Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend Rule 7.44-E Relating to the Retail Liquidity Program, 5948-5952 [2023-01743]
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Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Notices
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[FR Doc. 2023–01735 Filed 1–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96741; File No. SR–
NYSEARCA–2023–06]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend Rule 7.44–E
Relating to the Retail Liquidity
Program
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January 24, 2023.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
10, 2023, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
1 15
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.44–E relating to the Retail
Liquidity Program. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
1. Purpose
The Exchange proposes to amend
Rule 7.44–E, which sets forth the
Exchange’s Retail Liquidity Program
(the ‘‘Program’’).4 The purpose of the
Program is to attract retail order flow to
the Exchange and allow such order flow
to receive potential price improvement.
Rule 7.44–E currently provides for a
class of market participant called Retail
Liquidity Providers (‘‘RLPs’’) who, along
with non-RLP ETP Holders, are able to
provide potential price improvement to
retail investor orders in the form of a
non-displayed order that is priced better
than the best protected bid or offer,
called a Retail Price Improvement Order
(‘‘RPI Order’’).5 When there is an RPI
Order in a particular security, the
Exchange disseminates an indicator,
known as the Retail Liquidity Identifier,
that such interest exists.6 Retail Member
Organizations (‘‘RMOs’’) can submit a
Retail Order to the Exchange, which
interacts, to the extent possible, with
available contra-side RPI Orders and
then may interact with other liquidity
on the Exchange or elsewhere,
depending on the Retail Order’s
instructions.7 The segmentation in the
Program allows retail order flow to
receive potential price improvement as
a result of their order flow being
deemed more desirable by liquidity
providers. The Exchange recently
modified the Program to be available for
all securities traded on the Exchange.8
As described in further detail below,
the Exchange now proposes to
substantively amend the Program to (1)
modify the Program to provide Retail
Orders with price improvement at the
midpoint or better by proposing that
both RPI Orders and Retail Orders
would function as Mid-Point Liquidity
Orders (‘‘MPL Orders’’) and (2)
eliminate the role of RLPs.9
Proposed Midpoint Program
The Exchange proposes to modify the
Program to provide Retail Orders with
price improvement at the midpoint or
better, which change the Exchange
believes would further the purpose of
the Program to offer price improvement
opportunities to retail order flow. The
Exchange believes that the proposed
change would provide more
deterministic price improvement
opportunities for Retail Orders and
could attract additional retail order flow
to the Exchange.
RPI Orders
Rule 7.44–E(a)(4) currently provides
that an RPI Order consists of nondisplayed interest that would trade at
prices better than the PBB or PBO by at
least $0.001 and that is identified as
6 See
Rule 7.44–E(j).
Rule 7.44–E(a)(2) (defining RMO); Rules
7.44–E(a)(3) and 7.44–E(k) (describing Retail
Orders).
8 See Securities Exchange Act Release No. 96111
(October 20, 2022), 87 FR 64830 (October 26, 2022)
(SR–NYSEARCA–2022–70) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to Modify Rule 7.44–E).
9 The Exchange notes that, with the proposed
modification of the Program to provide Retail
Orders with price improvement at the midpoint or
better, the Exchange would no longer accept and
rank RPI Orders in increments smaller than $0.01,
as ordinarily prohibited by the Sub-Penny Rule.
Accordingly, the operation of the Program, as
proposed, would no longer be dependent on the
exemptive relief from the Sub-Penny Rule
previously granted by the Commission in
connection with its original approval of the
Program.
7 See
4 The Program was established on a pilot basis in
2013 and was approved by the Commission to
operate on a permanent basis in 2019. See
Securities Exchange Act Release No. 87350 (October
18, 2019), 84 FR 57106 (October 24, 2019) (SR–
NYSEArca–2019–63). In connection with the
Commission’s approval of the Program on a pilot
basis, the Commission granted the Exchange’s
request for exemptive relief from Rule 612 of
Regulation NMS, 17 CFR 242.612 (the ‘‘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 Securities
Exchange Act Release No. 71176 (December 23,
2013), 78 FR 79524 (December 30, 2013) (SR–
NYSEArca–2013–107).
5 See Rules 7.44–E(a)(1) (defining an RLP) and
7.44–E(a)(4) (defining RPI Order).
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such.10 RPI Orders are non-displayed
and are ranked Priority 3—Non-Display
Orders.11 Currently, Exchange systems
monitor whether RPI buy or sell interest
is eligible to trade with incoming Retail
Orders, and an RPI Order to buy (sell)
with a limit price at or below (above)
the PBB (PBO) or at or above (below) the
PBO (PBB) will not be eligible to trade
with incoming Retail Orders to sell
(buy), and such an RPI will cancel if a
Retail Order to sell (buy) trades with all
displayed liquidity at the PBB (PBO)
and then attempts to trade with the RPI.
