Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enhance the BX Retail Price Improvement Program, 55863-55866 [2022-19580]
Download as PDF
<![CDATA[
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 175 / Monday, September 12, 2022 / Notices
Æ The Certification to Comply with
Protective Conditions;
Æ The Certification of Compliance
with Protective Conditions and
Termination of Access; and
Æ The Commission’s rules applicable
to access to non-public materials filed in
Commission proceedings (subpart C of
part 3011 of the U.S. Code of Federal
Regulations).
Each person (and any individual
working on behalf of that person)
seeking access to these materials has
executed a Certification to Comply with
Protective Conditions by signing in ink
or by typing /s/ before his or her name
in the signature block. The movant
attaches the Protective Conditions
Statement and the executed
Certification(s) to Comply with
Protective Conditions to the motion for
access filed with the Commission.
The movant and each person seeking
access to these materials agree to
comply with the following protective
conditions:
1. In accordance with 39 CFR
3011.303, the Commission may impose
sanctions on any person who violates
these protective conditions, the persons
or entities on whose behalf the person
was acting, or both.
2. In accordance with 39 CFR
3011.300(b), no person involved in
competitive decision-making for any
individual or entity that might gain
competitive advantage from using these
materials shall be granted access to
these materials. Involved in competitive
decision-making includes consulting on
marketing or advertising strategies,
pricing, product research and
development, product design, or the
competitive structuring and
composition of bids, offers or proposals.
It does not include rendering legal
advice or performing other services that
are not directly in furtherance of
activities in competition with an
individual or entity having a proprietary
interest in the protected material.
3. In accordance with 39 CFR
3011.302(a), a person granted access to
these materials may not disseminate
these materials in whole or in part to
any person not allowed access pursuant
to 39 CFR 3011.300(a) (Commission and
court personnel) or 3011.301 (other
persons granted access by Commission
order) except in compliance with:
a. Specific Commission order,
b. Subpart B of 39 CFR 3011
(procedure for filing these materials in
Commission proceedings), or
c. 39 CFR 3011.305 (production of
these materials in a court or other
administrative proceeding).
VerDate Sep<11>2014
17:06 Sep 09, 2022
Jkt 256001
4. In accordance with 39 CFR
3011.302(b) and (c), all persons granted
access to these materials:
a. Must use these materials only
related to this matter; and
b. Must protect these materials from
any person not authorized to obtain
access under 39 CFR 3011.300 or
3011.301 by using the same degree of
care, but no less than a reasonable
degree of care, to prevent the
unauthorized disclosure of these
materials as those persons, in the
ordinary course of business, would be
expected to use to protect their own
proprietary material or trade secrets and
other internal, confidential,
commercially sensitive, and privileged
information.
5. The duties of each person granted
access to these materials apply to all:
a. Disclosures or duplications of these
materials in writing, orally,
electronically, or otherwise, by any
means, format, or medium;
b. Excerpts from, parts of, or the
entirety of these materials;
c. Written materials that quote or
contain these materials; and
d. Revised, amended, or supplemental
versions of these materials.
6. All copies of these materials will be
clearly marked as ‘‘Confidential’’ and
bear the name of the person granted
access.
7. Immediately after access has
terminated pursuant to 39 CFR
3011.304(a)(1), each person (and any
individual working on behalf of that
person) who has obtained a copy of
these materials must execute the
Certification of Compliance with
Protective Conditions and Termination
of Access. In compliance with 39 CFR
3011.304(a)(2), the movant will attach
the executed Certification(s) of
Compliance with Protective Conditions
and Termination of Access to the notice
of termination of access filed with the
Commission.
8. Each person granted access to these
materials consents to these or such other
conditions as the Commission may
approve.
