUN1
EN29AU19.006</GPH>
Treatment Stocks
45592
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
ADEP
AFOP
AGEN
AMPE
ANFI
ANIK
ARWR
AXU
BALT
BIOD
BITA
BSCE
BSCF
BSCG
BTT
CSQ
CVY
CWB
CYTX
DGS
DHF
DHY
DJP
DNP
DSCO
khammond on DSKBBV9HB2PROD with NOTICES
DWX
EW
FENG
FONR
GGS
GIM
GSVC
IEP
IGR
IPCI
JPS
MEMP
VerDate Sep<11>2014
28,679
27,526
71,459
172,321
229,063
68,860
70,645
230,586
80,703
26,981
46,794
29,793
32,166
31,031
151,527
432,638
174,542
235,888
382,146
153,899
278,036
378,011
263,902
601,848
285,432
204,097
290,037
75,634
140,123
75,042
287,120
199,122
6,871
350,131
22,568
317,131
225,059
17:49 Aug 28, 2019
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3.21
11.06
4.21
3.70
8.58
11.77
2.33
3.88
3.04
2.68
6.50
21.29
21.83
22.25
24.63
9.97
22.08
39.79
3.39
46.91
4.22
3.22
42.15
9.57
2.42
45.73
16.90
3.41
5.29
4.16
9.45
7.97
39.45
8.71
2.59
9.27
17.65
Jkt 247001
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
PO 00000
0.29
0.54
0.21
0.10
0.40
0.37
0.28
0.04
0.13
0.28
0.46
0.09
0.14
0.20
1.10
0.09
0.40
0.30
0.07
0.69
0.03
0.02
0.28
0.09
0.05
0.58
0.23
0.15
0.22
0.22
0.13
0.11
3.40
0.11
0.27
0.16
0.57
899.25
498.32
521.71
258.42
506.60
329.27
1029.30
113.49
396.67
1233.26
771.90
42.61
62.66
91.53
438.77
95.58
179.26
75.59
192.88
145.62
82.55
53.64
68.05
94.41
209.88
125.27
138.83
406.47
438.29
508.22
133.03
141.25
834.31
120.60
1003.85
161.08
293.19
Frm 00130
Fmt 4703
NCTY
LBAI
PBTH
LPHI
CARE
RLOC
LCAV
CDR
ATNY
MCBC
ARX
IAT
EEV
TTT
SXE
CEL
GXG
BDC
PLXT
NILE
BIRT
CLS
ITRI
RATE
MPG
CEB
RXN
NOA
PSP
CPIX
GTIV
IPHI
GK
OFG
UCFC
BAK
CAF
Sfmt 4725
28,661
25,475
68,052
211,463
104,257
69,380
63,221
233,355
107,266
30,629
55,242
57,855
97,173
44,481
153,198
350,429
217,768
230,320
473,016
155,239
279,488
315,718
261,108
627,537
201,992
194,130
265,450
59,429
132,197
58,545
221,813
222,621
11,763
327,395
20,760
314,601
216,657
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
E:\FR\FM\29AUN1.SGM
3.52
9.84
4.81
2.51
8.28
11.76
3.45
5.28
2.76
3.01
6.31
24.54
24.30
17.22
22.86
9.00
21.16
38.72
4.41
38.76
5.61
7.38
41.87
11.86
3.04
46.36
19.83
3.28
9.71
4.72
10.39
8.58
34.38
11.67
3.38
13.43
20.10
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
29AUN1
0.28
0.53
0.21
0.10
0.37
0.41
0.39
0.05
0.12
0.34
0.33
0.13
0.14
0.29
0.82
0.08
0.37
0.31
0.04
0.76
0.04
0.03
0.27
0.12
0.05
0.50
0.21
0.15
0.24
0.23
0.12
0.11
2.17
0.10
0.27
0.13
0.46
797.70
535.93
443.55
373.60
437.19
344.67
990.97
95.19
433.96
946.30
497.52
54.06
58.57
169.01
350.04
83.13
174.03
81.05
91.50
192.77
72.50
39.70
64.94
97.69
164.12
109.34
110.63
454.69
242.03
439.45
113.61
128.22
543.46
87.36
825.80
97.97
227.10
EN29AU19.007</GPH>
Symbol
Table 2A: Retail Program Matched Sample CADV Between 50,000 and 500,000 (Oct-Nov 2012)
Treatment Stocks
Control Stocks
CADV
Avg. Price Avg. Quoted Avg. Quoted
CADV
Avg. Price Avg. Quoted Avg. Quoted
Symbol
Spread
Spread
Spread
Spread
Across
Across
Across
Across
Exchanges Exchanges
Exchanges Exchanges
(bps)
(bps)
($)
($)
Mill
MINT
NEA
NIO
NMM
NOAH
NPP
NlN
NWBO
ONCY
PBP
PHB
PRAN
PTY
PXLW
REE
ROYT
SA
SCHA
SCHB
SCHD
SCHE
SCHF
SCHG
SCHH
SCHM
SCHO
SCHP
SCHV
SCHX
SCHZ
SDR
SWIR
TAN
TEU
TGB
TRX
UBNT
UVE
VMO
VNR
192,485
202,353
49,243
183,776
360,092
34,634
128,938
337,974
59,045
244,772
149,605
776,071
105,056
225,663
39,372
287,101
84,784
316,552
162,128
376,299
193,913
233,255
252,269
99,757
117,462
101,314
48,841
59,054
105,018
263,109
87,073
265,167
33,486
41,956
147,033
332,524
263,757
285,443
92,174
177,994
369,297
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4.35
101.53
15.51
15.54
13.58
5.12
16.57
10.40
3.34
3.02
20.46
19.15
2.39
20.17
2.53
3.80
17.86
17.35
37.08
34.25
28.39
25.22
26.32
34.18
30.02
27.28
50.52
58.62
31.92
33.75
52.61
17.72
7.94
15.23
5.07
2.92
4.70
11.81
4.07
15.16
27.88
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Avg
186,708
$
17.70
$
VerDate Sep<11>2014
17:49 Aug 28, 2019
Jkt 247001
PO 00000
0.12
0.13
0.39
0.31
0.16
0.32
0.41
0.16
0.04
0.30
0.02
0.12
0.36
0.19
0.04
0.65
0.13
0.33
0.14
0.13
0.18
0.27
0.21
0.21
0.24
0.34
0.80
0.11
0.59
0.73
0.34
0.12
0.48
0.09
0.02
0.04
0.27
0.12
0.34
0.28
272.73
13.09
255.53
199.61
115.41
609.39
246.03
157.16
530.24
183.58
144.28
12.37
498.26
177.80
755.04
111.28
365.66
78.89
89.41
42.54
46.85
71.11
101.37
63.09
70.78
91.25
66.15
136.73
34.41
200.28
138.97
185.12
156.77
311.37
170.02
72.44
93.17
217.75
308.00
223.54
101.52
0.30
261.73 Avg
0.17
Frm 00131
Fmt 4703
WHX
soxx
STBZ
PID
ELGX
IVAC
AGX
ONE
SPAR
ATSG
PATK
KT
CXPO
VCRA
UPI
FCF
EMO
ACXM
HTSI
ATO
NICE
CATM
PLXS
LTC
SNX
CBU
LWC
BOKF
EUM
VPRT
IEZ
GOVT
TPGI
CPF
AGD
STEC
TVL
CMRE
JRN
MANU
ETH
Sfmt 4725
45593
250,302
188,580
51,439
161,742
398,712
39,794
141,983
496,710
72,062
155,981
152,662
717,123
96,231
205,330
32,755
380,940
87,492
284,748
178,373
335,203
221,804
239,553
239,438
124,907
126,121
108,415
52,421
56,926
98,101
298,211
85,177
304,639
36,310
46,500
148,836
590,413
295,806
335,461
93,516
120,036
372,466
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.92
50.88
15.77
15.38
13.42
4.93
17.83
10.29
4.91
3.81
17.46
17.06
3.30
26.37
3.44
6.68
20.36
17.72
37.61
35.25
33.01
25.21
25.10
32.80
32.62
27.21
42.05
56.90
28.46
32.19
50.01
25.30
5.47
14.59
5.58
5.10
6.31
13.71
5.46
13.03
27.04
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.14
0.11
0.41
0.32
0.13
0.29
0.50
0.14
0.15
0.06
0.30
0.03
0.09
0.35
0.30
0.04
0.64
0.13
0.31
0.16
0.13
0.24
0.21
0.23
0.25
0.33
0.85
0.08
0.45
0.87
0.32
0.23
0.49
0.09
0.04
0.09
0.23
0.11
0.33
0.22
243.22
21.26
260.73
204.19
93.82
563.46
281.64
120.40
310.40
157.94
173.98
16.24
258.53
131.70
872.99
58.69
317.65
76.12
82.84
44.49
40.22
66.62
98.08
65.18
69.41
91.75
79.36
151.09
28.86
136.89
170.15
126.27
423.29
298.28
167.86
77.41
150.58
165.20
209.58
247.68
80.77
191,422
$
17.35
$
0.28
233.39
E:\FR\FM\29AUN1.SGM
29AUN1
0.17
EN29AU19.008</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
45594
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
II. Less Active Stocks (CADV Between
50,000 and 500,000) and Post-Period =
2013
process. The pairs, along with values of
selected variables, pre- and postProgram introduction, are shown as
follows:
For this sample, there were 78
matched pairs that emerged from this
ADEP
AFOP
AGEN
AMPE
ANFI
ANIK
ARWR
AXU
EALT
BIOD
EITA
ESCE
ESCF
ESCG
ETT
CSQ
CVY
CWB
CYTX
DGS
DHF
DHY
DJP
DNP
DSCO
DWX
EVV
FENG
FONR
GGS
GIM
GSVC
IEP
IGR
IPCI
JPS
MEMP
MILL
MINT
NEA
NIO
NMM
NOAH
NPP
NUV
NWEO
ONCY
PEP
PHE
PRAN
PTY
PXLW
REE
ROYT
SA
SCHA
SCHE
SCHD
SCHE
SCHF
SCHG
SCHH
SCHM
SCHO
SCHP
SCHV
SCHX
VerDate Sep<11>2014
RPIADY
259
702
347
277
250
252
309
262
391
286
540
347
242
265
311
301
390
359
252
242
246
269
346
252
290
288
352
468
264
248
450
389
285
416
383
284
305
274
284
250
364
282
351
290
327
440
279
282
368
585
329
305
604
251
279
1,119
813
l 218
l 953
l 777
560
725
642
l 012
322
534
581
118 689
361 379
329 671
304 243
159 596
160 054
304 762
337 096
423 102
390 665
430 309
107 963
128,294
118 991
294,021
389 939
227 687
397 543
389 085
203 722
253 663
430,972
383 945
381 104
496 619
207 589
346 524
490 075
107 948
279 537
369 761
432 081
196 075
416 278
377 771
367 636
404 684
405 037
401 362
233 989
275 123
411 126
368 566
170 919
494,727
335 522
432,947
94 306
435 895
413 704
301 847
267 829
373 960
197,606
473 242
251,719
410458
312 113
324 806
326316
119 371
142 411
179 045
92 286
64 319
Ill 498
318 590
17:49 Aug 28, 2019
0.218%
0.194%
0.105%
0.091%
0.157%
0.157%
0.101%
0.078%
0.092%
0.073%
0.126%
0.321%
0.189%
0.223%
0.106%
0.077%
0.171%
0.090%
0.065%
0.119%
0.097%
0.062%
0.090%
0.066%
0.058%
0.139%
0.102%
0.096%
0.244%
0.089%
0.122%
0.090%
0.146%
0.100%
0.101%
0.077%
0.075%
0.068%
0.071%
0.107%
0.132%
0.069%
0.095%
0.170%
0.066%
0.131%
0.064%
0.299%
0.085%
0.141%
0.109%
0.114%
0.162%
0.127%
0.059%
0.445%
0.198%
0.390%
0.601%
0.545%
0.469%
0.509%
0.358%
1.096%
0.500%
0.479%
0.182%
Jkt 247001
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
9.36
21.90
3.18
6.51
10.96
25.56
6.69
2.03
5.03
3.75
23.25
21.29
21.84
22.23
19.02
10.46
23.94
44.05
2.62
47.74
4.24
3.18
38.95
9.97
2.06
47.29
16.24
9.66
13.91
2.73
8.81
11.83
97.17
8.89
4.01
8.71
19.46
6.55
101.48
12.47
13.52
15.03
16.83
14.09
9.61
4.16
3.02
20.33
19.17
4.98
19.31
4.31
2.26
15.73
11.36
47.25
39.58
34.03
24.74
30.24
42.38
3l.ll
34.36
50.51
53.71
37.85
40.11
PO 00000
0.25
0.47
0.14
0.13
0.37
0.45
0.19
0.04
0.14
0.15
0.48
0.15
0.16
0.20
0.52
0.07
0.32
0.39
0.05
0.58
0.02
0.02
0.18
0.07
0.03
l.l7
0.23
0.12
0.39
0.08
0.10
0.16
2.38
0.08
0.21
0.13
0.26
0.11
0.20
0.30
0.25
0.26
0.44
0.33
0.09
0.16
0.03
0.28
0.05
0.14
0.40
0.14
0.04
0.48
0.11
0.65
0.15
0.19
0.29
0.31
0.35
0.43
1.05
0.29
0.95
0.20
0.21
619.38
268.39
346.84
236.72
437.40
280.64
599.17
212.12
348.94
514.48
408.67
70.08
71.61
89.04
249.64
70.62
134.99
91.20
176.01
117.42
49.86
50.70
47.37
70.78
166.14
129.97
146.01
240.50
564.67
259.26
110.12
152.99
317.29
86.43
974.14
130.78
131.29
238.23
19.66
223.28
172.44
173.94
393.26
219.66
93.02
409.23
110.29
139.94
24.11
447.02
206.00
500.08
190.13
274.23
91.52
134.98
36.51
55.20
119.45
107.28
86.39
134.72
246.30
56.86
173.26
53.63
53.55
Frm 00132
Fmt 4703
$
$
$
$
$
$
$
$
$
$
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$
$
$
$
$
$
$
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$
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NCfY
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RLOC
LCAV
CDR
ATNY
MCEC
ARX
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EEV
TIT
SXE
CEL
GXG
EDC
PLXT
NILE
EIRT
CLS
ITRI
RATE
MPG
CEE
RXN
NOA
PSP
CPIX
GTIV
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GK
OFG
UCFC
EAK
CAF
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soxx
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PID
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AGX
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SPAR
ATSG
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CXPO
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FCF
EMO
ACXM
HTSI
ATO
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CATM
PLXS
LTC
SNX
CEU
LWC
EOKF
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Sfmt 4725
23
10
ll
18
24
12
21
ll
22
20
9
7
8
18
19
21
4
5
24
ll
14
9
18
ll
7
4
12
12
10
19
19
19
14
21
8
10
13
12
7
4
17
15
10
23
17
13
12
24
l
5
13
14
16
5
12
5
17
22
21
10
21
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l
21
14
ll
59 298
66 322
180 748
53 455
107 764
88 923
60 222
280 520
53 665
78 638
57 610
112 186
222,972
81 312
51,716
144 276
142 Ill
218 199
321 600
157 435
187 631
264,069
280 396
483 264
483 833
117 449
201 093
69 570
273 290
57 420
212,930
167 025
52 978
276 658
55 822
289 968
200 701
384 622
158763
75 107
221 480
392 499
67 168
64 336
229,552
83 083
145,601
73 632
489 676
77 465
249 886
56 551
362 850
78,223
369619
478,320
387 927
159 002
238 221
170 432
138 686
166 928
122 481
53 345
59 757
246 768
265 421
E:\FR\FM\29AUN1.SGM
0.040% $
0.015% $
0.006% $
0.034% $
0.022% $
0.013% $
0.035% $
0.004% $
0.042% $
0.025% $
0.016% $
0.007% $
0.003% $
0.023% $
0.036% $
0.014% $
0.003% $
0.002% $
0.007% $
0.007% $
0.007% $
0.003% $
0.006% $
0.002% $
0.001% $
0.003% $
0.006% $
0.018% $
0.004% $
0.032% $
0.009% $
0.011% $
0.026% $
0.008% $
0.014% $
0.003% $
0.007% $
0.003% $
0.004% $
0.005% $
0.008% $
0.004% $
0.015% $
0.035% $
0.007% $
0.015% $
0.008% $
0.033% $
0.000% $
0.006% $
0.005% $
0.025% $
0.004% $
0.006% $
0.003% $
0.001% $
0.004% $
0.014% $
0.009% $
0.006% $
0.015% $
0.002% $
0.006% $
0.001% $
0.035% $
0.006% $
0.004% $
29AUN1
2.96
10.57
6.14
2.98
12.10
13.37
3.35
5.67
2.88
5.21
7.57
29.26
23.19
62.53
20.88
9.32
20.97
55.31
4.99
36.31
6.68
9.47
42.57
16.11
3.07
60.44
20.06
4.62
11.41
4.70
10.95
11.23
49.87
16.33
4.08
15.64
23.39
5.64
60.81
16.20
16.93
15.53
5.65
18.98
9.88
5.83
6.08
20.87
16.39
3.07
17.95
2.87
7.74
23.22
25.78
46.92
4l.l7
37.28
31.77
30.44
39.77
45.68
31.65
39.99
62.34
28.20
46.26
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.19
0.30
0.19
0.17
0.50
0.43
0.43
0.08
0.17
0.23
0.43
0.21
0.48
1.39
l.lO
0.12
0.45
0.50
0.03
0.68
0.05
0.03
0.30
0.17
0.03
0.87
0.29
0.20
0.22
0.23
0.19
0.19
1.98
0.25
0.17
0.13
0.47
0.14
0.18
0.43
0.11
0.14
0.21
0.67
0.15
0.17
0.10
1.00
0.04
0.14
0.27
0.20
0.03
0.86
0.22
0.25
0.20
0.21
0.29
0.36
0.43
0.55
0.34
0.62
1.33
0.14
0.69
643.60
278.89
343.18
619.43
457.39
324.00
817.94
65.16
578.25
462.74
533.62
62.05
106.96
209.15
519.73
119.65
224.96
86.83
57.98
180.52
67.92
31.36
70.27
108.86
105.62
135.61
142.56
409.87
186.24
485.24
144.50
168.23
398.16
146.98
446.76
86.25
206.56
268.25
30.18
270.67
63.81
89.57
391.97
364.96
153.67
286.80
167.32
425.04
26.49
439.44
144.66
735.96
39.61
378.04
90.96
56.91
47.68
55.93
88.39
110.85
110.01
107.93
105.84
161.30
210.52
49.70
143.71
EN29AU19.009</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
Symbol
Table 2B: Retail Program Matched Sa mole CADY Between 50 000 and 500 000 (2013)
Treatment Stocks
Control Stocks
CADY
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
Symbol
RPIADY
CADY
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
as. o/(lof
Spread
Spread
Spread
Spread
as 6/o:of
Symbol
Symbol
Across
Across.