If not cancelled, an RPI to buy (sell)
with a limit price that is no longer at or
below (above) the PBB (PBO) or at or
above (below) the PBO (PBB) will again
be eligible to trade with incoming Retail
Orders.12 An RPI Order may be an odd
lot, round lot, or mixed lot, may be
designated as either a Limit NonDisplayed Order or an MPL Order, and
will not interact with Type 2—Retail
Orders resting on the NYSE Arca
Book.13
To effect the proposed change that the
Program would function to provide
Retail Orders with price improvement at
the midpoint or better, the Exchange
proposes to modify RPI Orders to
function only as MPL Orders. An MPL
Order is defined in Rule 7.31–E(d)(3) as
a Limit Order to buy (sell) that is not
displayed and does not route, with a
working price at the lower (higher) of
the midpoint of the PBBO or its limit
price.14 The Exchange believes that
modifying RPI Orders to function as
MPL Orders would increase the
potential pool of midpoint-eligible
liquidity with which a Retail Order
10 Rule 7.44–E(a)(4)(C) currently provides that an
RLP may only enter an RPI in its RLP capacity for
securities to which it is assigned and is permitted,
but not required, to submit RPIs for securities to
which it is not assigned (and would be treated as
a non-RLP ETP Holder with respect to those
securities). As discussed below, the Exchange
proposes to delete current Rule 7.44–E(a)(4)(C) in
connection with the proposed elimination of the
RLP function.
11 See Rule 7.44–E(a)(4)(A).
12 See Rule 7.44–E(a)(4)(B).
13 See Rule 7.44–E(a)(4)(D).
14 An MPL Order may be entered during any
Exchange trading session, is ranked Priority 3—
Non-Display Orders, and does not participate in
auctions. See Rule 7.31–E(d)(3). An MPL Order to
buy (sell) must be designated with a limit price in
the minimum price variation for the security and
will be eligible to trade at its working price. See
Rule 7.31–E(d)(3)(A). If there is no PBB or PBO, or
if the PBBO is locked or crossed, an arriving or
resting MPL Order will not be eligible to trade until
the PBBO is not locked or crossed. See Rule 7.31–
E(d)(3)(B). An Aggressing MPL Order to buy (sell)
will trade at the working price of resting orders to
sell (buy) when such resting orders have a working
price at or below (above) the working price of the
MPL Order. Resting MPL Orders to buy (sell) will
trade against all Aggressing Orders to sell (buy)
priced at or below (above) the working price of the
MPL Order. See Rule 7.31–E(d)(3)(C).
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could interact. In addition, because all
RPI Orders would be priced at the
midpoint, the Retail Liquidity Identifier
would provide more deterministic
information about the potential liquidity
available to interact with Retail Orders
at the midpoint.
To effect this change, the Exchange
first proposes to modify current Rule
7.44–E(a)(4) (which, as discussed below,
would be renumbered as 7.44–E(a)(3))
and to combine current Rule 7.44–
E(a)(4)(A) into new Rule 7.44–E(a)(3),
with non-substantive changes to
improve the clarity of the rule text. Rule
7.44–E(a)(3), as proposed, would thus
define an RPI Order as an MPL Order
that is eligible to trade only with
incoming Retail Orders submitted by an
RMO. The Exchange also proposes to
add text to new Rule 7.44–E(a)(3) to
clarify that an RPI Order may not be
designated IOC, ALO, or with a
Minimum Trade Size (‘‘MTS’’)
Modifier.15 In addition, the Exchange
proposes to delete current Rules 7.44–
E(a)(4)(B) and 7.44–E(a)(4)(D) because
the text of those rules would no longer
be necessary.16 Specifically, the
provisions of Rule 7.44–E(a)(4)(B)
would no longer apply in light of the
Exchange’s proposal to modify RPI
Orders to function as MPL Orders and
the provisions of Rule 7.44–E(a)(4)(D)
are either duplicative of proposed Rule
7.44–E(a)(3) (as renumbered) or no
longer applicable based on the proposed
elimination Type 2 Retail Orders (as
further discussed below).17
The Exchange also proposes to modify
current Rule 7.44–E(j) (to be
renumbered as Rule 7.44–E(e), as
discussed below), which describes the
Retail Liquidity Identifier that is
currently disseminated via the
Consolidated Quotation System or the
UTP Quote Data Feed, as applicable,
15 See Rules 7.31–E(b)(2) (providing that an order
with an IOC Modifier will be traded in whole or in
part on the NYSE Arca Marketplace as soon as such
order is received, with any untraded quantity
cancelled); 7.31–E(e)(2) (providing that an ALO
Order is a Non-Routable Limit Order that, unless it
receives price improvement, will not remove
liquidity from the NYSE Arca Book); 7.31–E(i)(3)
(providing that the MTS Modifier designates an
order with a minimum trade size and an order with
an MTS Modifier will be rejected if the MTS is less
than a round lot or if the MTS is larger than the
size of the order).