Respectfully submitted,
/s/llllll
(signature of representative)
(print name of representative)
(address line 1 of representative)
(address line 2 of representative)
(telephone number of representative)
(email address of representative)
(choose the appropriate response)
Attorney/Non-Attorney Representative
for (name of the movant)
You may delete the instructional text
to complete this form. This form may be
filed as an attachment to the motion for
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
55863
access to non-public materials under 39
CFR 3011.301(b)(5).
Certification To Comply With
Protective Conditions
The Postal Service requests
confidential treatment of non-public
materials identified as lll (nonconfidential description of non-public
materials) (hereinafter ‘‘these
materials’’) filed in Commission Docket
No. N2022–2.
lll (name of participant filing
motion) requests that the Commission
grant me access to these materials to use
related to Docket No. N2022–2
(hereinafter ‘‘this matter’’).
I certify that:
Æ I have read and understand the
Protective Conditions Statement and
this Certification to Comply with
Protective Conditions;
Æ I am eligible to receive access to
these materials because I am not
involved in competitive decisionmaking for any individual or entity that
might gain competitive advantage from
using these materials; and
Æ I will comply with all protective
conditions established by the
Commission.
/s/llllll
(signature of individual receiving
access)
(print name of individual receiving
access)
(title of individual receiving access)
(employer of individual receiving
access)
(name of the participant filing the
motion)
(date)
You may delete the instructional text
to complete this form. This form may be
filed as an attachment to the motion for
access to non-public materials under 39
CFR 3011.301(b)(6).
[FR Doc. 2022–19635 Filed 9–9–22; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95676; File No. SR–BX–
2022–014]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Enhance the BX Retail
Price Improvement Program
September 6, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
E:\FR\FM\12SEN1.SGM
12SEN1
55864
Federal Register / Vol. 87, No. 175 / Monday, September 12, 2022 / Notices
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
24, 2022, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Equity 4, Rule 4780 to enhance the BX
Retail Price Improvement Program, as
described further below. The text of the
proposed rule change is available on the
Exchange’s website at https://
listingcenter.nasdaq.com/rulebook/bx/
rules, at the principal office of the
Exchange, 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
lotter on DSK11XQN23PROD with NOTICES1
1. Purpose
The purpose of the proposed rule
change is to amend Equity 4, Rule
4780 3 to enhance the BX Retail Price
Improvement Program in a manner that
will attract more liquidity providers to
participate in the Program. Specifically,
the Exchange proposes to amend
paragraph (e) of Rule 4780 to provide
Participants a choice whether to
disseminate the Retail Liquidity
Identifier (defined below) when
submitting Retail Price Improvement
interest to the Exchange.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Hereinafter, references to the Rule 4000 Series
shall mean the Rule Series set forth in Equity 4 of
the Exchange’s Rulebook.
2 17
VerDate Sep<11>2014
17:06 Sep 09, 2022
Jkt 256001
Retail Price Improvement Program (‘‘RPI
Program’’)
In June 2019, the Commission
approved making permanent the
Exchange’s pilot RPI Program.4 The RPI
Program is designed to attract retail
order flow to the Exchange and allow
such order flow to receive potential
price improvement. The RPI Program is
limited to trades occurring at prices
equal to or greater than $1.00 per share.
Under the RPI Program, Retail Member
Organizations are eligible to submit
Retail Orders to the Exchange. BX
members (‘‘Members’’) are permitted to
provide potential price improvement for
Retail Orders in the form of nondisplayed interest that is priced more
aggressively than the Protected National
Best Bid or Offer (‘‘Protected NBBO’’).5
The Exchange publishes a price
improvement indicator notifying market
participants that such price improving
liquidity is available.