Across
Across
CADY
Exchanges Exchanges
CADY
Exchanges Exchanges
(bps)
($)
(bps)
($)
VerDate Sep<11>2014
17:49 Aug 28, 2019
Jkt 247001
PO 00000
Frm 00133
Fmt 4703
Sfmt 4725
E:\FR\FM\29AUN1.SGM
29AUN1
45595
EN29AU19.010</GPH>
khammond on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
45596
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
WLL
8,695,695
11,320,196
2,227,771
4,813,167
8,718,795
5,377,436
346,635
8,031,212
6,042,629
2,512,679
11,564,069
1,214,021
10,790,890
5,213,886
4,303,396
5,899,108
216,835
7,797,343
9,941,706
9,209,293
10,599,360
7,695,187
6,114,178
4,807,113
4,631,297
4,998,931
2,549,541
9,245,096
6,056,290
2,206,389
9,984,860
7,740,689
4,797,906
3,096,656
2,584,714
5,682,978
689,476
2,082,157
1,870,893
444,604
3,692,718
4,150,411
4,206,552
2,452,505
1,518,310
289,195
1,859,270
2,524,630
1,294,018
23,199
1,699,845
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4.51
10.89
16.21
10.78
11.09
18.64
7.26
32.88
85.44
77.63
18.31
5.90
36.66
57.22
38.85
47.08
16.34
49.80
4.59
25.32
33.14
62.03
15.06
34.35
25.10
39.28
2.08
32.59
30.40
93.20
12.35
68.92
30.10
54.86
46.23
70.82
86.93
17.67
41.94
72.62
34.98
39.84
62.17
50.95
52.54
30.72
86.39
143.43
56.76
7.58
44.23
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.01
0.01
0.03
0.04
0.01
0.03
0.10
0.02
0.12
0.14
0.02
0.10
0.02
0.08
0.03
0.03
0.42
0.03
0.01
0.03
0.02
0.05
0.03
0.03
0.03
0.04
0.01
0.02
0.03
0.21
0.02
0.05
0.05
0.16
0.09
0.15
0.20
0.04
0.13
0.53
0.07
0.07
0.05
0.27
0.19
0.70
0.17
0.19
0.10
0.71
0.12
Avg
4,820,112
$
40.29
$
0.11
AKS
AMAT
AMLP
AMRN
ATVI
AUY
AVEO
BMY
CAT
CELG
CHK
CLSN
CMCSA
COP
CTL
cvs
DGAZ
DIS
FTR
GM
HAL
HD
HTZ
KMl
KR
M
MNKD
MO
MRO
NKE
NVDA
PG
QID
QLD
RIG
SLB
SPXL
SPXS
SQQQ
SVXY
SWN
TEVA
TGT
TQQQ
UA
UGAZ
UPRO
khammond on DSKBBV9HB2PROD with NOTICES
v
VRX
VSTM
VerDate Sep<11>2014
17:49 Aug 28, 2019
Jkt 247001
PO 00000
Frm 00134
28.32
12.04
15.92
40.16
11.65
13.51
131.02
5.18
13.57
18.10
11.07
161.64
6.02
14.24
7.82
6.54
252.80
5.65
27.33
10.02
7.18
7.99
17.76
9.44
10.14
9.21
65.68
4.81
8.62
23.06
14.84
7.37
16.53
29.40
18.62
20.97
22.82
25.26
30.62
75.15
21.28
16.62
8.72
52.04
35.79
214.58
19.29
13.33
17.00
906.19
27.05
SID
EWT
HOLX
MAS
PBCT
HlG
MTDR
SE
MON
CTXS
EWH
lNVN
EWG
AET
SLW
DD
FANG
BTU
BRCD
LNC
EPI
BHl
MPEL
MMC
JBL
ITB
SNV
EWC
ARIA
FFIV
RRD
IYR
PAY
TSO
KLAC
HLF
IVW
JEF
BMRN
WLK
EWA
CRUS
SYK
ADT
ILMN
SCHX
TDC
IWF
DRI
BANC
EMN
50.00 Avg
Fmt 4703
Sfmt 4725
6,406,260
5,835,244
2,592,724
4,458,288
3,056,198
5,758,691
275,470
3,203,645
2,350,388
2,660,668
3,865,117
981,021
3,725,160
4,120,054
3,740,709
5,792,275
214,720
7,674,184
4,956,291
2,992,968
3,415,673
3,947,283
4,251,767
2,187,478
3,512,918
3,248,593
7,137,885
1,705,707
2,393,958
1,676,420
2,894,620
8,227,543
2,615,150
3,229,689
1,986,996
4,183,222
645,836
2,515,938
1,467,136
504,877
2,571,111
3,046,303
1,905,028
2,633,727
1,717,544
263,109
1,822,857
2,061,355
1,408,747
20,248
1,605,066
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.36
13.14
20.05
15.70
12.06
21.40
8.64
28.08
89.50
64.53
18.73
11.12
23.19
43.42
38.10
45.42
17.81
26.26
5.57
24.70
18.67
42.88
14.69
34.58
18.00
20.37
2.39
28.23
21.94
93.31
9.71
63.77
30.32
40.06
46.35
37.99
75.91
16.11
44.51
75.42
24.57
32.48
53.71
40.80
50.41
33.75
66.32
65.45
50.33
11.67
59.75
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.01
0.01
0.04
0.02
0.01
0.02
0.20
0.03
0.14
0.11
0.02
0.14
0.02
0.04
0.05
0.04
1.32
0.05
0.01
0.04
0.02
0.08
0.02
0.03
0.02
0.03
0.01
0.02
0.05
0.31
0.02
0.07
0.06
0.21
0.06
0.19
0.07
0.04
0.11
0.90
0.05
0.09
0.08
0.94
0.15
0.06
0.16
0.04
0.10
0.68
0.24
22.61
9.31
18.31
13.96
12.03
8.70
223.92
11.18
15.96
17.71
9.75
125.44
7.79
9.11
13.28
9.06
764.44
19.53
22.66
15.00
8.74
17.92
16.32
9.83
11.13
12.85
50.16
8.14
21.70
32.85
18.14
11.06
20.75
54.91
13.39
42.52
9.04
28.07
24.86
119.52
18.72
27.81
15.48
222.95
29.17
16.88
24.00
6.24
20.55
581.08
40.92
3,048,311
$
34.46
$
0.14
56.58
E:\FR\FM\29AUN1.SGM
29AUN1
EN29AU19.011</GPH>
Symbol
Table 3A: Retail Program Matched Sample CADV > 500,000 (Oct-Nov 2012)
Treatment Stocks
Control Stocks
Avg. Price Avg. Quoted Avg. Quoted
Symbol
Avg. Price Avg. Quoted Avg. Quoted
CADV
CADV
Spread
Spread
Spread
Spread
Across
Across
Across
Across
Exchanges Exchanges
Exchanges Exchanges
($)
($)
(bps)
(bps)
45597
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
For this sample, there were 51
matched pairs that emerged from this
Symbol
AKS
AMAT
AMLP
AMRN
ATVI
AUY
AVEO
BMY
CAT
CELG
CHK
CLSN
CMCSA
COP
CTL
cvs
DGAZ
DIS
FTR
GM
HAL
HD
HTZ
KMI
KR
M
MNKD
MO
MRO
NKE
NVDA
PG
Iom
low
RIG
SLB
SPXL
SPXS
sooc
SVXY
SWN
TEVA
TGT
TQQQ
UA
UGAZ
UPRO
v
VRX
VSTM
WLL
khammond on DSKBBV9HB2PROD with NOTICES
Avg
VerDate Sep<11>2014
RPIADV
process. The pairs, along with values of
selected variables, pre- and postProgram introduction, are shown as
follows:
Table JB: Retail Program Matched Sample CADV >500 000 2017-2018
Treatment Stocks
CADV
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
Symbol
RPIADV
CADV
as. o/(lof
Spread
Spread
Symbol
Across
Across.
CADV
Exchanges Exchanges
(bps)
($)
10 927
12 020
6 775
8,703
4 881
4,853
9 607
6,220
5 487
6,561
24 960
4 875
6 112
5 829
6 118
8 086
10 932
7 882
5 315
7 860
5,129
5 818
6,018
5 849
6,466
5 197
8,320
6 910
7 197
5 730
31 762
5 893
7 896
5 289
6 268
6 582
25 345
8,473
37 752
7,971
6 333
8,457
6 651
28,012
4 822
6,854
7 626
6 258
11634
5 046
6 482
15 639 776
10 389 776
13 624 887
4,062,849
6 160 439
10,659,756
2 496 205
6,858,944
4 307 581
4,772,371
32 603 625
l 241 307
18 127 151
5 825 648
9 429 069
6 647 472
9 084 225
6 491 364
10 659 192
10945311
7,839,425
3 924 834
4,353,477
ll 512 513
9,751,318
8 755 161
3,723,798
6 350 096
11747548
7314237
14116672
6751513
3 469 547
l 350 765
13 126 392
6 978 354
2 934 698
3,533,077
13391485
6,797,318
17 373 481
13,635,469
5 606 069
6,914,269
3 780 807
6,988,878
2 507 297
6321460
11277 226
l 342 946
9 789 906
0.070% $
0.116% $
0.050% $
0.214% $
0.079% $
0.046% $
0.385% $
0.091% $
0.127% $
0.137% $
0.077% $
0.393% $
0.034% $
0.100% $
0.065% $
0.122% $
0.120% $
0.121% $
0.050% $
0.072% $
0.065% $
0.148% $
0.138% $
0.051% $
0.066% $
0.059% $
0.223% $
0.109% $
0.061% $
0.078% $
0.225% $
0.087% $
0.228% $
0.392% $
0.048% $
0.094% $
0.864% $
0.240% $
0.282% $
0.117% $
0.036% $
0.062% $
0.119% $
0.405% $
0.128% $
0.098% $
0.304% $
0.099% $
0.103% $
0.376% $
0.066% $
5.44
44.85
10.63
8.20
59.97
2.79
2.55
56.85
130.63
102.65
4.31
2.86
37.17
54.01
19.71
73.99
11.36
107.13
3.16
37.81
43.58
174.08
16.90
18.01
26.33
27.38
2.36
63.69
16.29
61.48
183.69
86.03
20.71
84.13
10.78
65.53
45.26
24.60
16.71
32.22
5.55
19.94
66.84
86.59
16.71
23.54
81.05
116.08
15.46
5.40
10.32
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.03
0.35
0.02
0.09
0.60
0.02
0.05
0.37
1.79
l.l9
0.03
0.12
0.12
0.42
0.06
0.59
0.54
0.70
0.12
0.26
0.46
1.38
0.20
0.06
0.15
0.21
0.09
0.36
0.05
0.47
2.59
0.32
0.19
1.54
0.07
0.55
0.56
0.08
0.04
0.35
0.02
0.23
0.62
0.96
0.11
1.33
1.09
0.98
0.14
0.21
0.23
53.30
72.88
16.62
106.09
90.82
58.52
429.01
63.67
137.18
123.39
50.88
716.66
31.49
69.40
28.66
80.86
190.26
64.15
97.46
65.44
103.12
77.10
109.28
28.21
55.89
74.57
252.80
57.08
26.15
70.55
129.18
38.07
49.75
175.92
56.84
83.05
115.96
29.27
21.02
36.24
32.31
96.53
91.46
127.19
67.91
211.34
168.20
79.13
75.04
416.42
76.02
9 177
8 299 745
0.154% $
43.99
$
0.45
109.38 Avg
17:49 Aug 28, 2019
Jkt 247001
PO 00000
Frm 00135
Fmt 4703
SID
EWT
HOLX
MAS
PBCT
HIG
MTDR
SE
MON
CTXS
EWH
INVN
EWG
AET
SLW
DD
FANG
BTU
BRCD
LNC
EPI
BHI
MPEL
MMC
JBL
ITB
SNV
EWC
ARIA
FFIV
RRD
IYR
PAY
TSO
KLAC
HLF
IVW
JEF
BMRN
WLK
EWA
CRUS
SYK
ADT
ILMN
SCHX
TDC
IWF
DR!