16 The proposed deletion of Rule 7.44–E(a)(4)(C)
is discussed below in connection with the proposed
elimination of RLPs.
17 The Exchange also proposes to delete text in
Rule 7.44–E(a)(4)(D) providing that an RPI Order
may be an odd lot, round lot, or mixed lot as
extraneous, because Exchange rules provide that
orders are accepted in any size unless otherwise
provided. See Rule 7.38–E(a). The Exchange further
proposes a conforming change to Rule 7.38–E(a) to
delete its reference to Rule 7.44–E, as Rule 7.44–E
does not specify that an order may not be entered
as an odd lot or mixed lot.
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5949
when RPI interest priced at least $0.001
better than the PBB or PBO for a
particular security is available in
Exchange systems. Consistent with the
proposed change to modify RPI Orders
to operate as MPL Orders only, the
Exchange proposes that new Rule 7.44–
E(e) would provide that the Retail
Liquidity Identifier would be
disseminated when RPI interest is
eligible to trade at the midpoint of the
PBBO. The dissemination of the Retail
Liquidity Identifier would thus alert
RMOs to the availability of trading
opportunities at the midpoint of the
PBBO.
Retail Orders
Current Rule 7.44–E(a)(3), which as
described below would be renumbered
as Rule 7.44–E(a)(2), defines a Retail
Order as an agency order or a riskless
principal order that meets the criteria of
FINRA Rule 5320.03 that originates
from a natural person and is submitted
to the Exchange by an 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 other computerized methodology.
Current Rule 7.44–E(a)(3) also provides
that a Retail Order will operate in
accordance with Rule 7.44–E(k) and
may be an odd lot, round lot, or mixed
lot.18
Rule 7.44–E(k) currently describes
how RMOs can designate how a Retail
Order would interact with available
contra-side interest and provides for
Type 1—Retail Orders and Type 2—
Retail Orders. Type 1—Retail Orders are
Limit IOC Orders to buy (sell) that will
trade only with available RPI Orders to
sell (buy) and all other orders to sell
(buy) with a working price below
(above) the PBO (PBB) on the NYSE
Arca Book and will not route. The
quantity of a Type 1—Retail Order to
buy (sell) that does not trade with
eligible orders to sell (buy) will be
immediately and automatically
cancelled. Type 2—Retail Orders may
be Limit Orders designated IOC or Day
or Market Orders. A Type 2—Retail
Order IOC is a Limit IOC Order to buy
(sell) that will trade first with available
RPI Orders to sell (buy) and all other
orders to sell (buy) with a working price
below (above) the PBO (PBB) on the
NYSE Arca Book. Any remaining
quantity of the Retail Order will trade
with orders to sell (buy) on the NYSE
Arca Book at prices equal to or above
18 Consistent with the proposed change to Rule
7.44–E(a)(4)(D) regarding odd lots, round lots, or
mixed lots, see id., the Exchange also proposes to
delete the similar provision in current Rule 7.44–
E(a)(3) for the same reasons.
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(below) the PBO (PBB) and will be
traded as a Limit IOC Order and will not
route. A Type 2—Retail Order Day is a
Limit Order to buy (sell) that will trade
first with available RPI Orders to sell
(buy) and all other orders to sell (buy)
with a working price below (above) the
PBO (PBB) on the NYSE Arca Book. Any
remaining quantity of the Retail Order,
if marketable, will trade with orders to
sell (buy) on the NYSE Arca Book or
route, and if non-marketable, will be
ranked in the NYSE Arca Book as a
Limit Order. Finally, a Type 2—Retail
Order Market is a Market Order that will
trade first with available RPI Orders to
sell (buy) and all other orders to sell
(buy) with a working price below
(above) the NBO (NBB). Any remaining
quantity of the Retail Order will
function as a Market Order.
To effect the change that Retail Orders
in the Program would be eligible to
trade at the midpoint or better, the
Exchange proposes to amend Rule 7.44–
E(k) (which is proposed to be
renumbered as Rule 7.44–E(f)). In new
Rule 7.44–E(f), the Exchange proposes
to both rename the section ‘‘Retail Order
Operation’’ rather than ‘‘Retail Order
Designation’’ and reflect the Exchange’s
proposal to offer only one type of Retail
Order, which, as noted above, would
function as an MPL Order.19 The
Exchange proposes to delete text in
current Rule 7.44–E(k) providing that an
RMO may designate how a Retail Order
would trade with contra-side interest, as
such text would no longer apply with
only one type of Retail Order. The
Exchange also proposes to move text in
current Rule 7.44–E(k)(1) into new Rule
7.44–E(f) and to modify the description
of a Type 1 Retail Order in current Rule
7.44–E(k)(1) to describe the only Retail
Order that would be available, as
proposed.