The SEC approved making the RPI
Program permanent, in part, because it
concluded, ‘‘the Exchange’s Program
data and analysis about price
improvement for retail investors . . .
supports the Exchange’s conclusion that
the program provides meaningful price
improvement to retail investors on a
regulated exchange venue and has not
demonstrably caused harm to the
broader market.’’ 6 In approving the
pilot RPI Program, the Commission
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.’’ 7 As the
4 Securities Exchange Act Release No. 86194
(June 25, 2019), 84 FR 31385 (July 1, 2019) (SR–BX–
2019–011) (‘‘RPI Approval Order’’). In addition to
approving the proposal to make the RPI Program
permanent, the Commission granted the Exchange’s
request for limited exemptive relief from Rule 612
of Regulation NMS, 17 CFR 242.612 (‘‘Sub-Penny
Rule’’), which among other things prohibits a
national securities exchange from accepting or
ranking orders priced greater than $1.00 per share
in an increment smaller than $0.01. See id.
5 The term Protected Quotation is defined in
Equity 1, Section 1(a)(16) and has the same meaning
as is set forth in Regulation NMS Rule 600. The
Protected NBBO is the best-priced protected bid
and offer. Generally, the Protected NBBO and the
national best bid and offer (‘‘NBBO’’) will be the
same. However, a market center is not required to
route to the NBBO if that market center is subject
to an exception under Regulation NMS Rule
611(b)(1) or if such NBBO is otherwise not available
for an automatic execution. In such case, the
Protected NBBO would be the best-priced protected
bid or offer to which a market center must route
interest pursuant to Regulation NMS Rule 611.
6 See RPI Approval Order, supra note 4 at 31387.
7 Securities Exchange Act Release No. 73702
(November 28, 2014), 79 FR 72049, 72051
(December 4, 2014) (SR–BX–2014–048).
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
SEC acknowledged, the retail order
segmentation was designed to create
greater competition for retail investor
orders thereby creating more
competition for these orders on
transparent and well-regulated
exchanges. This would help to ensure
that retail investors benefit from
competitive price improvement that
exchange-based liquidity providers
provide.
Retail Liquidity Identifier
Currently, 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 (the ‘‘Retail Liquidity
Identifier’’). The Retail Liquidity
Identifier is disseminated through
consolidated data streams (i.e., pursuant
to the Consolidated Tape Association
Plan/Consolidated Quotation System, or
CTA/CQS, for Tape A and Tape B
securities, and The Nasdaq Stock
Market, LLC (‘‘Nasdaq’’) UTP Plan for
Tape C securities) as well as through
proprietary Exchange data feeds.8 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, CQS 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 RPI Program.
The Exchange proposes to amend
Rule 4780(e) to enable Participants that
send Retail Price Improvement Orders
to elect whether to disseminate the
Retail Liquidity Identifier. The
Exchange believes that providing
Participants with the option to opt out
of dissemination of the Retail Liquidity
Identifier is appropriate in order to
increase liquidity in the RPI Program
and improve price improvement for
retail investors. The Exchange believes
that the mandatory use of the Retail
Liquidity Identifier discourages some
firms from providing liquidity to the RPI
Program due to concerns around
signaling to the market. The Exchange is
confident that, by allowing firms to opt
out of displaying the Retail Liquidity
8 The Exchange notes that the Retail Liquidity
Identifier for Tape A and Tape B securities are
disseminated pursuant to the CTA/CQS 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.
E:\FR\FM\12SEN1.SGM
12SEN1
Federal Register / Vol. 87, No. 175 / Monday, September 12, 2022 / Notices
Identifier, the Exchange would be able
to increase participation in the RPI
Program and generate additional price
improvement to orders of retail
investors.
Although the Exchange expects that
the proposed optionality relating to the
Retail Liquidity Identifier would
increase liquidity to the RPI Program,
the Exchange also recognizes the value
of the Retail Liquidity Identifier, which
makes it clear that there is price
improving liquidity available.