BANC
EMN
Sfmt 4725
375
95
400
450
421
477
253
235
332
163
175
64
210
446
656
528
286
63
365
357
144
235
142
426
393
222
130
230
209
164
294
255
252
508
403
322
74
90
298
118
173
384
447
708
298
230
142
344
461
247
229
2 510 559
4513048
2 141 270
2,752,589
2 569 773
2,014,773
l 375 252
1,215,332
l 554 968
1,260,537
3 987 617
828 461
3510465
1933012
l 510 152
l 447 341
l 454 441
883 231
4 881 730
l 350 545
1,944,146
l 150 440
950,705
l 497 086
1,629,101
2 667 541
869,544
2 576 525
l 724 630
620 758
907 658
6 565 856
l 265 358
1175 360
l 195 514
1063746
760 113
1,081,974
l 048 100
739,423
2 067 Oll
977,604
l 026 348
3,111,301
811 645
939,059
l 162 863
l 626 114
l 347 432
735 845
981 095
293
l 763 039
Control Stocks
RPIVolume Avg. Price Avg. Quoted Avg.Quoted
Spread
Spread
as 6/o:of
Symbol
CADV
E:\FR\FM\29AUN1.SGM
Across
Across
Exchanges
Exchanges
(bps)
($)
0.015%
0.002%
0.019%
0.016%
0.016%
0.024%
0.018%
0.019%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.68
35.45
40.37
37.07
17.85
5l.l3
26.51
23.66
119.09
92.06
24.18
12.69
30.43
171.08
20.73
79.68
110.58
34.10
12.39
68.62
25.01
58.98
17.26
79.43
27.67
35.66
45.01
27.79
23.55
145.45
9.49
78.85
20.07
85.31
101.69
66.37
153.06
21.57
90.29
86.28
22.16
49.30
153.83
9.01
233.26
63.23
34.31
133.18
91.86
19.67
90.16
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.02
0.02
0.19
0.19
0.03
0.21
0.33
0.16
1.30
0.91
0.02
0.04
0.02
1.72
0.06
0.64
1.22
0.60
0.01
0.43
0.02
0.32
0.06
0.38
0.09
0.05
0.26
0.02
0.02
1.87
0.06
0.07
0.06
0.42
l.ll
0.88
0.45
0.08
l.l4
0.74
0.02
0.92
l.l7
0.10
4.74
0.08
0.22
0.51
0.60
0.12
0.59
62.72
4.53
46.07
49.11
15.83
40.56
115.69
119.60
115.70
94.57
7.48
33.44
7.73
98.50
31.43
80.84
107.18
166.13
9.27
63.09
9.90
53.74
35.40
47.18
32.67
12.91
57.09
6.03
11.39
125.53
64.95
8.53
32.97
49.83
107.81
132.50
27.96
35.25
125.94
82.98
7.65
205.13
73.75
100.29
192.78
12.19
59.05
35.50
62.85
65.50
65.41
0.020% $
60.96
$
0.50
62.94
0.021%
0.013%
0.004%
0.008%
0.006%
0.023%
0.043%
0.036%
0.020%
0.007%
0.007%
0.026%
0.007%
0.020%
0.015%
0.028%
0.024%
0.008%
0.015%
0.009%
0.012%
0.026%
0.032%
0.004%
0.020%
0.043%
0.034%
0.030%
0.010%
0.008%
0.028%
0.016%
0.008%
0.039%
0.044%
0.023%
0.037%
0.024%
0.012%
0.021%
0.034%
0.034%
0.023%
29AUN1
EN29AU19.012</GPH>
III. Active Stocks (CADV >500,000) and
Post-Period = 2017–208
45598
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
process. The pairs, along with values of
selected variables, pre- and postProgram introduction, are shown as
follows:
IV. Less Active Stocks (CADV Between
50,000 and 500,000) and Post-Period =
2017–2018
For this sample, there were 34
matched pairs that emerged from this
ALT
AWX
AXTI
BBOX
BTX
CLMf
CLNT
CPLP
CYCC
DEST
FGP
GCAP
GROW
GTXI
KNDI
KOPN
LBIX
LGCY
LIFE
MITK
MTSL
NMFC
PTX
RCON
RWM
SBLK
SDLP
SINO
SORL
SSH
TEAR
TIS
VHC
YANG
khammond on DSKBBV9HB2PROD with NOTICES
Avg
VerDate Sep<11>2014
11,289
2,179
148,034
41,839
83,164
338,358
267,697
233,355
343,055
50,197
239,295
46,088
22,346
63,123
58,910
81,063
3,351
370,879
1,334,018
336,039
110,498
223,844
15,194
141,356
1,218,858
52,411
234,452
30,072
56,169
87,156
148,896
23,989
930,026
27,219
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
49.88
3.72
2.97
24.14
3.39
30.87
4.14
7.10
6.17
20.58
17.76
4.33
4.82
4.19
4.13
3.47
4.12
24.77
49.36
2.98
3.31
14.60
7.59
2.14
25.48
5.10
24.56
2.05
2.25
7.05
4.20
20.11
31.48
12.25
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.83
0.55
0.05
0.74
0.16
0.29
0.25
0.11
0.30
0.75
0.27
0.22
0.37
0.27
0.21
0.09
0.49
0.32
0.09
0.10
0.21
0.15
0.62
0.23
0.07
0.46
0.50
0.36
0.42
0.41
0.11
1.01
0.41
0.52
216,895
$
12.80
$
0.35
17:49 Aug 28, 2019
Jkt 247001
PO 00000
Frm 00136
166.53
1363.05
178.64
297.15
447.46
90.53
780.34
152.45
459.35
394.31
146.41
506.75
708.36
751.91
524.97
271.52
1160.60
121.36
19.18
314.64
696.07
102.69
815.90
1513.68
28.79
737.07
198.39
1746.57
1412.09
594.68
257.52
506.79
131.78
416.81
SCJ
MPAC
LIOX
AMU
MEG
NSR
SYRG
TESO
CORR
UFCS
MPWR
PAM
SYUf
ZLTQ
SGU
FLOW
ARGT
ECON
esc
NLS
CCRN
OMCL
TRR
PFSW
CLGX
ADUS
SIL
IBCP
HCKT
BXG
FSS
PICK
RHP
NEWS
529.83 Avg
Fmt 4703
Sfmt 4725
14,075
5,050
201,793
38,519
73,776
344,647
261,547
273,224
184,055
47,666
232,887
53,193
20,858
64,418
66,946
98,862
4,246
254,618
1,348,256
140,148
104,861
191,017
18,097
51,521
913,531
30,365
283,436
36,642
56,051
95,593
148,600
23,687
806,048
25,473
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
43.20
6.63
3.73
24.61
4.75
39.94
4.42
10.09
5.94
22.03
19.84
3.37
4.51
5.19
4.13
3.42
8.04
25.73
35.84
3.11
4.44
14.59
7.32
2.59
25.32
6.39
24.23
3.31
3.84
8.79
6.37
21.87
36.40
12.31
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.84
0.50
0.05
0.69
0.16
0.25
0.10
0.10
0.42
0.78
0.18
0.23
0.35
0.31
0.18
0.08
0.49
0.33
0.08
0.08
0.12
0.14
0.64
0.21
0.09
0.45
0.49
0.28
0.17
0.40
0.09
0.88
0.40
0.62
193.16
842.63
131.75
275.58
376.40
61.24
231.54
97.15
575.36
345.78
91.99
672.11
775.36
589.15
427.76
251.71
561.44
136.23
23.77
253.89
269.74
91.97
962.69
768.02
36.65
727.17
209.91
864.93
421.49
536.74
152.47
421.50
107.44
502.43
191,580
$
13.42
$
0.33
381.98
E:\FR\FM\29AUN1.SGM
29AUN1
EN29AU19.013</GPH>
Symbol
Table 4A: Retail Program Matched Sample CADV Between 50,000 and 500,000 (Oct-Nov 2012)
Treatment Stocks
Control Stocks
CADV
Avg. Price Avg. Quoted Avg. Quoted
Symbol
CADV
Avg. Price Avg. Quoted Avg. Quoted
Spread
Spread
Spread
Spread
Across
Across
Across
Across
Exchanges Exchanges
Exchanges Exchanges
($)
(bps)
($)
(bps)
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
khammond on DSKBBV9HB2PROD with NOTICES
IV. Conclusion
When the Commission approved the
initial retail price improvement pilot on
the New York Stock Exchange LLC
(‘‘NYSE’’) and NYSE Amex LLC
(‘‘Amex’’) it stated that it was not
concerned that such a program would
‘‘cause a major shift in market
structure.’’ 30 Instead, the Commission
explained that the program ‘‘should
closely replicate the trading dynamics
that exist in the OTC markets’’ and
would ‘‘simply present another
competitive venue for retail order flow
execution’’ that is ‘‘not likely to alter the
incentives for market participants to
post limit orders in a material way.’’ 31
At the same time, the Commission saw
fit to approve such programs on a pilot
basis so that it would have the
opportunity to monitor the operation of
the Program and confirm its
expectations about the impact on
broader market structure before
permanent approval. The Exchange
believes that the Commission’s
expectations that the Program would not
30 See Securities Exchange Act Release No. 67347
(July 3, 2012), 77 FR 40673 (July 10, 2012) (SR–
NYSE–2011–55; SR–NYSEAmex–2011–84).
31 Id.
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
have any significant impact on broader
market structure is both correct and
confirmed by the data. Specifically,
based on the Exchange’s experience in
operating the Program, and the data
provided here and during the duration
of the pilot, the Exchange believes that
the Program has been a positive
experiment in attracting retail order
flow to a public exchange, and should
thus be approved on a permanent basis
so that retail investors can continue to
reap its benefits.
The data provided by the Exchange
describes a valuable service that
delivers considerable price
improvement to retail investors in a
transparent and well-regulated
environment. The Program represents
just a fraction of retail orders, most of
which are executed off-exchange by a
wide range of order handling services
that have considerably more market
share, and which operate pursuant to
different rules and regulatory
requirements. Specifically, the majority
of retail order flow is currently executed
off-exchange by various wholesale
market makers that are able to offer subpenny price improvement to retail
orders without running afoul of the Sub-
PO 00000
Frm 00137
Fmt 4703
Sfmt 4703
Penny Rule under Regulation NMS.32
Given that retail orders already trade
off-exchange in increments of less than
one penny, the Exchange believes that
the primary impact of the Program is to
provide an opportunity for retail
investors to receive price improvement
on a transparent, well-regulated,
exchange venue.
The Exchange believes that this
understanding is also supported by the
data, which shows that the Program was
not likely to have caused any significant
harm to broader market quality. The
order flow the Program attracted and
continues to attract to the Exchange
provides tangible price improvement to
retail investors through a competitive
and transparent pricing process
unavailable in non-exchange venues. As
such, despite relatively modest
volumes, the Exchange believes that the
Program has satisfied the twin goals of
attracting retail order flow to the
32 The Commission has itself has opined that OTC
market makers appear to handle the vast majority
of marketable retail order flow, with the eight retail
broker-dealers with significant retail accounts
whose Rule 606 order routing disclosures the
Commission reviewed routing ‘‘nearly 100%’’ of
their customer market orders to OTC market
makers. See Securities Exchange Act Release No.
61358 (January 14, 2010), 75 FR 3593, 3600 (January
21, 2010) (Concept Release on Equity Market
Structure).
E:\FR\FM\29AUN1.SGM
29AUN1
EN29AU19.014</GPH>
BILLING CODE 8011–01–C
45599
45600
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
Exchange and allowing such order flow
to receive potential price improvement.
Moreover, the Exchange believes that
the data collected supports the
conclusion that the Program did not
have a negative impact on broader
market quality. Although the results of
the Program highlight the substantial
advantages that broker-dealers retain
when managing the benefits of retail
order flow, the Exchange believes that
the level of price improvement provided
by the Program and the scant evidence
that the Program negatively impacted
the marketplace justifies making the
Program permanent.
khammond on DSKBBV9HB2PROD with NOTICES
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
requirements of Section 6(b) of the
Act,33 in general, and Section 6(b)(5) of
the Act,34 in particular, in that it is
designed to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest
and not to permit unfair discrimination
between customers, issuers, brokers, or
dealers.
The Exchange believes that making
the pilot permanent is consistent with
these principles because the Program is
reasonably designed to attract retail
order flow to the exchange environment,
while helping to ensure that retail
investors benefit from the better price
that liquidity providers are willing to
give their orders. During the pilot
period, the Exchange has provided data
and analysis to the Commission. The
Exchange believes that this data and
analysis, as well as the further analysis
provided in this filing, show that the
Program has provided the intended
benefits to the market, and retail
investors in particular, and is therefore
consistent with the Act. Furthermore,
the Exchange notes that similar
programs instituted by NYSE and
Nasdaq BX have recently been approved
by the Commission to operate on a
permanent basis.35 The Exchange
believes that its analysis, as well as the
analysis conducted by NYSE and
Nasdaq BX in their proposals for
permanent approval, show that retail
price improvement programs do not
negatively impact market structure, and
can therefore provide benefits to retail
33 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
35 See Securities Exchange Act Release No. 85160
(February 15, 2019), 84 FR 5754 (February 22, 2019)
(SR–NYSE–2018–28); 86194 (June 25, 2019), 84 FR
31385 (July 1, 2019) (SR–BX–2019–011).
34 15
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
investors without negatively impacting
the broader market.
The proposed rule change is designed
to facilitate transactions in securities
and to remove impediments to, and
perfect the mechanisms of, a free and
open market and a national market
system because making the Program
permanent would allow the Exchange to
continue to attract retail order flow to a
public exchange and allow such order
flow to receive potential price
improvement. The data provided by the
Exchange to the Commission staff
demonstrates that the Program provided
tangible price improvement to retail
investors through a competitive pricing
process unavailable in non-exchange
venues, and otherwise had an
insignificant impact on the broader
market. The Exchange believes that
making the Program permanent would
encourage the additional utilization of,
and interaction with, the Exchange and
provide retail customers with an
additional venue for price discovery,
liquidity, competitive quotes, and price
improvement. For the same reasons, the
Exchange believes that making the
Program permanent would promote just
and equitable principles of trade and
remove impediments to and perfect the
mechanism of a free and open market.