New Rule 7.44–E(f) would thus
provide that a Retail Order to buy (sell)
would be an MPL IOC Order with a
working price at the lower (higher) of
the midpoint of the PBBO or its limit
price and that will trade only with
available RPI Orders to sell (buy) and all
other orders to sell (buy) with a working
price below (above) or equal to the
midpoint of the PBBO on the NYSE
Arca Book and will not route. New Rule
7.44–E(f) would also continue to
provide that the quantity of a Retail
Order to buy (sell) that does not trade
with eligible orders to sell (buy) will be
immediately and automatically
cancelled. The Exchange proposes to
delete references to Type 1 Retail Orders
in current Rule 7.44–E(k)(1), as the
proposed change would result in only
19 See
note 14, supra and accompanying text.
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one type of Retail Order. The Exchange
also proposes to update the remainder
of current Rule 7.44–E(k)(1) such that
new Rule 7.44–E(f) would provide that
the quantity of a Retail Order to buy
(sell) that does not trade with eligible
orders to sell (buy) will be rejected on
arrival if there is no PBBO or the PBBO
is locked or crossed. The Exchange
believes this proposed change would
simplify the Program by offering only
one type of Retail Order and, similar to
the proposed change to RPI Orders,
would modify the Program to provide
price improvement opportunities for
Retail Orders priced at the midpoint or
better.
The Exchange further proposes to add
new text to new Rule 7.44–E(f) to
provide additional options to ETP
Holders with respect to Retail Orders.
First, the Exchange proposes to add text
to new Rule 7.44–E(f) providing that a
Retail Order may be designated with an
MTS Modifier, at the ETP Holder’s
option.20 The Exchange also proposes to
add text to new Rule 7.44–E(f) to
introduce a new ‘‘No Retail Modifier’’
for use at an ETP Holder’s discretion.
Proposed Rule 7.44–E(f) would provide
that the No Retail Modifier is available
for use with MPL Orders and MPL–ALO
Orders only, and orders designated with
the No Retail Modifier would not trade
with Retail Orders.21 Specifically, as
proposed, an incoming Retail Order
would not interact with an MPL Order
or MPL–ALO Order designated with the
No Retail Modifier and may trade
through such MPL Order or MPL–ALO
Order.
The Exchange also proposes to delete
current Rule 7.44–E(k)(2), which
currently describes Type 2 Retail
Orders, as such order types would no
longer be offered, as proposed.22
20 Consistent with this proposed change, the
Exchange proposes to delete text in Rule 7.44–E(k)
currently providing that a Retail Order may not be
designated with a minimum trade size.
21 The Exchange also proposes to modify Rule
7.31–E(d)(3), which defines MPL Orders, to add
new subparagraph (G) regarding the No Retail
Modifier. Subparagraph (G) would, consistent with
the proposed addition to new Rule 7.44–E(f),
provide that MPL Orders and MPL–ALO Orders
may be designated with a No Retail Modifier and
that orders so designated would not trade with
Retail Orders. The Exchange proposes to offer the
No Retail Modifier to provide ETP Holders with the
ability to designate their MPL Orders and MPL–
ALO Orders to not interact with Retail Orders,
which some ETP Holders may choose to do based
on their desired trading strategy.
22 The Exchange also proposes a conforming
change in the final paragraph of new Rule 7.44–E(g)
to reflect the proposed elimination of Type 2 Retail
Orders. The Exchange proposes to delete the second
sentence in the final paragraph of current Rule
7.44–E(l), which relates to Type 2 Market Retail
Orders, as such rule text would no longer have
application following the elimination of Type 2
Retail Orders.
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Finally, the Exchange proposes to
modify Rule 7.44–E(l) (proposed to be
renumbered as Rule 7.44–E(g)), which
currently describes priority and order
allocation of RPI Orders and Retail
Orders, to reflect the changes described
above. Under current Rule 7.44–E(l), RPI
Orders in the same security will be
ranked together with all other interest
ranked as Priority 3—Non-Display
Orders. Odd-lot orders ranked as
Priority 2—Display Orders will have
priority over orders ranked Priority 3—
Non-Display Orders at each price. Any
remaining unexecuted RPI interest will
remain available to trade with other
incoming Retail Orders. Currently, any
remaining unfilled quantity of the Retail
Order will cancel, execute, or post to the
NYSE Arca Book in accordance with
Rule 7.44–E(k).