Therefore, the Exchange will monitor
the program in light of the change and,
if necessary, propose modifications
aimed at ensuring the program
continues to operate consistent with its
design and objectives.
lotter on DSK11XQN23PROD with NOTICES1
Implementation Date
The Exchange intends to introduce
this new functionality no later than the
Fourth Quarter of 2022. In any event,
the Exchange will issue an Equities
Trader Alert not less than 7 days prior
to introducing the new functionality.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Section 6(b)(5) of the Act,10
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
promoting competition for retail order
flow among execution venues and
providing the potential for meaningful
price improvement to orders of retail
investors. The proposal would allow
Participants to choose whether to
disseminate the Retail Liquidity
Identifier when Participants submit
Retail Price Improvement Orders to the
Exchange. By providing an option to opt
out of disseminating the Retail Liquidity
Identifier, the Exchange could attract
more liquidity providers to interact with
retail order flow.
A significant percentage of retail order
flow is executed off-exchanges. The
Exchange believes that it is appropriate
to continue to improve the RPI Program
to encourage on-exchange interaction
with retail investor orders. The
proposed changes to the RPI Program
would increase competition among
execution venues, encourage additional
liquidity, and offer potential price
improvement to retail investors.
Increased competition for retail order
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
VerDate Sep<11>2014
17:06 Sep 09, 2022
Jkt 256001
flow could also lead to increased
investor interest in trading securities
and innovation within the market,
thereby increasing the quality of the
national market system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that, by allowing
Participants to choose whether to
disseminate the Retail Liquidity
Identifier, the proposed rule change
would enhance competition for retail
order flow among execution venues.
This change would encourage
expansion of the RPI Program, thereby
creating additional price improvement
opportunities for retail orders and
increasing competition between
execution venues. All Participants
would have the option to opt out of
displaying the Retail Liquidity
Identifier.
The Exchange believes that the
proposed rule changes would increase
competitive interaction with retail
investor orders which should lead to
increased retail investor order activity
on transparent and well-regulated
exchanges. This would help to ensure
that retail investors benefit from
competitive price improvement that
exchange-based liquidity providers
provide. The Exchange 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 venues.
Therefore, 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
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
55865
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 11 and
subparagraph (f)(6) of Rule 19b–4
thereunder.12
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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.
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 rule-comments@
sec.gov. Please include File Number SR–
BX–2022–014 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–BX–2022–014. 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
11 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
12 17
E:\FR\FM\12SEN1.SGM
12SEN1
55866
Federal Register / Vol. 87, No. 175 / Monday, September 12, 2022 / Notices
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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
offices 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–BX–2022–014, and should
be submitted on or before October 3,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–19580 Filed 9–9–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95679; File No. SR–
PEARL–2022–34]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 2614, Orders and Order
Instructions, To Adopt the Primary Peg
Order Type
September 6, 2022.
lotter on DSK11XQN23PROD with NOTICES1
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
26, 2022 MIAX PEARL, LLC (‘‘MIAX
Pearl’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I and II 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposed rule
change to amend Exchange Rule 2614,
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:06 Sep 09, 2022
Jkt 256001
Orders and Order Instructions, to adopt
the Primary Peg Order Type.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, 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 Exchange currently offers one
type of pegging order on its equity
trading platform (‘‘MIAX Pearl
Equities’’), the Midpoint Peg Order,
which is automatically re-priced in
response to changes in the Protected
Best Bid or Offer (‘‘PBBO’’).3 Exchange
Rule 2614(a)(3) sets forth the operation
of the Midpoint Peg Order and, in sum,
defines it as a ‘‘non-displayed Limit
Order that is assigned a working price
pegged to the midpoint of the PBBO.’’
The Exchange now proposes to adopt
a second type of pegging order, the
Primary Peg Order. In sum, a Primary
Peg Order would be a Limit Order 4 that
is assigned a working price pegged to
the Protected Best Bid (‘‘PBB’’),5 for a
buy order, or the Protected Best Offer
(‘‘PBO’’),6 for a sell order. The proposed
operation of the Primary Peg Order is
well established in the equity markets
and is based on similar functionality
offered at other exchanges.7
3 See Exchange Rule 1901 (stating ‘‘the term
‘Protected NBB’ or ‘PBB’ shall mean the national
best bid that is a Protected Quotation, the term
‘Protected NBO’ or ‘PBO’ shall mean the national
best offer that is a Protected Quotation, and the term
‘Protected NBBO’ or ‘PBBO’ shall mean the national
best bid and offer that is a Protected Quotation.’’).