Finally, the Exchange also believes
that it is subject to significant
competitive forces, as described below
in the Exchange’s statement regarding
the burden on competition. For all of
these reasons, the Exchange believes
that the proposed rule change is
consistent with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that making the
Program permanent would continue to
promote competition for retail order
flow among execution venues and
contribute to the public price discovery
process. The Exchange believes that the
data supplied to the Commission, and
experience gained over the life of the
pilot, have demonstrated that the
Program creates price improvement
opportunities for retail orders that are
similar to what would be provided
under OTC internalization
arrangements, thereby benefiting retail
investors and increasing competition
between execution venues. The
Exchange also believes that making the
Program permanent will promote
competition between execution venues
operating their own retail liquidity
PO 00000
Frm 00138
Fmt 4703
Sfmt 4703
programs, including competition
between the Program and a similar
programs currently operated by NYSE
and Nasdaq BX on a permanent basis
pursuant to a recently approved rule
changes.36 Such competition will lead
to innovation within the market, thereby
increasing the quality of the national
market system and allowing national
securities exchanges to compete both
with each other and with off-exchange
venues for order flow. Such competition
ultimately benefits investors, and in this
case specifically retail investors by
providing multiple potential trading
venues for the execution of their order
flow, consistent with the principles of
Regulation NMS, which was premised
on promoting fair competition among
markets. Finally, the Exchange notes
that it operates in a highly competitive
market in which market participants can
easily direct their orders to competing
venues, including off-exchange venues.
In such an environment, the Exchange
must continually review, and consider
adjusting the services it offers and the
requirements it imposes to remain
competitive with other U.S. equity
exchanges. For the reasons described
above, the Exchange believes that the
proposed rule change reflects this
competitive environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
36 Id.
E:\FR\FM\29AUN1.SGM
29AUN1
Federal Register / Vol. 84, No. 168 / Thursday, August 29, 2019 / Notices
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release Nos. 33–10675; 34–86750/August
23, 2019]
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBYX–2019–014 on the subject line.
Paper Comments:
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
khammond on DSKBBV9HB2PROD with NOTICES
All submissions should refer to File
Number SR–CboeBYX–2019–014. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
CboeBYX–2019–014, and should be
submitted on or before September 19,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18636 Filed 8–28–19; 8:45 am]
BILLING CODE 8011–01–P
37 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:00 Aug 28, 2019
Jkt 247001
Order Making Fiscal Year 2020 Annual
Adjustments to Registration Fee Rates
I. Background
The Commission collects fees under
various provisions of the securities
laws. Section 6(b) of the Securities Act
of 1933 (‘‘Securities Act’’) requires the
Commission to collect fees from issuers
on the registration of securities.1 Section
13(e) of the Securities Exchange Act of
1934 (‘‘Exchange Act’’) requires the
Commission to collect fees on specified
repurchases of securities.2 Section 14(g)
of the Exchange Act requires the
Commission to collect fees on specified
proxy solicitations and statements in
corporate control transactions.3 These
provisions require the Commission to
make annual adjustments to the
applicable fee rates.
II. Fiscal Year 2020 Annual Adjustment
to Fee Rates
Section 6(b)(2) of the Securities Act
requires the Commission to make an
annual adjustment to the fee rate
applicable under Section 6(b).4 The
annual adjustment to the fee rate under
Section 6(b) of the Securities Act also
sets the annual adjustment to the fee
rates under Sections 13(e) and 14(g) of
the Exchange Act.5
Section 6(b)(2) sets forth the method
for determining the annual adjustment
to the fee rate under Section 6(b) for
fiscal year 2020. Specifically, the
Commission must adjust the fee rate
under Section 6(b) to a ‘‘rate that, when
applied to the baseline estimate of the
aggregate maximum offering prices for
[fiscal year 2020], is reasonably likely to
produce aggregate fee collections under
[Section 6(b)] that are equal to the target
fee collection amount for [fiscal year
2020].’’ That is, the adjusted rate is
determined by dividing the ‘‘target fee
collection amount’’ for fiscal year 2020
by the ‘‘baseline estimate of the
aggregate maximum offering prices’’ for
fiscal year 2020.
Section 6(b)(6)(A) specifies that the
‘‘target fee collection amount’’ for fiscal
1 15
U.S.C. 77f(b).
U.S.C. 78m(e).
3 15 U.S.C. 78n(g).
4 15 U.S.C. 77f(b)(2). The annual adjustments are
designed to adjust the fee rate in a given fiscal year
so that, when applied to the aggregate maximum
offering price at which securities are proposed to
be offered for the fiscal year, it is reasonably likely
to produce total fee collections under Section 6(b)
equal to the ‘‘target fee collection amount’’ specified
in Section 6(b)(6)(A) for that fiscal year.
5 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4).
2 15
PO 00000
Frm 00139
Fmt 4703
Sfmt 4703
45601
year 2020 is $705,000,000. Section
6(b)(6)(B) defines the ‘‘baseline estimate
of the aggregate maximum offering
prices’’ for fiscal year 2020 as ‘‘the
baseline estimate of the aggregate
maximum offering price at which
securities are proposed to be offered
pursuant to registration statements filed
with the Commission during [fiscal year
2020] as determined by the
Commission, after consultation with the
Congressional Budget Office and the
Office of Management and
Budget. . . .’’
To make the baseline estimate of the
aggregate maximum offering price for
fiscal year 2020, the Commission is
using a methodology that has been used
in prior fiscal years and that was
developed in consultation with the
Congressional Budget Office and Office
of Management and Budget.6 Using this
methodology, the Commission
determines the ‘‘baseline estimate of the
aggregate maximum offering price’’ for
fiscal year 2020 to be
$5,429,883,452,897. Based on this
estimate, the Commission calculates the
fee rate for fiscal 2020 to be $129.80 per
million. This adjusted fee rate applies to
Section 6(b) of the Securities Act, as
well as to Sections 13(e) and 14(g) of the
Exchange Act.
III. Effective Dates of the Annual
Adjustments
The fiscal year 2020 annual
adjustments to the fee rates applicable
under Section 6(b) of the Securities Act
and Sections 13(e) and 14(g) of the
Exchange Act will be effective on
October 1, 2019.7
IV. Conclusion
Accordingly, pursuant to Section 6(b)
of the Securities Act and Sections 13(e)
and 14(g) of the Exchange Act,8
It is hereby ordered that the fee rates
applicable under Section 6(b) of the
Securities Act and Sections 13(e) and
14(g) of the Exchange Act shall be
$129.80 per million effective on October
1, 2019.
6 Appendix A explains how we determined the
‘‘baseline estimate of the aggregate maximum
offering price’’ for fiscal year 2020 using our
methodology, and then shows the arithmetical
process of calculating the fiscal year 2020 annual
adjustment based on that estimate. The appendix
includes the data used by the Commission in
making its ‘‘baseline estimate of the aggregate
maximum offering price’’ for fiscal year 2020.
7 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6) and 15
U.S.C. 78n(g)(6).
8 15 U.S.C. 77f(b), 78m(e) and 78n(g).
E:\FR\FM\29AUN1.SGM
29AUN1
]]>Agencies
[Federal Register Volume 84, Number 168 (Thursday, August 29, 2019)]
[Notices]
[Pages 45575-45601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18636]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86742; File No. SR-CboeBYX-2019-014]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Make Permanent Rule 11.24, Which
Sets Forth the Exchange's Pilot Retail Price Improvement Program
August 23, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 22, 2019, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission (the
``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (``BYX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to make permanent Rule 11.24, which sets forth the
Exchange's pilot Retail Price Improvement Program. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Rule 11.24 to
make permanent the Retail Price Improvement Program (the ``Program''),
which is currently offered on a pilot basis. The Exchange has operated
the pilot for a six year period and believes that it has been
successful in its stated goal of providing price improvement
opportunities to retail investors. The analysis conducted by the
Exchange shows that retail investors have been provided a total of $4.5
million of price improvement during the 2.5 year period reviewed from
January 2016 through June 2018. In addition, the Exchange's analysis
shows that the Program has provided these benefits to retail investors
without having an adverse impact on the broader market. The proposal
provides an analysis of the economic benefits to retail investors and
the marketplace flowing from operation of the Program, which the
Exchange believes supports making the Program permanent.
Background
In November 2012, the Commission approved the Program on a pilot
basis.\3\ The Program is designed to attract retail order flow to the
Exchange, and allow such order flow to receive potential price
improvement. The Program is currently limited to trades occurring at
prices equal to or greater than $1.00 per share.\4\ Under the Program,
a class of market participant called a Retail Member Organization
(``RMO'') is eligible to submit certain retail order flow (``Retail
Orders'') to the Exchange. Users \5\ are permitted to provide potential
price improvement for Retail Orders \6\ in the form of non-displayed
interest that is better than the national best bid that is a Protected
Quotation (``Protected NBB'') or the national best offer that is a
Protected Quotation (``Protected NBO'', and together with the Protected
NBB, the ``Protected NBBO'').\7\ The Program was approved by the
Commission on a pilot basis running
[[Page 45576]]
one-year from the date of implementation.\8\ The Commission approved
the Program on November 27, 2012.\9\ The Exchange implemented the
Program on January 11, 2013, and has extended the pilot period seven
times.\10\ The pilot period for the Program is scheduled to expire on
September 30, 2019. The Exchange believes that the Program has been
successful in its goal of providing price improvement to Retail Orders,
and is therefore proposing to amend Rule 11.24 to make this pilot
permanent so that retail investors can continue to reap the benefits of
the Program.\11\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 68303 (November 27,
2012), 77 FR 71652 (December 3, 2012) (``RPI Approval Order'') (SR-
BYX-2012-019).
\4\ The Exchange will periodically notify the membership
regarding the securities included in the Program through an
information circular.
\5\ A ``User'' is defined in Rule 1.5(cc) as any member or
sponsored participant of the Exchange who is authorized to obtain
access to the System.
\6\ A ``Retail Order'' is defined in Rule 11.24(a)(2) as an
agency order that originates from a natural person and is submitted
to the Exchange by a RMO, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any
computerized methodology. See Rule 11.24(a)(2).
\7\ The term Protected Quotation is defined in BYX Rule 1.5(t)
and has the same meaning as is set forth in Regulation NMS Rule
600(b)(58). The terms Protected NBB and Protected NBO are defined in
BYX Rule 1.5(s). The Protected NBB is the best-priced protected bid
and the Protected NBO is the best-priced protected offer. Generally,
the Protected NBB and Protected NBO and the national best bid
(``NBB'') and national best offer (``NBO'', together with the NBB,
the ``NBBO'') will be the same. However, a market center is not
required to route to the NBB or NBO if that market center is subject
to an exception under Regulation NMS Rule 611(b)(1) or if such NBB
or NBO is otherwise not available for an automatic execution. In
such case, the Protected NBB or Protected NBO would be the best-
priced protected bid or offer to which a market center must route
interest pursuant to Regulation NMS Rule 611.
\8\ See RPI Approval Order, supra note 3 at 71652.
\9\ Id.
\10\ See Securities Exchange Act Release Nos. 71249 (January 7,
2014), 79 FR 2229 (January 13, 2014) (SR-BYX-2014-001); 74111
(January 22, 2015), 80 FR 4598 (January 28, 2015) (SR-BYX-2015-05);
76965 (January 22, 2016), 81 FR 4682 (January 27, 2016) (SR-BYX-
2016-01); 78180 (June 28, 2016), 81 FR 43306 (July 1, 2016) (SR-
BatsBYX-2016-15); 81368 (August 10, 2017), 82 FR 38960 (August 16,
2017) (SR-BatsBYX-2017-18); 84830 (December 17, 2018), 83 FR 65769
(December 21, 2018) (SR-CboeBYX-2018-025); 86206 (June 26, 2019), 84
FR 31650 (July 2, 2019) (SR-CboeBYX-2019-010).
\11\ The Program will continue to only apply to trades occurring
at prices equal to or greater than $1.00 per share.
---------------------------------------------------------------------------
The SEC approved the Program on a pilot basis, in part, because it
concluded, ``the Program is reasonably designed to benefit retail
investors by providing price improvement to retail order flow.'' \12\
The Commission also found that ``while the Program would treat retail
order flow differently from order flow submitted by other market
participants, such segmentation would not be inconsistent with Section
6(b)(5) of the Act, which requires that the rules of an exchange are
not designed to permit unfair discrimination.'' \13\ As the SEC
acknowledged, the retail order segmentation was designed to create
greater retail order flow competition and thereby increase the amount
of this flow to transparent and well-regulated exchanges. This would
help to ensure that retail investors benefit from competitive price
improvement that exchange-based liquidity providers provide. As
discussed below, the Exchange believes that the Program data supports
the conclusion that it provides valuable price improvement to retail
investors that they may not otherwise have received, and that it is
therefore appropriate to make the Program permanent.
---------------------------------------------------------------------------
\12\ See RPI Approval Order, supra note 3 at 71655.
\13\ Id.
---------------------------------------------------------------------------
Definitions
The Exchange adopted the following definitions under Rule 11.24(a):
First, the term ``Retail Member Organization'' is defined as a
Member (or a division thereof) that has been approved by the Exchange
to submit Retail Orders.
Second, the term ``Retail Order'' is defined as an agency order or
riskless principal that meets the criteria of FINRA Rule 5320.03 \14\
that originates from a natural person and is submitted to the Exchange
by a Retail Member Organization, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any other
computerized methodology. A Retail Order is an Immediate or Cancel
(``IOC'') Order and shall operate in accordance with Rule 11.24(f). A
Retail Order may be an odd lot, round lot, or mixed lot.
---------------------------------------------------------------------------
\14\ FINRA Rule 5320.03 clarifies that an RMO may enter Retail
Orders on a riskless principal basis, provided that (i) the entry of
such riskless principal orders meet the requirements of FINRA Rule
5320.03, including that the RMO maintains supervisory systems to
reconstruct, in a time[hyphen]sequenced manner, all Retail Orders
that are entered on a riskless principal basis; and (ii) the RMO
submits a report, contemporaneously with the execution of the
facilitated order, that identifies the trade as riskless principal.
---------------------------------------------------------------------------
Finally, the term ``Retail Price Improvement Order'' or ``RPI
Order'' consists of non-displayed interest on the Exchange that is
priced better than the Protected NBB or Protected NBO by at least
$0.001 and that is identified as such (``RPI interest'').\15\ The
System \16\ will monitor whether RPI buy or sell interest, adjusted by
any offset and subject to the ceiling or floor price, is eligible to
interact with incoming Retail Orders. An RPI Order remains non-
displayed in its entirety (the buy or sell interest, the offset, and
the ceiling or floor). An RPI Order may also be entered in a sub-penny
increment with an explicit limit price. Any User is permitted, but not
required, to submit RPI Orders. An RPI Order may be an odd lot, round
lot or mixed lot.
---------------------------------------------------------------------------
\15\ Exchange systems prevent Retail Orders from interacting
with RPI Orders if the RPI Order is not priced at least $0.001
better than the Protected NBBO. The Exchange notes, however, that
price improvement of $0.001 would be a minimum requirement and Users
could enter RPI Orders that better the Protected NBBO by more than
$0.001. Exchange systems will accept RPI Orders without a minimum
price improvement value; however, such interest will execute at its
floor or ceiling price only if such floor or ceiling price is better
than the Protected NBBO by $0.001 or more.
\16\ The ``System'' is defined in BYX Rule 1.5(aa) as ``the
electronic communications and trading facility designated by the
Board through which securities orders of Users are consolidated for
ranking, execution and, when applicable, routing away.''