The Exchange proposes to delete text
from the last sentence of the first
paragraph under current Rule 7.44–E(l)
referring to an unfilled quantity of a
Retail Order executing or posting to the
NYSE Arca Book. The Exchange
proposes to eliminate this text because
Retail Orders would, as proposed,
function as IOC orders only, and any
remaining unfilled quantity of a Retail
Order would thus be cancelled. The
Exchange also proposes to delete the
examples currently provided in Rule
7.44–E(l) to illustrate priority and order
allocation of RPI Orders and Retail
Orders. With the changes proposed in
this filing to modify RPI Orders and
Retail Orders to function only as MPL
Orders and to offer only one type of
Retail Order, RPI Orders and Retail
Orders would simply trade according to
price/time priority as described in Rule
7.36–E. The Exchange thus believes that
new Rule 7.44–E(g) clearly describes the
ranking and priority of RPI Orders and
Retail Orders and that no examples are
needed to further illustrate how such
orders would trade. The Exchange
believes that removing unnecessary
examples from current Rule 7.44–E(l)
would improve the clarity of the rule.
Proposed Elimination of Retail Liquidity
Providers
NYSE Arca Rules 7.44–E(a)(1), 7.44–
E(a)(4)(C), and 7.44–E(c) through (i)
currently set forth rules pertaining to
RLPs:
• Rule 7.44–E(a)(1) provides that
RLPs are ETP Holders that are approved
by the Exchange and required to submit
RPIs.
• Rule 7.44–E(a)(4)(C) describes how
RLPs may enter RPIs for their assigned
and non-assigned securities.
• Rule 7.44–E(c) describes how an
ETP Holder may qualify to become an
RLP.
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• Rule 7.44–E(d) sets forth the
process by which an ETP Holder may
apply to become an RLP, subject to the
Exchange’s approval of such
application.
• Rule 7.44–E(e) provides for an
RLP’s voluntary withdrawal from RLP
status.
• Rule 7.44–E(f) sets forth an RLP’s
obligations with respect to entering
RPIs.
• Rule 7.44–E(g) describes action the
Exchange may take with respect to an
RLP that fails to meet the requirements
of Rule 7.44–E.
• Rule 7.44–E(i) describes the process
through which an ETP Holder may
appeal the Exchange’s decision to
disapprove or disqualify it as an RLP.
The Exchange proposes to modify the
Program to eliminate the role of RLPs,
as there are no ETP Holders currently
registered as RLPs. Accordingly, the
Exchange does not believe that
modifying Rule 7.44–E to remove text
providing for the RLP function would
impact the effectiveness of the Program
and notes that other exchanges currently
operate retail price improvement
programs that do not include an RLP
function.23 To effect this change, the
Exchange proposes to delete Rules 7.44–
E(a)(1), 7.44–E(a)(4)(C), and 7.44–E(c)
through (g) in their entirety and to
modify Rule 7.44–E(i) to remove text
relating to the disapproval or
disqualification of an RLP.24 The
Exchange also proposes to renumber
current Rules 7.44–E(a)(2) through (4) as
Rules 7.44–E(a)(1) through (3) to reflect
the deletion of current Rule 7.44–E(a)(1)
and to renumber Rules 7.44–E(h)
through (l) as Rules 7.44–E(c) through
(g) to reflect the proposed deletion of
current Rules 7.44–E(c) through (g).25
23 See, e.g., Investors Exchange LLC (‘‘IEX’’) Rule
11.232 (describing IEX Retail Price Improvement
Program); Nasdaq BX, Inc. (‘‘Nasdaq BX’’) Rule
4780 (describing Nasdaq BX Retail Price
Improvement Program).
24 In Rule 7.44–E(i) (which is proposed to be
renumbered as Rule 7.44–E(d)), the Exchange
proposes to delete references to Rules 7.44–E(d) and
7.44–E(g), which currently provide for the process
by which an ETP Holder may apply to become an
RLP and actions the Exchange may take with
respect to an RLP that fails to meet the requirements
of Rule 7.44–E, respectively. The Exchange also
proposes a conforming change to replace the
reference to Rule 7.44–E(h) with a reference to Rule
7.44–E(c) to reflect the proposed renumbering of
Rules 7.44–E(h) through (l). The Exchange also
proposes to delete current Rule 7.44–E(i)(1)(A)
(which describes the reassignment of securities
from an RLP that has been disqualified) because the
rule would no longer have application. The
Exchange further proposes to delete the defined
term ‘‘appellant’’ in current Rule 7.44–E(i)(1), as
such term would no longer be used following the
elimination of Rule 7.44–E(i)(1)(A).