4 See Exchange Rule 2614(a)(1) (describing the
operation of a Limit Order).
5 See Exchange Rule 1901, supra note 3.
6 Id.
7 See, e.g., Cboe BYX Exchange, Inc. (‘‘BYX’’) and
Cboe BZX Exchange, Inc. (‘‘BZX’’) Rules
11.9(c)(8)(a), Cboe EDGA Exchange, Inc. (‘‘EDGA’’)
and Cboe EDGX Exchange, Inc. (‘‘EDGX’’,
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
Some characteristics of the Primary
Peg Order would be identical to the
Midpoint Peg Order, such as its
operation during a locked or crossed
market, and each of these identical
characteristics are described below.
Rather than describe identical behavior
separately under different rules, and to
ensure its rules are concise, thorough,
and easy to understand, the Exchange
proposes to amend Exchange Rule
2614(a)(3) to describe ‘‘Pegged Orders’’
generally as a standalone order type
category and describe the operation of
the existing Midpoint Peg Order and
proposed Primary Peg Order. The
Exchange proposes to amend certain
provisions of Exchange Rule 2614(a)(3)
to cover identical characteristics shared
by both Primary Peg and Midpoint Peg
Orders.8
Exchange Rule 2614(a)(3) would
define a Pegged Order as ‘‘an order that
is automatically re-priced in response to
changes in the PBBO.’’ 9 Both the
existing Midpoint Peg Order and
proposed Primary Peg Order would be
described under Exchange Rule
2614(a)(3)(A), which would be titled
‘‘Types of Pegged Orders’’. The
description of the Midpoint Peg Order
under current Exchange Rule 2614(a)(3)
would now be under Exchange Rule
2614(a)(3)(A)(i) with one change.
Exchange Rule 2614(a)(3) currently
provides that ‘‘[a] Midpoint Peg Order
receives a new timestamp each time its
working price changes in response to
changes to the midpoint of the PBBO.’’
A Primary Peg Order would also receive
a new timestamp each time its working
price changes in response to changes in
the PBBO. Therefore, the Exchange
proposes to replace this provision with
a general provision under Exchange
Rule 2614(a)(3) that would cover all
Pegged Orders and would state, ‘‘[a]
Pegged Order receives a new timestamp
each time its working price changes in
response to changes in the PBBO.’’ 10
collectively with BYX, BZX, and EDGA, the ‘‘Cboe
Equity Exchanges’’) Rules 11.6(j)(2), New York
Stock Exchange LLC (‘‘NYSE’’) Rule 7.31(h), NYSE
Arca, Inc. (‘‘NYSE Arca’’) Rule 7.31–E(h)(1),
Investors Exchange, Inc. (‘‘IEX’’) Rule 11.190(a)(3),
The NASDAQ Stock Market LLC (‘‘NASDAQ’’) Rule
4703(d), and MEMX LLC (‘‘MEMX’’) Rule 11.6(h).
8 The Exchange notes that other exchanges have
described pegged order functionality similarly
within their rules and have combined the
description of the various pegged order types they
offer under the same rule. See, e.g., IEX Rule
11.190(a)(3), and NASDAQ Rule 4703(d). The
Exchange also proposes to renumber certain
provisions in Exchange Rule 2614(a)(3) as a result
of this change.
9 This is consistent with similar provisions in
other exchanges’ rules regarding pegged orders. See,
e.g., MEMX Rule 11.6(h), EDGA and EGDX Rules
11.6(j).