---------------------------------------------------------------------------
The price of an RPI Order is determined by a User's entry of the
following into the Exchange: (1) RPI buy or sell interest; (2) an
offset, if any; and (3) a ceiling or floor price. RPI Orders submitted
with an offset are similar to other peg orders available to Users in
that the order is tied or ``pegged'' to a certain price, and would have
its price automatically set and adjusted upon changes in the Protected
NBBO, both upon entry and any time thereafter. RPI buy or sell interest
is typically entered to track the Protected NBBO, that is, RPI Orders
are typically submitted with an offset. The offset is a predetermined
amount by which the User is willing to improve the Protected NBBO,
subject to a ceiling or floor price. The ceiling or floor price is the
amount above or below which the User does not wish to trade. RPI Orders
in their entirety (the buy or sell interest, the offset, and the
ceiling or floor) will remain non-displayed. The Exchange also allows
Users to enter RPI Orders that establish the exact limit price, which
is similar to a non-displayed limit order currently accepted by the
Exchange except the Exchange accepts sub-penny limit prices on RPI
Orders in increments of $0.001. The Exchange monitors whether RPI buy
or sell interest, adjusted by any offset and subject to the ceiling or
floor price, is eligible to interact with incoming Retail Orders.
Users and RMOs may enter odd lots, round lots or mixed lots as RPI
Orders and as Retail Orders respectively. As discussed below, RPI
Orders are ranked and allocated according to price and time of entry
into the System consistent with Rule 11.12 and therefore without regard
to whether the size entered is an odd lot, round lot or mixed lot
amount. Similarly, Retail Orders interact with RPI Orders according to
the Priority and Allocation rules of the Program and without regard to
whether they are odd lots, round lots or mixed lots. Finally, Retail
Orders are designated as Type 1 or Type 2 without regard to the size of
the order.
RPI Orders interact with Retail Orders as follows. Assume a User
enters RPI sell interest with an offset of $0.001 and a floor of $10.10
while the Protected NBO is $10.11. The RPI Order could interact with an
incoming buy Retail Order at $10.109. If, however, the Protected NBO
was $10.10, the RPI Order could not interact with the Retail Order
because the price required to deliver the minimum $0.001 price
improvement ($10.099) would violate the User's floor of $10.10. If a
User otherwise enters an offset greater than the minimum required price
improvement and the offset would produce a price that would violate the
User's floor, the offset would be applied
[[Page 45577]]
only to the extent that it respects the User's floor. By way of
illustration, assume RPI buy interest is entered with an offset of
$0.005 and a ceiling of $10.112 while the Protected NBB is at $10.11.
The RPI Order could interact with an incoming sell Retail Order at
$10.112, because it would produce the required price improvement
without violating the User's ceiling, but it could not interact above
the $10.112 ceiling. Finally, if a User enters an RPI Order without an
offset (i.e., an explicitly priced limit order), the RPI Order will
interact with Retail Orders at the level of the User's limit price as
long as the minimum required price improvement is produced.
Accordingly, if RPI sell interest is entered with a limit price of
$10.098 and no offset while the Protected NBO is $10.11, the RPI Order
could interact with the Retail Order at $10.098, producing $0.012 of
price improvement. The System will not cancel RPI interest when it is
not eligible to interact with incoming Retail Orders; such RPI interest
will remain in the System and may become eligible again to interact
with Retail Orders depending on the Protected NBBO.
RMO Qualifications and Application Process
Under Rule 11.24(b), any Member may qualify as an RMO if it
conducts a retail business or routes retail orders on behalf of another
broker-dealer. For purposes of Rule 11.24(b), conducting a retail
business shall include carrying retail customer accounts on a fully
disclosed basis. Any Member that wishes to obtain RMO status is
required to submit: (1) An application form; (2) supporting
documentation sufficient to demonstrate the retail nature and
characteristics of the applicant's order flow; and (3) an attestation,
in a form prescribed by the Exchange, that substantially all orders
submitted as Retail Orders will qualify as such under Rule 11.24.\17\
The Exchange shall notify the applicant of its decision in writing.
---------------------------------------------------------------------------
\17\ For example, a prospective RMO could be required to provide
sample marketing literature, website screenshots, other publicly
disclosed materials describing the retail nature of their order
flow, and such other documentation and information as the Exchange
may require to obtain reasonable assurance that the applicant's
order flow would meet the requirements of the Retail Order
definition.
---------------------------------------------------------------------------
An RMO is required to have written policies and procedures
reasonably designed to assure that it will only designate orders as
Retail Orders if all requirements of a Retail Order are met. Such
written policies and procedures must require the Member to (i) exercise
due diligence before entering a Retail Order to assure that entry as a
Retail Order is in compliance with the requirements of this rule, and
(ii) monitor whether orders entered as Retail Orders meet the
applicable requirements. If the RMO represents Retail Orders from
another broker-dealer customer, the RMO's supervisory procedures must
be reasonably designed to assure that the orders it receives from such
broker-dealer customer that it designates as Retail Orders meet the
definition of a Retail Order. The RMO must (i) obtain an annual written
representation, in a form acceptable to the Exchange, from each broker-
dealer customer that sends it orders to be designated as Retail Orders
that entry of such orders as Retail Orders will be in compliance with
the requirements of this rule, and (ii) monitor whether its broker-
dealer customers' Retail Order flow continues to meet the applicable
requirements.\18\
---------------------------------------------------------------------------
\18\ The Exchange or another self-regulatory organization on
behalf of the Exchange will review an RMO's compliance with these
requirements through an exam-based review of the RMO's internal
controls.
---------------------------------------------------------------------------
If the Exchange disapproves the application, the Exchange provides
a written notice to the Member. The disapproved applicant could appeal
the disapproval by the Exchange as provided in Rule 11.24(d), and/or
reapply for RMO status 90 days after the disapproval notice is issued
by the Exchange. An RMO also could voluntarily withdraw from such
status at any time by giving written notice to the Exchange.
Failure of RMO To Abide by Retail Order Requirements
Rule 11.24(c) addresses an RMO's failure to abide by Retail Order
requirements. If an RMO designates orders submitted to the Exchange as
Retail Orders and the Exchange determines, in its sole discretion, that
those orders fail to meet any of the requirements of Retail Orders, the
Exchange may disqualify a Member from its status as an RMO. When
disqualification determinations are made, the Exchange provides a
written disqualification notice to the Member. A disqualified RMO may
appeal the disqualification as provided in Rule 11.24(d) and/or reapply
for RMO status 90 days after the disqualification notice is issued by
the Exchange.
Appeal of Disapproval or Disqualification
Rule 11.24(d) provides appeal rights to Members. If a Member
disputes the Exchange's decision to disapprove it as an RMO under Rule
11.24(b) or disqualify it under Rule 11.24(c), such Member
(``appellant'') may request, within five business days after notice of
the decision is issued by the Exchange, that the Retail Price
Improvement Program Panel (``RPI Panel'') review the decision to
determine if it was correct.
The RPI Panel consists of the Exchange's Chief Regulatory Officer
(``CRO''), or a designee of the CRO, and two officers of the Exchange
designated by the Chief Operating Officer (``COO''). The RPI Panel
reviews the facts and render a decision within the time frame
prescribed by the Exchange. The RPI Panel may overturn or modify an
action taken by the Exchange and all determinations by the RPI Panel
constitute final action by the Exchange on the matter at issue.
Retail Liquidity Identifier
Under Rule 11.24(e), the Exchange disseminates an identifier when
RPI interest priced at least $0.001 better than the Exchange's
Protected Bid or Protected Offer for a particular security is available
in the System (``Retail Liquidity Identifier''). The Retail Liquidity
Identifier is disseminated through consolidated data streams (i.e.,
pursuant to the Consolidated Tape Association Plan/Consolidated
Quotation Plan, or CTA/CQ, for Tape A and Tape B securities, and the
Nasdaq UTP Plan for Tape C securities) as well as through proprietary
Exchange data feeds.\19\ The Retail Liquidity Identifier reflects the
symbol and the side (buy or sell) of the RPI interest, but does not
include the price or size of the RPI interest. In particular, CQ and
UTP quoting outputs include a field for codes related to the Retail
Liquidity Identifier. The codes indicate RPI interest that is priced
better than the Exchange's Protected Bid or Protected Offer by at least
the minimum level of price improvement as required by the Program.
---------------------------------------------------------------------------
\19\ The Exchange notes that the Retail Liquidity Identifier for
Tape A and Tape B securities are disseminated pursuant to the CTA/CQ
Plan. The identifier is also available through the consolidated
public market data stream for Tape C securities. The processor for
the Nasdaq UTP quotation stream disseminates the Retail Liquidity
Identifier and analogous identifiers from other market centers that
operate programs similar to the RPI Program.
---------------------------------------------------------------------------
Retail Order Designations
Under Rule 11.24(f), an RMO can designate how a Retail Order would
interact with available contra-side interest as follows:
A Type 1-designated Retail Order will interact with available
contra-side RPI Orders and other price improving contra-side interest
but will not interact with other available contra-side interest
[[Page 45578]]
in the System that is not offering price improvement or route to other
markets. The portion of a Type 1-designated Retail Order that does not
execute against contra-side RPI Orders or other price improving
liquidity will be immediately and automatically cancelled.
A Type 2-designated Retail Order will interact first with available
contra-side RPI Orders and other price improving liquidity and then any
remaining portion of the Retail Order will be executed as an Immediate-
or-Cancel (``IOC'') Order pursuant to Rule 11.9(b)(1). A Type 2-
designated Retail Order can either be submitted as a BYX Only Order
\20\ or as an order eligible for routing pursuant to Rule 11.13(a)(2).
---------------------------------------------------------------------------
\20\ A BYX Only Order is defined in BYX Rule 11.9(c)(4) and
includes orders that are not eligible for routing to other trading
centers.
---------------------------------------------------------------------------
Priority and Order Allocation
Under Rule 11.24(g), competing RPI Orders in the same security are
ranked and allocated according to price then time of entry into the
System. Executions occur in price/time priority in accordance with Rule
11.12. Any remaining unexecuted RPI interest remains available to
interact with other incoming Retail Orders if such interest is at an
eligible price. Any remaining unexecuted portion of the Retail Order
will cancel or execute in accordance with Rule 11.24(f). The following
example illustrates this method:
Protected NBBO for security ABC is $10.00-$10.05
User 1 enters an RPI Order to buy ABC at $10.015 for 500
User 2 then enters an RPI Order to buy ABC at $10.02 for
500
User 3 then enters an RPI Order to buy ABC at $10.035 for
500
An incoming Retail Order to sell ABC for 1,000 executes first
against User 3's bid for 500 at $10.035, because it is the best priced
bid, then against User 2's bid for 500 at $10.02, because it is the
next best priced bid. User 1 is not filled because the entire size of
the Retail Order to sell 1,000 is depleted. The Retail Order executes
against RPI Orders in price/time priority.
However, assume the same facts above, except that User 2's RPI
Order to buy ABC at $10.02 is for 100. The incoming Retail Order to
sell 1,000 executes first against User 3's bid for 500 at $10.035,
because it is the best priced bid, then against User 2's bid for 100 at
$10.02, because it is the next best priced bid. User 1 then receives an
execution for 400 of its bid for 500 at $10.015, at which point the
entire size of the Retail Order to sell 1,000 is depleted.
As a final example, assume the same facts as above, except that
User 3's order was not an RPI Order to buy ABC at $10.035, but rather,
a non-displayed order to buy ABC at $10.03. The result would be similar
to the result immediately above, in that the incoming Retail Order to
sell 1,000 executes first against User 3's bid for 500 at $10.03,
because it is the best priced bid, then against User 2's bid for 100 at
$10.02, because it is the next best priced bid. User 1 then receives an
execution for 400 of its bid for 500 at $10.015, at which point the
entire size of the Retail Order to sell 1,000 is depleted.
Eligible Securities
All Regulation NMS securities traded on the Exchange are eligible
for inclusion in the RPI Program. The Exchange limits the Program to
trades occurring at prices equal to or greater than $1.00 per share.
Toward that end, Exchange trade validation systems prevent the
interaction of RPI buy or sell interest (adjusted by any offset) and
Retail Orders at a price below $1.00 per share.\21\ For example, if
there is RPI buy interest tracking the Protected NBB at $0.99 with an
offset of $0.001 and a ceiling of $1.02, Exchange trade validation
systems would prevent the execution of the RPI Order at $0.991 with a
sell Retail Order with a limit of $0.99. However, if the Retail Order
was Type 2 as defined the Program,\22\ it would be able to interact at
$0.99 with liquidity outside the Program in the Exchange's order book.
In addition to facilitating an orderly \23\ and operationally intuitive
program, the Exchange believes that limiting the Program to trades
equal to or greater than $1.00 per share enabled it better to focus its
efforts to monitor price competition and to assess any indications that
data disseminated under the Program is potentially disadvantaging
retail orders. As part of that review, the Exchange produced data
throughout the pilot, which included statistics about participation,
the frequency and level of price improvement provided by the Program,
and any effects on the broader market structure.
---------------------------------------------------------------------------
\21\ As discussed above, the price of an RPI is determined by a
User's entry of buy or sell interest, an offset (if any) and a
ceiling or floor price. RPI sell or buy interest typically tracks
the Protected NBBO.
\22\ Type 2 Retail Orders are treated as IOC orders that execute
against displayed and non-displayed liquidity in the Exchange's
order book where there is no available liquidity in the Program.
Type 2 Retail Orders can either be designated as eligible for
routing or as BYX Only Orders, and thus non-routable, as described
above.
\23\ Given the limitation, the Program would have no impact on
the minimum pricing increment for orders priced less than $1.00 and
therefore no effect on the potential of markets executing those
orders to lock or cross. In addition, the non-displayed nature of
the liquidity in the Program simply has no potential to disrupt
displayed, protected quotes. In any event, the Program would do
nothing to change the obligation of exchanges to avoid and reconcile
locked and crossed markets under NMS Rule 610(d).
---------------------------------------------------------------------------
Rationale for Making the Program Pilot Permanent
The Exchange established the Program in an attempt to attract
retail order flow to the Exchange by providing an opportunity for price
improvement to such order flow. The Exchange believes that the Program
promotes transparent competition for retail order flow by allowing
Exchange members to submit RPI Orders to interact with Retail Orders.
As the Commission stated in the RPI Approval Order, such competition
``promote[s] efficiency by facilitating the price discovery process''
and ``may generate additional investor interest in trading securities,
thereby promoting capital formation.'' The Program will continue to be
limited to trades occurring at prices equal to or greater than $1.00
per share.
In accordance with its filing establishing the pilot, the Exchange
did ``produce data throughout the pilot, which will include statistics
about participation, the frequency and level of price improvement
provided by the Program, and any effects on the broader market
structure.'' \24\ The Exchange has fulfilled this obligation through
the reports and assessments it has submitted to the Commission since
the implementation of the pilot Program. The Exchange believes that its
analysis of data provided to the Commission to date, as well as the
data being provided in this proposed rule change, support the continued
operation of the Program on a permanent basis.
---------------------------------------------------------------------------
\24\ RPI Approval Order, 77 FR at 71655.
\25\ Id. See also Concept Release on Equity Market Structure,
Securities Exchange Act Release No. 61358 (January 14, 2010), 75 FR
3593, 3600 (January 21, 2010) (File No. S7-02-10) (``A review of the
order routing disclosures required by Rule 606 of Regulation NMS of
eight broker-dealers with significant retail customer accounts
reveals that nearly 100% of their customer market orders are routed
to OTC market makers.'').