25 The Exchange also proposes conforming
changes to renumbered Rules 7.44–E(a)(2) (Retail
Order) and 7.44–E(g) (Priority and Order
VerDate Sep<11>2014
17:30 Jan 27, 2023
Jkt 259001
The Exchange believes that the
proposed change would simplify and
add clarity to its Rules by removing the
description of an unutilized aspect of
the Program.
Subject to approval of this proposed
rule change, the Exchange will
implement this change no later than in
the second quarter of 2023 and
announce the implementation date by
Trader Update.
2. Statutory Basis
The proposed rule change is
consistent with section 6(b) of the Act,26
in general, and furthers the objectives of
section 6(b)(5),27 in particular, because
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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.
The Exchange believes that the
proposed changes to both Retail Orders
and RPI Orders in the Program would
promote just and equitable principles of
trade and remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
system because modifying RPI Orders
and Retail Orders to function as MPL
Orders would further the purpose of the
Program by providing Retail Orders
with price improvement opportunities
at the midpoint or better. The Exchange
believes that providing more
deterministic price improvement
opportunities for Retail Orders would
attract additional retail order flow to the
Exchange. The Exchange also believes
that the proposed change to the Program
would allow it to compete with other
exchanges that operate retail price
improvement programs that are priced
at the midpoint.28 The Exchange
believes that the proposed change to
streamline how Retail Orders function
would also promote just and equitable
principles of trade and remove
impediments to, and perfect the
mechanism of, a free and open market
Allocation) to update references to Rule 7.44–E(k)
to refer instead to Rule 7.44–E(f), to account for the
proposed renumbering described above in
connection with the elimination of RLPs.
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
28 See, e.g., IEX Rule 11.232 (providing for Retail
Price Improvement Program with Retail Order
defined as a Discretionary Peg order or Midpoint
Peg order with a Time-in-Force of IOC or FOK, that
is only eligible to trade at a price between the NBB
and the Midpoint Price (for bids) or between the
NBO and the Midpoint Price (for offers)).
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
5951
and a national market system by
simplifying the operation of the
Program.
The Exchange also believes that the
proposed change to eliminate RLPs as a
class under the Program would promote
just and equitable principles of trade,
remove impediments to, and perfect the
mechanism of, a free and open market
and a national market system, and
protect investors and the public interest
because there are no ETP Holders
currently registered as RLPs and,
accordingly, deleting rule text providing
for RLPs would not have any impact on
any existing ETP Holders. Moreover,
because any ETP Holder may enter RPI
Orders, eliminating RLPs as a class
would not impact the ability of ETP
Holders to enter RPI Orders on the
Exchange. The Exchange further notes
that other exchanges currently operate
retail price improvement programs that
do not include RLPs.29
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
change could promote competition by
modifying RPI Orders and Retail Orders
to function as MPL Orders, thereby
encouraging additional trading
opportunities at the midpoint and
supporting price improvement
opportunities at the midpoint of the
PBBO or better for retail investors. The
Exchange also believes that the
proposed change to eliminate the RLP
function would not impose any burden
on competition, as no ETP Holders are
currently registered as RLPs. The
Exchange further believes that the
proposed change could promote
competition between the Exchange and
other exchanges that offer retail price
improvement programs, including an
exchange that operates a retail price
improvement program intended to
provide additional trading opportunities
at the midpoint.30
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
29 See
note 23, supra.
note 28, supra; see also, e.g., Nasdaq BX
Rule 4780 (describing BX’s Retail Price
Improvement Program); Cboe BYX Exchange, Inc.
(‘‘BYX’’) Rule 11.24 (describing BYX’s Retail Price
Improvement Program).
30 See
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Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Notices
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 (i)
as the Commission may designate up to
90 days of such date 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 shall:
(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.
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–
NYSEARCA–2023–06 on the subject
line.
lotter on DSK11XQN23PROD with NOTICES1
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–NYSEARCA–2023–06. 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
10:00 a.m. and 3:00 p.m. Copies of the
VerDate Sep<11>2014
19:53 Jan 27, 2023
Jkt 259001
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–NYSEARCA–2023–06 and
should be submitted on or before
February 21, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–01743 Filed 1–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–187, OMB Control No.
3235–0211]
Submission for OMB Review;
Comment Request; Extension: Rule
18f–1 and Form N–18f–1
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 350l–3520), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
Rule 18f–1 (17 CFR 270.18f–1)
enables a registered open-end
management investment company
(‘‘fund’’) that may redeem its securities
in-kind, by making a one-time election,
to commit to make cash redemptions
pursuant to certain requirements
without violating section 18(f) of the
Investment Company Act of 1940 (15
U.S.C. 80a–18(f)). A fund relying on the
rule must file Form N–18F–1 (17 CFR
274.51) to notify the Commission of this
election. The Commission staff
estimates that 12 funds file Form N–
18F–1 annually, and that each response
takes one hour. Based on these
estimates, the total annual burden hours
associated with the rule is estimated to
be 12 hours. The estimated burden
hours associated with rule 18f–1 and
31 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00103
Fmt 4703
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Form 18F–1 have decreased by 10 hours
from the current allocation of 22 hours.