10 This is consistent with similar provisions in
other exchanges’ rules regarding pegged orders. See,
E:\FR\FM\12SEN1.SGM
12SEN1
]]>Agencies
[Federal Register Volume 87, Number 175 (Monday, September 12, 2022)]
[Notices]
[Pages 55863-55866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19580]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95676; File No. SR-BX-2022-014]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Enhance the BX
Retail Price Improvement Program
September 6, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 55864]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 24, 2022, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') 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
The Exchange proposes to amend Equity 4, Rule 4780 to enhance the
BX Retail Price Improvement Program, as described further below. The
text of the proposed rule change is available on the Exchange's website
at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the principal
office of the Exchange, 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 Equity 4, Rule
4780 \3\ to enhance the BX Retail Price Improvement Program in a manner
that will attract more liquidity providers to participate in the
Program. Specifically, the Exchange proposes to amend paragraph (e) of
Rule 4780 to provide Participants a choice whether to disseminate the
Retail Liquidity Identifier (defined below) when submitting Retail
Price Improvement interest to the Exchange.
---------------------------------------------------------------------------
\3\ Hereinafter, references to the Rule 4000 Series shall mean
the Rule Series set forth in Equity 4 of the Exchange's Rulebook.
---------------------------------------------------------------------------
Retail Price Improvement Program (``RPI Program'')
In June 2019, the Commission approved making permanent the
Exchange's pilot RPI Program.\4\ The RPI Program is designed to attract
retail order flow to the Exchange and allow such order flow to receive
potential price improvement. The RPI Program is limited to trades
occurring at prices equal to or greater than $1.00 per share. Under the
RPI Program, Retail Member Organizations are eligible to submit Retail
Orders to the Exchange. BX members (``Members'') are permitted to
provide potential price improvement for Retail Orders in the form of
non-displayed interest that is priced more aggressively than the
Protected National Best Bid or Offer (``Protected NBBO'').\5\ The
Exchange publishes a price improvement indicator notifying market
participants that such price improving liquidity is available.
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 86194 (June 25, 2019),
84 FR 31385 (July 1, 2019) (SR-BX-2019-011) (``RPI Approval
Order''). In addition to approving the proposal to make the RPI
Program permanent, the Commission granted the Exchange's request for
limited exemptive relief from Rule 612 of Regulation NMS, 17 CFR
242.612 (``Sub-Penny Rule''), which among other things prohibits a
national securities exchange from accepting or ranking orders priced
greater than $1.00 per share in an increment smaller than $0.01. See
id.
\5\ The term Protected Quotation is defined in Equity 1, Section
1(a)(16) and has the same meaning as is set forth in Regulation NMS
Rule 600. The Protected NBBO is the best-priced protected bid and
offer. Generally, the Protected NBBO and the national best bid and
offer (``NBBO'') will be the same. However, a market center is not
required to route to the NBBO if that market center is subject to an
exception under Regulation NMS Rule 611(b)(1) or if such NBBO is
otherwise not available for an automatic execution. In such case,
the Protected NBBO would be the best-priced protected bid or offer
to which a market center must route interest pursuant to Regulation
NMS Rule 611.
---------------------------------------------------------------------------
The SEC approved making the RPI Program permanent, in part, because
it concluded, ``the Exchange's Program data and analysis about price
improvement for retail investors . . . supports the Exchange's
conclusion that the program provides meaningful price improvement to
retail investors on a regulated exchange venue and has not demonstrably
caused harm to the broader market.'' \6\ In approving the pilot RPI
Program, the Commission 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.'' \7\ As the SEC
acknowledged, the retail order segmentation was designed to create
greater competition for retail investor orders thereby creating more
competition for these orders on transparent and well-regulated
exchanges. This would help to ensure that retail investors benefit from
competitive price improvement that exchange-based liquidity providers
provide.
---------------------------------------------------------------------------
\6\ See RPI Approval Order, supra note 4 at 31387.
\7\ Securities Exchange Act Release No. 73702 (November 28,
2014), 79 FR 72049, 72051 (December 4, 2014) (SR-BX-2014-048).