---------------------------------------------------------------------------
The SEC stated in the RPI Approval Order that the Program could
promote competition for retail order flow among execution venues, and
that this could benefit retail investors by creating additional well-
regulated and transparent price improvement opportunities for
marketable retail order flow, most of which is currently executed in
the Over-the-Counter
[[Page 45579]]
(``OTC'') markets without ever reaching a public exchange.\25\ The
Exchange believes that it has achieved its goal of attracting retail
order flow to the Exchange. As the Exchange's analysis of the Program
data below demonstrates, there has been consistent retail investor
interest in the Program, which has provided tangible price improvement
to those retail investors through a competitive pricing process over
the course of the pilot. The data also demonstrates that the Program
had an overall negligible impact on broader market quality outside of
the Program. The Exchange has not received any complaints or negative
feedback concerning the Program.
I. Overall Analysis of the Program
Brokers route retail orders to a wide range of different trading
systems. The Program offers a transparent and well-regulated option,
providing meaningful competition and price improvement. As explained
above, the purpose of the Program is to attract retail order flow to
the Exchange by providing an opportunity for retail investors to
receive price improvement. The Exchange believes that the Program has
satisfied this goal, having provided a total of $4.5 million of price
improvement, or approximately $153,000 per month, in the 2.5 year
period analyzed. Furthermore, to ensure that the price improvement
opportunities for Retail Orders under the Program are meaningful, the
Exchange compared the volume weighted average price improvement in
basis points received in the Program to the same metric for marketable
orders executed on the BYX Book. As Shown in Table A, retail investors
have benefited from significantly higher price improvement by
participating in the Program, including when assessed across different
liquidity groupings.\26\
Table A--Retail Price Improvement Compared to BYX Book
[May 2018--Oct. 2018]
----------------------------------------------------------------------------------------------------------------
CADV 500,000 or more CADV between 50,000 and 500,000
-------------------------------------------------------------------------------
Volume Weighted Avg. Price Retail................ 2.947 Retail................ 4.502
Improvement (bps). BYX Book.............. 0.649 BYX Book.............. 3.574
----------------------------------------------------------------------------------------------------------------
Furthermore, while the amount of price improvement provided in the
Program varies month to month, the amount of price improvement provided
in recent months has generally increased relative to prior months due
to additional participation in the Program by market participants with
retail order flow. The Exchange believes that this supports permanent
approval of the pilot as retail investors continue to reap the benefits
afforded by the Program. The amount of monthly and cumulative price
improvement provided in the Program is illustrated in Chart 1 below.
---------------------------------------------------------------------------
\26\ The two liquidity categories used for this analysis
correspond to the liquidity profiles described in the Exchange's
analysis of the market structure impact of the Program.
---------------------------------------------------------------------------
[[Page 45580]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.000
Furthermore, Retail Order volume executed in the Program accounted
for between 0.86% and 2.32% of total BYX volume from January 2017 to
June 2018, as shown in Chart 2 below, and between 0.05% and 0.11% of
total consolidated volume, as shown in Chart 3 below. Despite its size
relative to total volume executed on the Exchange or the broader
market, the Program has continued to provide considerable price
improvement each month to retail investors that participated in the
Program. In addition, the Exchange believes that the relatively modest
volume executed in the Program relative to total BYX volume and total
consolidated volume limits the potential impact of the Program on
broader market quality on the Exchange.\27\ The Exchange therefore
believes that the Program has demonstrated the effectiveness of a
transparent, on-exchange retail order price improvement functionality,
notwithstanding that the majority of retail volume is still traded off-
exchange.\28\
---------------------------------------------------------------------------
\27\ The Exchange has also performed an analysis of the impact
of the Program on other market quality indicators, which found that
the Program did not have a significant impact on market quality in
the broader market. See Section III below.
\28\ See supra note 25.
---------------------------------------------------------------------------
BILLING CODE 8011-01-P
[[Page 45581]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.001
[[Page 45582]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.002
BILLING CODE 8011-01-C
Retail Orders are routed by sophisticated brokers using systems
that seek the highest fill rates and amounts of price improvement.
These brokers have many choices of execution venues for this order
flow. When they choose to route to the Program, they have determined
that it is the best opportunity for fill rate and price improvement at
that time. As shown in Table 1 below, Retail Order average daily volume
(``ADV'') executed in the Program averaged between 2 and 7 million
shares from January 2016 to June 2018. Increased volatility in February
2018 likely contributed to the increased Retail Order shares executed
in the Program that month. Fill rates for the majority of the period
studied ranged from 11%-19% with fill rates declining below 10%
starting in December 2017, likely due to additional participation in
the Program that resulted in a significant increase in the Retail Order
volume entered on the Exchange. Retail Orders also continue to receive
more than the minimum $0.001 price improvement required of a liquidity
providing RPI Order, with the monthly average price improvement
provided to Retail Orders ranging from $0.0011-$0.0014 per share, and
the monthly effective/quoted spread ratio ranging from 0.77-0.90. The
Exchange believes that this data supports permanent approval of the
Program as this would allow retail investors to continue to execute
their orders with price improvement in the Program.
Table 1--Summary Statistics on the Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effective/
Date Retail shares Retail orders Effective Quoted spread quoted spread Price Fill rate
executed ADV placed ADV spread BPS BPS ratio improvement (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-16.................................. 4,666,052 20,560 19 22 0.89 $0.0011 16.09
Feb-16.................................. 4,083,670 18,025 19 22 0.87 0.0011 16.10
Mar-16.................................. 3,474,997 15,103 21 24 0.90 0.0011 17.50
Apr-16.................................. 3,216,923 14,126 18 21 0.88 0.0011 19.23
[[Page 45583]]
May-16.................................. 2,912,160 12,980 18 21 0.87 0.0011 19.73
Jun-16.................................. 3,144,024 13,924 16 18 0.89 0.0011 19.65
Jul-16.................................. 4,009,916 17,257 18 20 0.90 0.0011 19.97
Aug-16.................................. 3,906,624 17,135 19 21 0.90 0.0011 17.66
Sep-16.................................. 4,887,221 20,708 17 19 0.88 0.0011 17.28
Oct-16.................................. 3,595,900 15,922 24 27 0.90 0.0012 17.19
Nov-16.................................. 2,273,885 8,972 29 33 0.88 0.0013 12.71
Dec-16.................................. 3,192,065 12,768 36 41 0.88 0.0013 14.82
Jan-17.................................. 3,122,721 16,951 31 36 0.88 0.0013 16.09
Feb-17.................................. 3,262,046 21,151 31 35 0.88 0.0013 14.71
Mar-17.................................. 3,068,930 20,921 33 38 0.88 0.0014 13.85
Apr-17.................................. 2,680,646 18,518 34 38 0.88 0.0013 13.97
May-17.................................. 3,407,603 23,437 29 33 0.87 0.0013 16.88
Jun-17.................................. 7,896,833 46,398 28 32 0.88 0.0013 17.07
Jul-17.................................. 5,966,961 36,717 27 31 0.88 0.0012 16.43
Aug-17.................................. 6,467,615 38,608 23 26 0.88 0.0013 16.24
Sep-17.................................. 5,237,243 33,314 27 31 0.87 0.0013 15.76
Oct-17.................................. 5,702,759 33,578 34 40 0.84 0.0012 16.77
Nov-17.................................. 4,427,779 62,352 33 40 0.83 0.0012 11.61
Dec-17.................................. 5,131,502 142,810 34 41 0.84 0.0012 8.30
Jan-18.................................. 6,359,122 167,730 29 36 0.82 0.0013 7.98
Feb-18.................................. 7,230,230 227,980 21 27 0.79 0.0012 8.29
Mar-18.................................. 5,967,844 202,050 23 31 0.73 0.0011 7.69
Apr-18.................................. 4,976,642 178,009 20 27 0.75 0.0011 7.90
May-18.................................. 4,367,743 169,085 23 28 0.83 0.0011 7.02
Jun-18.................................. 5,211,044 202,601 23 31 0.77 0.0011 7.19
--------------------------------------------------------------------------------------------------------------------------------------------------------
II. Analysis of Retail Orders by Order Size
Tables 2, 3, and 4 show the distribution of Retail Orders entered
and executed in the Program for the period from January 2017 to June
2018. As shown in Table 2, a majority of all Retail Orders entered to
participate in the Program from January 2016 to June 2018 were for a
round lot or fewer shares. Specifically, Retail Orders of one round lot
or fewer shares accounted for an average of approximately 56% of the
total number of Retail Orders entered. More than 73% of Retail Orders
entered were for 300 shares or less. Very large orders of more than
7,500 shares accounted for only 1.9% of Retail Orders submitted to the
Program but accounted for a significant portion (approximately 40%) of
the shares entered, as shown in Table 3. In addition, despite lower
fill rates, large orders account for a reasonable portion
(approximately 9%) of the shares executed in the Program, as shown in
Table 4. The Program also receives a significantly large number of odd
lot and single lot sized shares, which could be representative of
retail marketable orders from retail customers. By providing price
improvement to these orders, retail customers would continue to benefit
from the Program.
Table 2--Distribution of Retail Orders Entered by Order Size
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
<= 100 101-300 301-500 501-1,000 1,001-2,000 2,001-4,000 4,001-7,500 7,500-15,000 >15000
Date (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-17.......................................... 44.90 18.45 8.60 10.12 6.84 4.90 3.10 1.93 1.16
Feb-17.......................................... 47.80 18.04 8.21 9.61 6.27 4.41 2.82 1.75 1.09
Mar-17.......................................... 47.60 17.76 8.16 9.67 6.36 4.60 3.01 1.78 1.05
Apr-17.......................................... 48.82 17.30 7.88 9.48 6.19 4.61 2.88 1.82 1.02
May-17.......................................... 52.39 18.69 7.13 8.13 5.21 3.81 2.40 1.41 0.83
Jun-17.......................................... 55.32 13.89 6.67 8.08 5.35 4.47 3.24 2.03 0.95
Jul-17.......................................... 53.18 15.12 7.32 8.85 5.86 4.12 2.71 1.79 1.05
Aug-17.......................................... 49.41 16.53 8.00 9.65 6.33 4.49 2.75 1.76 1.08
Sep-17.......................................... 49.88 16.51 7.94 9.50 6.27 4.49 2.71 1.71 1.00
Oct-17.......................................... 49.92 16.17 7.73 9.45 6.49 4.67 2.76 1.79 1.02
Nov-17.......................................... 61.01 17.66 5.65 6.33 3.86 2.54 1.39 0.98 0.59
Dec-17.......................................... 61.48 18.49 6.31 6.65 3.40 1.97 0.93 0.49 0.28
Jan-18.......................................... 61.20 17.06 6.54 7.14 3.84 2.25 1.06 0.58 0.33
Feb-18.......................................... 66.63 15.79 5.61 5.80 2.98 1.70 0.80 0.43 0.25
Mar-18.......................................... 66.11 15.39 5.82 6.22 3.25 1.76 0.78 0.41 0.24
Apr-18.......................................... 67.41 15.45 5.40 6.06 3.10 1.43 0.59 0.34 0.22
May-18.......................................... 66.09 16.12 5.43 6.30 3.41 1.47 0.59 0.35 0.24
Jun-18.......................................... 66.29 16.17 5.59 6.14 3.20 1.46 0.59 0.35 0.22
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 45584]]
Table 3--Distribution of Shares Entered by Order Size
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
<= 100 101-300 301-500 501-1,000 1,001-2,000 2,001-4,000 4,001-7,500 7,500-15,000 >15000
Date (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-17.......................................... 2.15 3.45 3.27 7.03 9.15 12.48 14.61 17.00 30.87
Feb-17.......................................... 2.36 3.64 3.40 7.30 9.16 12.29 14.52 16.80 30.53
Mar-17.......................................... 2.25 3.55 3.36 7.32 9.21 12.68 15.38 16.92 29.33
Apr-17.......................................... 2.36 3.54 3.32 7.32 9.17 13.00 14.92 17.45 28.91
May-17.......................................... 3.44 4.59 3.60 7.51 9.25 12.92 15.02 16.32 27.35
Jun-17.......................................... 1.89 2.89 2.92 6.64 8.44 13.27 17.56 20.05 26.34
Jul-17.......................................... 1.98 3.18 3.22 7.24 9.17 12.23 14.73 18.29 29.96
Aug-17.......................................... 1.92 3.36 3.39 7.59 9.57 12.76 14.33 17.21 29.87
Sep-17.......................................... 2.15 3.49 3.43 7.55 9.70 13.15 14.55 17.27 28.70
Oct-17.......................................... 1.97 3.34 3.30 7.41 9.91 13.48 14.54 17.90 28.16
Nov-17.......................................... 6.28 5.19 3.86 7.92 9.53 12.10 12.18 16.22 26.72
Dec-17.......................................... 9.96 7.34 5.96 11.51 11.24 12.70 11.15 11.31 18.83
Jan-18.......................................... 8.56 6.29 5.64 11.27 11.49 13.17 11.61 12.18 19.79
Feb-18.......................................... 11.33 7.16 6.01 11.31 11.12 12.42 10.99 11.30 18.37
Mar-18.......................................... 11.06 6.96 6.10 12.00 11.88 12.69 10.62 10.82 17.88
Apr-18.......................................... 12.30 7.46 5.95 12.51 12.19 11.17 8.89 9.73 19.80
May-18.......................................... 12.14 7.50 5.74 12.40 12.76 11.08 8.53 9.67 20.17
Jun-18.......................................... 12.39 7.77 6.12 12.60 12.60 11.42 8.76 9.89 18.45
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 4--Distribution of Shares Executed by Order Size
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
<= 100 101--300 301--500 501--1,000 1,001--2,000 2,001--4,000 4,001--7,500 7,500--15,000 >15000
Date (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-17.......................................... 11.39 14.06 10.40 18.41 15.88 12.34 8.41 5.26 3.86
Feb-17.......................................... 13.96 15.27 10.48 17.77 14.54 11.44 7.82 5.15 3.60
Mar-17.......................................... 14.14 14.99 10.15 17.53 14.74 11.80 8.15 5.02 3.48
Apr-17.......................................... 14.69 14.83 10.01 17.80 14.84 11.55 7.85 5.00 3.42
May-17.......................................... 17.86 18.10 9.98 16.46 13.17 10.48 6.94 4.23 2.78
Jun-17.......................................... 9.74 11.25 8.91 16.71 14.58 14.86 12.03 7.97 3.95
Jul-17.......................................... 10.37 12.33 9.91 18.84 16.17 12.75 8.96 6.56 4.11
Aug-17.......................................... 9.39 12.34 10.01 18.97 16.70 13.36 8.77 6.15 4.31
Sep-17.......................................... 10.60 12.93 10.22 18.87 16.28 13.00 8.56 5.74 3.79
Oct-17.......................................... 9.40 12.40 10.16 19.36 17.12 13.45 8.58 5.86 3.66
Nov-17.......................................... 12.42 13.48 9.27 16.56 15.84 13.24 7.98 6.63 4.56
Dec-17.......................................... 14.98 15.80 10.29 16.77 14.92 11.67 6.98 5.04 3.55
Jan-18.......................................... 14.27 14.96 10.28 17.53 15.27 11.90 7.12 5.16 3.50
Feb-18.......................................... 16.74 15.75 10.78 17.05 14.27 11.08 6.48 4.57 3.30
Mar-18.......................................... 17.27 15.97 10.58 16.87 13.81 10.51 6.66 4.63 3.70
Apr-18.......................................... 17.12 15.58 10.24 16.30 13.60 10.04 6.71 5.37 5.03
May-18.......................................... 18.24 16.29 10.18 15.89 12.80 9.80 6.25 5.25 5.31
Jun-18.......................................... 18.93 17.28 10.59 16.16 12.96 9.64 5.66 4.95 3.84
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange also analyzed fill rates across the different order
size buckets and found that while fill rates are higher for smaller
orders as expected, large size orders are still able to access
liquidity and therefore receive price improvement in the Program.