This decrease is due to a decrease in the
estimated number of investment
companies filing Form N–18F–1
annually. There is no external cost
associated with this collection of
information.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules. The
collection of information required by
rule 18f–1 is necessary to obtain the
benefits of the rule. Responses to the
collection of information will not be
kept confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice by March 1, 2023 to (i)
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: January 24, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–01741 Filed 1–27–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–404, OMB Control No.
3235–0461]
Submission for OMB Review;
Comment Request; Extension: Rule
602
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Notices]
[Pages 5948-5952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01743]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96741; File No. SR-NYSEARCA-2023-06]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend Rule 7.44-E Relating to the Retail
Liquidity Program
January 24, 2023.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on January 10, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 Rule 7.44-E relating to the Retail
Liquidity Program. The proposed rule change is available on the
Exchange's website at www.nyse.com, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.44-E, which sets forth the
Exchange's Retail Liquidity Program (the ``Program'').\4\ The purpose
of the Program is to attract retail order flow to the Exchange and
allow such order flow to receive potential price improvement. Rule
7.44-E currently provides for a class of market participant called
Retail Liquidity Providers (``RLPs'') who, along with non-RLP ETP
Holders, are able to provide potential price improvement to retail
investor orders in the form of a non-displayed order that is priced
better than the best protected bid or offer, called a Retail Price
Improvement Order (``RPI Order'').\5\ When there is an RPI Order in a
particular security, the Exchange disseminates an indicator, known as
the Retail Liquidity Identifier, that such interest exists.\6\ Retail
Member Organizations (``RMOs'') can submit a Retail Order to the
Exchange, which interacts, to the extent possible, with available
contra-side RPI Orders and then may interact with other liquidity on
the Exchange or elsewhere, depending on the Retail Order's
instructions.\7\ The segmentation in the Program allows retail order
flow to receive potential price improvement as a result of their order
flow being deemed more desirable by liquidity providers. The Exchange
recently modified the Program to be available for all securities traded
on the Exchange.\8\
---------------------------------------------------------------------------
\4\ The Program was established on a pilot basis in 2013 and was
approved by the Commission to operate on a permanent basis in 2019.
See Securities Exchange Act Release No. 87350 (October 18, 2019), 84
FR 57106 (October 24, 2019) (SR-NYSEArca-2019-63). In connection
with the Commission's approval of the Program on a pilot basis, the
Commission granted the Exchange's request for exemptive relief from
Rule 612 of Regulation NMS, 17 CFR 242.612 (the ``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 Securities Exchange Act
Release No. 71176 (December 23, 2013), 78 FR 79524 (December 30,
2013) (SR-NYSEArca-2013-107).
\5\ See Rules 7.44-E(a)(1) (defining an RLP) and 7.44-E(a)(4)
(defining RPI Order).
\6\ See Rule 7.44-E(j).
\7\ See Rule 7.44-E(a)(2) (defining RMO); Rules 7.44-E(a)(3) and
7.44-E(k) (describing Retail Orders).
\8\ See Securities Exchange Act Release No. 96111 (October 20,
2022), 87 FR 64830 (October 26, 2022) (SR-NYSEARCA-2022-70) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change to
Modify Rule 7.44-E).
---------------------------------------------------------------------------
As described in further detail below, the Exchange now proposes to
substantively amend the Program to (1) modify the Program to provide
Retail Orders with price improvement at the midpoint or better by
proposing that both RPI Orders and Retail Orders would function as Mid-
Point Liquidity Orders (``MPL Orders'') and (2) eliminate the role of
RLPs.\9\
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\9\ The Exchange notes that, with the proposed modification of
the Program to provide Retail Orders with price improvement at the
midpoint or better, the Exchange would no longer accept and rank RPI
Orders in increments smaller than $0.01, as ordinarily prohibited by
the Sub-Penny Rule. Accordingly, the operation of the Program, as
proposed, would no longer be dependent on the exemptive relief from
the Sub-Penny Rule previously granted by the Commission in
connection with its original approval of the Program.
---------------------------------------------------------------------------
Proposed Midpoint Program
The Exchange proposes to modify the Program to provide Retail
Orders with price improvement at the midpoint or better, which change
the Exchange believes would further the purpose of the Program to offer
price improvement opportunities to retail order flow. The Exchange
believes that the proposed change would provide more deterministic
price improvement opportunities for Retail Orders and could attract
additional retail order flow to the Exchange.