---------------------------------------------------------------------------
Retail Liquidity Identifier
Currently, 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 (the ``Retail Liquidity Identifier''). The Retail Liquidity
Identifier is disseminated through consolidated data streams (i.e.,
pursuant to the Consolidated Tape Association Plan/Consolidated
Quotation System, or CTA/CQS, for Tape A and Tape B securities, and The
Nasdaq Stock Market, LLC (``Nasdaq'') UTP Plan for Tape C securities)
as well as through proprietary Exchange data feeds.\8\ 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, CQS 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 RPI Program.
---------------------------------------------------------------------------
\8\ The Exchange notes that the Retail Liquidity Identifier for
Tape A and Tape B securities are disseminated pursuant to the CTA/
CQS 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.
---------------------------------------------------------------------------
The Exchange proposes to amend Rule 4780(e) to enable Participants
that send Retail Price Improvement Orders to elect whether to
disseminate the Retail Liquidity Identifier. The Exchange believes that
providing Participants with the option to opt out of dissemination of
the Retail Liquidity Identifier is appropriate in order to increase
liquidity in the RPI Program and improve price improvement for retail
investors. The Exchange believes that the mandatory use of the Retail
Liquidity Identifier discourages some firms from providing liquidity to
the RPI Program due to concerns around signaling to the market. The
Exchange is confident that, by allowing firms to opt out of displaying
the Retail Liquidity
[[Page 55865]]
Identifier, the Exchange would be able to increase participation in the
RPI Program and generate additional price improvement to orders of
retail investors.
Although the Exchange expects that the proposed optionality
relating to the Retail Liquidity Identifier would increase liquidity to
the RPI Program, the Exchange also recognizes the value of the Retail
Liquidity Identifier, which makes it clear that there is price
improving liquidity available. Therefore, the Exchange will monitor the
program in light of the change and, if necessary, propose modifications
aimed at ensuring the program continues to operate consistent with its
design and objectives.
Implementation Date
The Exchange intends to introduce this new functionality no later
than the Fourth Quarter of 2022. In any event, the Exchange will issue
an Equities Trader Alert not less than 7 days prior to introducing the
new functionality.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, by promoting competition for retail order flow among
execution venues and providing the potential for meaningful price
improvement to orders of retail investors. The proposal would allow
Participants to choose whether to disseminate the Retail Liquidity
Identifier when Participants submit Retail Price Improvement Orders to
the Exchange. By providing an option to opt out of disseminating the
Retail Liquidity Identifier, the Exchange could attract more liquidity
providers to interact with retail order flow.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
A significant percentage of retail order flow is executed off-
exchanges. The Exchange believes that it is appropriate to continue to
improve the RPI Program to encourage on-exchange interaction with
retail investor orders. The proposed changes to the RPI Program would
increase competition among execution venues, encourage additional
liquidity, and offer potential price improvement to retail investors.
Increased competition for retail order flow could also lead to
increased investor interest in trading securities and innovation within
the market, thereby increasing the quality of the national market
system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that, by
allowing Participants to choose whether to disseminate the Retail
Liquidity Identifier, the proposed rule change would enhance
competition for retail order flow among execution venues. This change
would encourage expansion of the RPI Program, thereby creating
additional price improvement opportunities for retail orders and
increasing competition between execution venues. All Participants would
have the option to opt out of displaying the Retail Liquidity
Identifier.
The Exchange believes that the proposed rule changes would increase
competitive interaction with retail investor orders which should lead
to increased retail investor order activity on transparent and well-
regulated exchanges. This would help to ensure that retail investors
benefit from competitive price improvement that exchange-based
liquidity providers provide. The Exchange 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 venues. Therefore, 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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \11\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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. 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-BX-2022-014 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-BX-2022-014. 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
[[Page 55866]]
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 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal offices 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-BX-
2022-014, and should be submitted on or before October 3, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19580 Filed 9-9-22; 8:45 am]
BILLING CODE 8011-01-P