Moreover, overall fill rates indicate that market participants that
provide liquidity are responding with quote depth when the contra side
order is looking for a fill. While fill rates decreased starting in
November 2017, the Exchange believes that this is due to new Retail
Order flow being routed to the Program, rather than a decrease in the
available liquidity. Monthly volume executed in the Program, as shown
in Table 1, has therefore remained constant or increased since November
2017 despite the lower overall fill rates for those months. The
Exchange therefore believes that the Program is an attractive option
for market participants looking to fill Retail Orders with price
improvement.
Table 5--Fill Rates
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
<= 100 101--300 301--500 501--1,000 1,001--2,000 2,001--4,000 4,001--7,500 7,500--15,000 >15000
Date (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-17.......................................... 85.19 65.62 51.13 42.16 27.93 15.91 9.26 4.98 2.01
Feb-17.......................................... 87.21 61.69 45.31 35.83 23.36 13.69 7.92 4.51 1.73
Mar-17.......................................... 87.04 58.53 41.87 33.20 22.18 12.89 7.34 4.11 1.65
Apr-17.......................................... 86.90 58.46 42.12 33.97 22.59 12.40 7.35 4.00 1.65
May-17.......................................... 87.53 66.54 46.75 36.99 24.03 13.69 7.80 4.38 1.71
Jun-17.......................................... 87.78 66.50 52.07 42.98 29.48 19.12 11.70 6.78 2.56
Jul-17.......................................... 85.99 63.63 50.52 42.77 28.96 17.12 9.99 5.89 2.25
Aug-17.......................................... 79.61 59.74 48.02 40.59 28.33 17.00 9.94 5.81 2.34
Sep-17.......................................... 77.55 58.32 46.98 39.39 26.44 15.58 9.27 5.24 2.08
Oct-17.......................................... 80.19 62.29 51.71 43.82 28.97 16.73 9.90 5.49 2.18
Nov-17.......................................... 22.78 29.93 27.66 24.11 19.16 12.61 7.55 4.71 1.97
Dec-17.......................................... 12.14 17.37 13.96 11.77 10.72 7.42 5.05 3.60 1.52
Jan-18.......................................... 12.84 18.31 14.06 11.98 10.24 6.96 4.72 3.26 1.36
Feb-18.......................................... 11.79 17.56 14.32 12.03 10.24 7.12 4.70 3.23 1.43
[[Page 45585]]
Mar-18.......................................... 11.56 17.00 12.85 10.42 8.60 6.13 4.64 3.17 1.53
Apr-18.......................................... 10.61 15.91 13.11 9.93 8.50 6.85 5.76 4.21 1.94
May-18.......................................... 10.11 14.61 11.93 8.62 6.75 5.95 4.93 3.65 1.77
Jun-18.......................................... 10.57 15.39 11.98 8.88 7.12 5.84 4.47 3.46 1.44
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
III. Impact of the Program on Broader Market Quality
As shown in Charts 2 and 3 above, Retail Order volume executed in
the Program is a small percentage of both total volume executed on the
Exchange and total consolidated volume. While the Program has better
depth available for Retail Orders, it does not significantly affect the
market volume of BYX. The average volume within the 95th percentile is
between 1.3% and 1.7%. With the Program volume mostly below 2.5% of BYX
volume, the Exchange does not believe that it is able to significantly
impact BYX market quality. Nevertheless, to test the impact of the
Program on broader market quality, the Exchange: (1) Reviewed the
correlation between metrics that are tied to overall market quality
with relevant Program metrics over both 2017 and 2018, and (2)
performed a difference-in-difference analysis to analyze the potential
impact of the Program on a number of important market quality
indicators. Based on the results of this analysis, the Exchange does
not believe that the Program has had any significant impact on broader
market quality. The Exchange therefore believes that the Program can
continue on a permanent basis--and thereby provide increased price
improvement opportunities to retail investors on a transparent well-
regulated exchange--without degrading market quality outside of the
Program.
Correlation Analysis
As shown in Table 6 below, the Exchange's correlation analysis
shows that: (1) Inside size in the broader market is not correlated
with either RPI effective spreads or the percentage of volume executed
in the Program, which suggests that market participants are not moving
volume from the regular market to the Program as effective spreads
narrow or volume executed in the Program increases; (2) effective
spreads in the broader market are not correlated with the percentage of
volume executed in the Program, which suggests that spreads are not
widening as a result of more Retail Order flow being executed in the
Program; (3) midpoint volume executed is not correlated with effective
spreads in the Program, which suggests that market participants are not
moving midpoint liquidity from the regular market to instead receive
price improvement in the Program; and (4) displayed volume executed is
not correlated with quoted spreads in the Program, which suggest that
market participants are not entering non-displayed retail price
improving interest in the Program as an alternative to displaying
interest on an order book.
Table 6--BYX Market Quality Correlation Analysis
------------------------------------------------------------------------
Date
-------------------------------
2017 2018
------------------------------------------------------------------------
Correlation of RPI Effective Spread to -0.0145 -0.0096
Average Inside Size across all Equities
Exchanges \29\.........................
Correlation of RPI Volume as a Percent -0.0217 -0.0056
of Total Volume to Average Inside Size
across all Equities Exchanges..........
Correlation of RPI Volume as a Percent 0.1175 0.0134
of Total Volume to Average Effective
Spread across all Venues...............
Correlation of RPI Effective Spread to -0.1438 -0.1366
Total Midpoint Volume across all Venues
Correlation of RPI Quoted Spread to -0.1221 -0.0999
Total Protected Lit Volume across all
Equities Exchanges.....................
------------------------------------------------------------------------
Difference in Difference Analysis
---------------------------------------------------------------------------
\29\ Inside size is the average bid or ask size when the venue
is at the NBB or NBO.
---------------------------------------------------------------------------
The aim of this analysis was to compare the values of a set of
general market metrics prior to the introduction of the Program to
those prevailing after. The Exchange follows what is commonly termed
the `difference-in-difference' approach (``DnD''). A DnD analysis
involves identifying a group of subjects (stocks in this case) that
receive a given `treatment.' In this case, the `treatment' is the
introduction of the Program. The Exchange would then observe the change
(difference) in a set of empirical indicia of market quality, before
and after Program introduction. The analysis is enhanced by observing
the intertemporal change in the same indicia for a set of stocks that
did not receive the treatment. The non-treated stocks would serve as
`controls.' The impact of the Program could therefore be assessed by
comparing the pre/post changes in the treated stocks with those from
the control stocks, hence the difference in differences. Observed
changes in the control stocks would account for environmental effects,
such as changes in general market volatility, that are unrelated to the
introduction of the Program.
The introduction of the Program applied to all stocks traded on the
Exchange. Thus, control stocks in the strict sense are not available.
The Exchange applies therefore a fallback approach, in which it
identifies stocks with relatively high levels of participation in the
Program and use these as the `treatment' stocks. Those for which
Program participation was light serve as the `control' stocks. The
approach suffers from the limitation that Program participation is a
determined by endogenous choice. It is possible that stocks with high
levels of participation are systematically different from those with
low participation. That is, the controls may be different from the
treated stocks in important ways. With this caveat in mind, it is
nevertheless of interest to see differences in outcomes between the two
groups of stocks.
While the treatment and control stocks differ substantially in
terms of participation in the Program, the validity of the DnD analysis
is enhanced to the extent that the two groups are otherwise as similar
to each other as possible. To achieve this objective, the Exchange
first breaks its analysis into two parts: One dealing with active
securities, the other with less active
[[Page 45586]]
securities. The Exchange's set of active securities are those with
consolidated average daily volume (``CADV'') of 500,000 shares or more
after Program introduction. The less active group have CADV between
50,000 and 500,000 shares after Program introduction. Then, within each
volume grouping, the Exchange conducts a `matched pairs' process to
identify a smaller set of treatment and control groups that are as
close to each other as possible across three dimensions: Consolidated
average daily share volume, average price, and average BBO spread
across exchanges. The values of these variables prior to Program
introduction were used.
Data from the pre-treatment period was obtained from trading during
the three months of October through December 2012. The Exchange looks
at two post-treatment periods. The first is based on trading from
January through December 2013. The second is based on trading from the
two years from January 2017 through December 2018.
The overall set of four DnD analyses can be represented and
hereafter labeled as follows:
------------------------------------------------------------------------
Post-period dates
CADV -----------------------------------------
2013 2017-2018
------------------------------------------------------------------------
500,000 or more............... I.................. III
2012 pair.......... 2012 pair
2013 pair.......... 2017-18 pair
Between 50,000 and 500,000.... II................. IV
2012 pair.......... 2012 pair
2013 pair.......... 2017-18 pair
------------------------------------------------------------------------
For each of the four DnD analyses, the specific matched-pairs
process employed the following steps:
1. Daily averages for a set of variables are computed for each
stock for the appropriate pre/post time frames.
2. The initial universe of stocks are identified as having, in the
post period, the appropriate CADV, an average share price greater than
$2, and positive average daily BYX share volume.
3. These stocks are ranked on the percentage of consolidated volume
that was done in the Program (in the post period). Selection of the
treatment stocks starts with the top 100 stocks in terms of post-
introduction RPI Program volume for analysis I, II and III, and top 200
stocks are selected for analysis IV in order to generate sufficient
number of pairs in the sample set.
4. Pre-period data for the provisional treatment stocks is
obtained. During the pre-period, the treatment stocks must also have
the appropriate CADV level, an average price greater than $2, positive
BYX share volume, and listed during the entire pre-period. This process
will generally result in fewer than 1000 remaining treatment
candidates.
5. The candidate control stocks are selected from those with low
RPI Program volume, where the control stocks were selected from stocks
whose RPI volume was less than one-tenth that of the lowest RPI volume
from the treatment stocks.
6. The control stocks must also have similar restrictions to the
treatment stocks in both pre- and post-periods: CADV in the appropriate
range, price greater than $2, and positive BYX volume.
7. Each treatment stock was compared with each candidate control
stock. Using pre-period data, a discrepancy score was computed as:
[GRAPHIC] [TIFF OMITTED] TN29AU19.003
In words, the score is the sum of the absolute value of the
percentage differences in the indicated values. The lower the score,
the closer the match.
8. Each treatment stock was paired with the best possible match,
subject to the constraint that a given control stock could be used only
once (often termed `sampling without replacement').
9. Finally, only stock pairs with reasonable discrepancy scores,
which were 2.0 and lower, were retained.
Once a set of matched pairs was determined for a given analysis,
the Exchange computed the DnD result using a standard linear regression
framework. A DnD regression model can be expressed as:
[GRAPHIC] [TIFF OMITTED] TN29AU19.004
[[Page 45587]]
The Exchange considered ten metrics of interest, all of which were
computed during standard 9:30 a.m.-4:00 p.m. (Eastern time) trading
hours: (1) Average BBO spread across exchanges in dollars; (2) average
BBO spread across exchanges in basis points; (3) average BYX spread in
dollars; (4) average BYX spread in basis points; (5) average inside ask
size across exchanges in round lots; (6) average inside bid size across
exchanges in round lots; (7) average inside ask size on BYX in round
lots; (8) average inside bid size on BYX in round lots; (9) BYX volume
compared to total consolidated volume (``TCV'') in basis points; (10)
trade reporting facility (``TRF'') volume as a percentage of Symbol
Total Volume.
In assessing the results of the DnD analysis, certain caveats are
worth bearing in mind. As shown above, BYX RPI volume represents a very
small fraction of consolidated volume. Further, the Program was
introduced at a time when similar exchange-based retail price
improvement programs were introduced by other exchanges. It is also
important to recognize that much, if not most, marketable retail order
flow is routed to off-exchange market makers. For example, the Exchange
examined Rule 606 disclosures for the second quarter of 2019 from four
prominent retail brokerages: E-Trade, TD Ameritrade, Charles Schwab,
and Fidelity. Only Fidelity reported routing any market orders to
national securities exchanges, and its total exchange percentage was
less than 2.5% for each of Tape A, B, and C securities. This practice
of routing retail marketable orders to off-exchange venues has been in
place for a long time, both before and after the introduction of the
Program. Considering the smallness of the Program, the existence of
similar programs on other national securities exchanges, and the
continuing prevalence of off-exchange trading of retail orders, the
incremental impact of the Program on market quality generally would not
be expected to be large.
Furthermore, BYX RPI activity is itself somewhat anomalous in the
first place since the majority of retail market orders are routed off-
exchange for execution. Why some retail flow reaches exchanges via the
Program (or that of similar exchange programs), and why it varies
across stocks is not clear. Since treatment and control stocks are
determined on the basis of observed RPI usage--resulting from
participant choice--they may be different in important ways. The DnD
study attempts to take into account differences in average share
volume, price, and spread in the pre-period. If, however, the two
groups of stocks are nevertheless still not properly fully matched, it
is possible that results drawn from the DnD may be spurious. `Spurious'
in this context means a result that is robust statistically, but
nevertheless does not indicate the impact of the intended factor. In
other words, a spurious result is caused by some extraneous factor.
Matching Summary
The full set of matched pairs data for each of the four analyses
will be provided below, but the following table provides summary
information. Shown are the number of matched pairs, and sample averages
for the three matching variables. Also shown is the average of the
discrepancy score used in the matching process.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Treatment Control
--------------------------------------------------------------------------------------------------------------------------------------------------------
Post Post
Analysis Score Number of Price Period CADV Spread Price Period CADV Spread
pairs RPI Pct RPI Pct
--------------------------------------------------------------------------------------------------------------------------------------------------------
I......................................... 1.01 58 $ 44.93 0.034 8,216,026 38 $ 37.76 0.004 3,608,540 40
II........................................ 0.5 78 17.70 0.184 186,708 262 17.35 0.011 191,422 233
III....................................... 0.87 51 40.29 0.154 4,820,112 50 34.46 0.020 3,048,311 45
IV........................................ 0.58 34 12.80 0.328 216,895 530 13.42 0.029 191,580 382
--------------------------------------------------------------------------------------------------------------------------------------------------------
The table again illustrates the low level of Program participation,
even for the treatment stocks. The RPI percentages are especially low
for the higher volume samples (I and III). As intended, the RPI
percentages for the control stocks are much lower still, averaging at
least an order of magnitude lower than the treatment stocks.
Other than these differences, the pairs exhibit strong average
similarity in terms of the values of the pre-period matching variables.
Regression Results
The following table provides the estimated coefficients for the DnD
regressions for the indicated market indicator and sample. In addition
to the estimated coefficient, the p-value is provided. This value can
be used to gauge the statistical significance of the coefficient--the
confidence that the true value of the coefficient is different than
zero. The results are accompanied, as appropriate, with a set of
asterisks indicating the associated level of significance: * = 10%, **
= 5%, and *** = 1%.
----------------------------------------------------------------------------------------------------------------
Spreads
---------------------------------------------------------------
Avg. BBO Avg. BBO
spread for all Avg. BYX spread for all Avg. BYX
exchanges spread (bps) exchanges spread
(bps) (dollars) (dollars)
----------------------------------------------------------------------------------------------------------------
I
coef........................................ -2.77 -9.63 -0.01 0.03
p value..................................... 0.823 0.722 0.887 0.819
II
coef........................................ -50.87 -54.69 -0.10 -0.04
p value..................................... 0.287 0.531 0.212 0.835
III
coef........................................ 40.95 -11.06 -0.03 * -0.27
p value..................................... 0.148 0.781 0.797 0.098
IV
[[Page 45588]]
coef........................................ 166.71 211.50 -2.18 ** -0.42
p value..................................... 0.219 0.316 0.207 0.018
----------------------------------------------------------------------------------------------------------------
Four measures were analyzed to assess the potential impact that the
Program had on spreads: Average BBO spreads across all exchanges and
BYX quoted spreads were both measured in both basis points and dollar
terms. The table above shows limited impact of the Program on spreads
on BYX and the broader market. The only statistically significant
changes identified were to BYX spreads measured in dollar terms when
using a post-period treatment group from 2017-2018. Specifically, the
Exchange observed a relative narrowing of average BYX spreads in
treatment securities that is equivalent to: $0.27 for the more liquid
symbols in Sample III, and $0.42 for the less liquid symbols contained
in Sample IV, indicating an improvement in market quality on BYX in
securities with more volume traded in the Program. While the Exchange's
analysis does not prove that the observed improvements in BYX spreads
could necessarily be attributed to the Program rather than other
factors, this result supports the overall conclusion that the Program
did not result in spreads widening.
----------------------------------------------------------------------------------------------------------------
Depth in Round Lots
---------------------------------------------------------------
Avg. inside Avg. inside
bid size for Avg. BYX bid ask size for Avg. BYX ask
all exchanges size all exchanges size
----------------------------------------------------------------------------------------------------------------
I
coef........................................ 1.30 -4.85 4.66 1.03
p value..................................... 0.926 0.538 0.840 0.948
II
coef........................................ -2.79 -2.10 0.11 -1.40
p value..................................... 0.505 0.170 0.984 0.331
III
coef........................................ 4.75 -3.76 3.23 -7.03
p value..................................... 0.699 0.556 0.813 0.406
IV
coef........................................ -15.18 * -16.54 -6.19 * -13.22
p value..................................... 0.105 0.052 0.277 0.065
----------------------------------------------------------------------------------------------------------------
Similar to the analysis of spreads, four size measures are
analyzed, including inside bid and ask sizes both on BYX and across all
exchanges. Here, the Exchange found only two statistically significant
changes in the available size. Specifically, the Exchange found a
relative decrease in the average bid and ask size on BYX in treatment
securities when looking at the results for Sample IV, which includes
less liquid securities with a post-period treatment group of 2017-2018.
For the bid side of the market, the Exchange found that the average
size on BYX for treatment securities decreased by 16.54 round lots
(i.e., 1654 shares) relative to the control group. Similarly, for the
offer side of the market, the Exchange found that the average size on
BYX for treatment securities decreased by 13.22 round lots (i.e., 1322
shares) relative to the control group. While available bid and offer
sizes on BYX in the treatment group decreased relative to the control
group, the Exchange believes that this change may have been caused by
factors unrelated to the Program. In fact, the average BYX bid and ask
sizes materially increased during the duration of the Program for
securities included in both the treatment and control groups. For
example, the average BYX bid size for Sample IV increased from 3.49
round lots in the pre-period to 4.91 round lots in the post-period, an
approximately 40% improvement. Similarly, the average BYX ask size for
Sample IV increased from 3.74 round lots in the pre-period to 5.16
round lots in the post-period, an approximately 38% improvement. The
Program results simply indicate a larger increase in size for the
control groups was observed. The same statistics for the control group
indicate 791% increase in BYX bid size and a 1014% increase in BYX ask
size. The Exchange therefore believes the results are largely due to
outlier stocks in the control group that experienced a significant
increase in depth that was most likely related to outside factors
rather than the lack of Program participation. Given the significant
increase in depth across stocks in both the control and treatment
groups, the Exchange believes that the results are consistent with a
finding that the Program did not materially harm depth on BYX.
------------------------------------------------------------------------
Volume
-------------------------------
TRF volume as
BYX volume as % of symbol
% of TCV (bps) total volume
------------------------------------------------------------------------
I
coef................................ * 0.43 1.10%
p value............................. 0.051 0.522
II
coef................................ 0.38 1.09%
p value............................. 0.112 0.641
III
coef................................ * -1.11 *** 7.43%
p value............................. 0.051 0.002
IV
coef................................ * -1.72 ** 7.95%
p value............................. 0.068 0.033
------------------------------------------------------------------------
Market Share
To assess the impact of the Program on market share the Exchange
explored measures related to both BYX volume as a percentage of TCV and
TRF volume as a percentage of Symbol Total Volume. The BYX market share
coefficients shown in the table are expressed in
[[Page 45589]]
market share basis point. For example, a value of 100 means that market
share increased by one point (e.g., 30% to 31%). Many of the results
related to market share are statically significant, suggesting shifts
in both BYX and TRF market share in the years following the
introduction of the Program. Sample I, for example, suggests a
statistically significant relative increase in BYX volume in more
liquid treatment securities immediately following the introduction of
the Program, but Samples III and IV suggest that any such increases
were temporary with BYX volume as a percentage of TCV decreasing
relative to the control group in both of the later samples. In
addition, Samples III and IV also reflect a large and statistically
significant relative increase in TRF share for securities with more
volume executed in the Program. Collectively, it can be safely stated
that the introduction of the Program did not work towards decreasing
TRF share. More likely what the results tell us is that the treatment
stocks with relatively high volume executed in the Program also had
high levels of retail interest generally. Such retail interest is
executed largely off-exchange, hence the increase in TRF share.
I. Active Stocks (CADV >500,000) and Post-Period = 2013
For this sample, there were 58 matched pairs that emerged from this
process. The pairs, along with values of selected variables, pre- and
post-Program introduction, are shown as follows:
BILLING CODE 8011-01-P
[[Page 45590]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.005
[[Page 45591]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.006
[[Page 45592]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.007
[[Page 45593]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.008
[[Page 45594]]
II. Less Active Stocks (CADV Between 50,000 and 500,000) and Post-
Period = 2013
For this sample, there were 78 matched pairs that emerged from this
process. The pairs, along with values of selected variables, pre- and
post-Program introduction, are shown as follows:
[GRAPHIC] [TIFF OMITTED] TN29AU19.009
[[Page 45595]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.010
[[Page 45596]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.011
[[Page 45597]]
III. Active Stocks (CADV >500,000) and Post-Period = 2017-208
For this sample, there were 51 matched pairs that emerged from this
process. The pairs, along with values of selected variables, pre- and
post-Program introduction, are shown as follows:
[GRAPHIC] [TIFF OMITTED] TN29AU19.012
[[Page 45598]]
IV. Less Active Stocks (CADV Between 50,000 and 500,000) and Post-
Period = 2017-2018
For this sample, there were 34 matched pairs that emerged from this
process. The pairs, along with values of selected variables, pre- and
post-Program introduction, are shown as follows:
[GRAPHIC] [TIFF OMITTED] TN29AU19.013
[[Page 45599]]
[GRAPHIC] [TIFF OMITTED] TN29AU19.014
BILLING CODE 8011-01-C
IV. Conclusion
When the Commission approved the initial retail price improvement
pilot on the New York Stock Exchange LLC (``NYSE'') and NYSE Amex LLC
(``Amex'') it stated that it was not concerned that such a program
would ``cause a major shift in market structure.'' \30\ Instead, the
Commission explained that the program ``should closely replicate the
trading dynamics that exist in the OTC markets'' and would ``simply
present another competitive venue for retail order flow execution''
that is ``not likely to alter the incentives for market participants to
post limit orders in a material way.'' \31\ At the same time, the
Commission saw fit to approve such programs on a pilot basis so that it
would have the opportunity to monitor the operation of the Program and
confirm its expectations about the impact on broader market structure
before permanent approval. The Exchange believes that the Commission's
expectations that the Program would not have any significant impact on
broader market structure is both correct and confirmed by the data.
Specifically, based on the Exchange's experience in operating the
Program, and the data provided here and during the duration of the
pilot, the Exchange believes that the Program has been a positive
experiment in attracting retail order flow to a public exchange, and
should thus be approved on a permanent basis so that retail investors
can continue to reap its benefits.
---------------------------------------------------------------------------
\30\ See Securities Exchange Act Release No. 67347 (July 3,
2012), 77 FR 40673 (July 10, 2012) (SR-NYSE-2011-55; SR-NYSEAmex-
2011-84).
\31\ Id.
---------------------------------------------------------------------------
The data provided by the Exchange describes a valuable service that
delivers considerable price improvement to retail investors in a
transparent and well-regulated environment. The Program represents just
a fraction of retail orders, most of which are executed off-exchange by
a wide range of order handling services that have considerably more
market share, and which operate pursuant to different rules and
regulatory requirements. Specifically, the majority of retail order
flow is currently executed off-exchange by various wholesale market
makers that are able to offer sub-penny price improvement to retail
orders without running afoul of the Sub-Penny Rule under Regulation
NMS.\32\ Given that retail orders already trade off-exchange in
increments of less than one penny, the Exchange believes that the
primary impact of the Program is to provide an opportunity for retail
investors to receive price improvement on a transparent, well-
regulated, exchange venue.
---------------------------------------------------------------------------
\32\ The Commission has itself has opined that OTC market makers
appear to handle the vast majority of marketable retail order flow,
with the eight retail broker-dealers with significant retail
accounts whose Rule 606 order routing disclosures the Commission
reviewed routing ``nearly 100%'' of their customer market orders to
OTC market makers. See Securities Exchange Act Release No. 61358
(January 14, 2010), 75 FR 3593, 3600 (January 21, 2010) (Concept
Release on Equity Market Structure).
---------------------------------------------------------------------------
The Exchange believes that this understanding is also supported by
the data, which shows that the Program was not likely to have caused
any significant harm to broader market quality. The order flow the
Program attracted and continues to attract to the Exchange provides
tangible price improvement to retail investors through a competitive
and transparent pricing process unavailable in non-exchange venues. As
such, despite relatively modest volumes, the Exchange believes that the
Program has satisfied the twin goals of attracting retail order flow to
the
[[Page 45600]]
Exchange and allowing such order flow to receive potential price
improvement. Moreover, the Exchange believes that the data collected
supports the conclusion that the Program did not have a negative impact
on broader market quality. Although the results of the Program
highlight the substantial advantages that broker-dealers retain when
managing the benefits of retail order flow, the Exchange believes that
the level of price improvement provided by the Program and the scant
evidence that the Program negatively impacted the marketplace justifies
making the Program permanent.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act,\33\ in general, and
Section 6(b)(5) of the Act,\34\ in particular, in that it is designed
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest and not to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\33\ 15 U.S.C. 78f(b).
\34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that making the pilot permanent is consistent
with these principles because the Program is reasonably designed to
attract retail order flow to the exchange environment, while helping to
ensure that retail investors benefit from the better price that
liquidity providers are willing to give their orders. During the pilot
period, the Exchange has provided data and analysis to the Commission.
The Exchange believes that this data and analysis, as well as the
further analysis provided in this filing, show that the Program has
provided the intended benefits to the market, and retail investors in
particular, and is therefore consistent with the Act. Furthermore, the
Exchange notes that similar programs instituted by NYSE and Nasdaq BX
have recently been approved by the Commission to operate on a permanent
basis.\35\ The Exchange believes that its analysis, as well as the
analysis conducted by NYSE and Nasdaq BX in their proposals for
permanent approval, show that retail price improvement programs do not
negatively impact market structure, and can therefore provide benefits
to retail investors without negatively impacting the broader market.
---------------------------------------------------------------------------
\35\ See Securities Exchange Act Release No. 85160 (February 15,
2019), 84 FR 5754 (February 22, 2019) (SR-NYSE-2018-28); 86194 (June
25, 2019), 84 FR 31385 (July 1, 2019) (SR-BX-2019-011).
---------------------------------------------------------------------------
The proposed rule change is designed to facilitate transactions in
securities and to remove impediments to, and perfect the mechanisms of,
a free and open market and a national market system because making the
Program permanent would allow the Exchange to continue to attract
retail order flow to a public exchange and allow such order flow to
receive potential price improvement. The data provided by the Exchange
to the Commission staff demonstrates that the Program provided tangible
price improvement to retail investors through a competitive pricing
process unavailable in non-exchange venues, and otherwise had an
insignificant impact on the broader market. The Exchange believes that
making the Program permanent would encourage the additional utilization
of, and interaction with, the Exchange and provide retail customers
with an additional venue for price discovery, liquidity, competitive
quotes, and price improvement. For the same reasons, the Exchange
believes that making the Program permanent would promote just and
equitable principles of trade and remove impediments to and perfect the
mechanism of a free and open market.
Finally, the Exchange also believes that it is subject to
significant competitive forces, as described below in the Exchange's
statement regarding the burden on competition. For all of these
reasons, the Exchange believes that the proposed rule change is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
believes that making the Program permanent would continue to promote
competition for retail order flow among execution venues and contribute
to the public price discovery process. The Exchange believes that the
data supplied to the Commission, and experience gained over the life of
the pilot, have demonstrated that the Program creates price improvement
opportunities for retail orders that are similar to what would be
provided under OTC internalization arrangements, thereby benefiting
retail investors and increasing competition between execution venues.
The Exchange also believes that making the Program permanent will
promote competition between execution venues operating their own retail
liquidity programs, including competition between the Program and a
similar programs currently operated by NYSE and Nasdaq BX on a
permanent basis pursuant to a recently approved rule changes.\36\ Such
competition will lead to innovation within the market, thereby
increasing the quality of the national market system and allowing
national securities exchanges to compete both with each other and with
off-exchange venues for order flow. Such competition ultimately
benefits investors, and in this case specifically retail investors by
providing multiple potential trading venues for the execution of their
order flow, consistent with the principles of Regulation NMS, which was
premised on promoting fair competition among markets. Finally, the
Exchange notes that it operates in a highly competitive market in which
market participants can easily direct their orders to competing venues,
including off-exchange venues. In such an environment, the Exchange
must continually review, and consider adjusting the services it offers
and the requirements it imposes to remain competitive with other U.S.
equity exchanges. For the reasons described above, the Exchange
believes that the proposed rule change reflects this competitive
environment.
---------------------------------------------------------------------------
\36\ Id.
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act.
[[Page 45601]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBYX-2019-014 on the subject line.
Paper Comments:
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBYX-2019-014. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10 a.m. and 3 p.m.
Copies of the filing also will be available for inspection and copying
at the principal office of the Exchange. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
CboeBYX-2019-014, and should be submitted on or before September 19,
2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18636 Filed 8-28-19; 8:45 am]
BILLING CODE 8011-01-P