RPI Orders
Rule 7.44-E(a)(4) currently provides that an RPI Order consists of
non-displayed interest that would trade at prices better than the PBB
or PBO by at least $0.001 and that is identified as
[[Page 5949]]
such.\10\ RPI Orders are non-displayed and are ranked Priority 3--Non-
Display Orders.\11\ Currently, Exchange systems monitor whether RPI buy
or sell interest is eligible to trade with incoming Retail Orders, and
an RPI Order to buy (sell) with a limit price at or below (above) the
PBB (PBO) or at or above (below) the PBO (PBB) will not be eligible to
trade with incoming Retail Orders to sell (buy), and such an RPI will
cancel if a Retail Order to sell (buy) trades with all displayed
liquidity at the PBB (PBO) and then attempts to trade with the RPI. If
not cancelled, an RPI to buy (sell) with a limit price that is no
longer at or below (above) the PBB (PBO) or at or above (below) the PBO
(PBB) will again be eligible to trade with incoming Retail Orders.\12\
An RPI Order may be an odd lot, round lot, or mixed lot, may be
designated as either a Limit Non-Displayed Order or an MPL Order, and
will not interact with Type 2--Retail Orders resting on the NYSE Arca
Book.\13\
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\10\ Rule 7.44-E(a)(4)(C) currently provides that an RLP may
only enter an RPI in its RLP capacity for securities to which it is
assigned and is permitted, but not required, to submit RPIs for
securities to which it is not assigned (and would be treated as a
non-RLP ETP Holder with respect to those securities). As discussed
below, the Exchange proposes to delete current Rule 7.44-E(a)(4)(C)
in connection with the proposed elimination of the RLP function.
\11\ See Rule 7.44-E(a)(4)(A).
\12\ See Rule 7.44-E(a)(4)(B).
\13\ See Rule 7.44-E(a)(4)(D).
---------------------------------------------------------------------------
To effect the proposed change that the Program would function to
provide Retail Orders with price improvement at the midpoint or better,
the Exchange proposes to modify RPI Orders to function only as MPL
Orders. An MPL Order is defined in Rule 7.31-E(d)(3) as a Limit Order
to buy (sell) that is not displayed and does not route, with a working
price at the lower (higher) of the midpoint of the PBBO or its limit
price.\14\ The Exchange believes that modifying RPI Orders to function
as MPL Orders would increase the potential pool of midpoint-eligible
liquidity with which a Retail Order could interact. In addition,
because all RPI Orders would be priced at the midpoint, the Retail
Liquidity Identifier would provide more deterministic information about
the potential liquidity available to interact with Retail Orders at the
midpoint.
---------------------------------------------------------------------------
\14\ An MPL Order may be entered during any Exchange trading
session, is ranked Priority 3--Non-Display Orders, and does not
participate in auctions. See Rule 7.31-E(d)(3). An MPL Order to buy
(sell) must be designated with a limit price in the minimum price
variation for the security and will be eligible to trade at its
working price. See Rule 7.31-E(d)(3)(A). If there is no PBB or PBO,
or if the PBBO is locked or crossed, an arriving or resting MPL
Order will not be eligible to trade until the PBBO is not locked or
crossed. See Rule 7.31-E(d)(3)(B). An Aggressing MPL Order to buy
(sell) will trade at the working price of resting orders to sell
(buy) when such resting orders have a working price at or below
(above) the working price of the MPL Order. Resting MPL Orders to
buy (sell) will trade against all Aggressing Orders to sell (buy)
priced at or below (above) the working price of the MPL Order. See
Rule 7.31-E(d)(3)(C).
---------------------------------------------------------------------------
To effect this change, the Exchange first proposes to modify
current Rule 7.44-E(a)(4) (which, as discussed below, would be
renumbered as 7.44-E(a)(3)) and to combine current Rule 7.44-E(a)(4)(A)
into new Rule 7.44-E(a)(3), with non-substantive changes to improve the
clarity of the rule text. Rule 7.44-E(a)(3), as proposed, would thus
define an RPI Order as an MPL Order that is eligible to trade only with
incoming Retail Orders submitted by an RMO. The Exchange also proposes
to add text to new Rule 7.44-E(a)(3) to clarify that an RPI Order may
not be designated IOC, ALO, or with a Minimum Trade Size (``MTS'')
Modifier.\15\ In addition, the Exchange proposes to delete current
Rules 7.44-E(a)(4)(B) and 7.44-E(a)(4)(D) because the text of those
rules would no longer be necessary.\16\ Specifically, the provisions of
Rule 7.44-E(a)(4)(B) would no longer apply in light of the Exchange's
proposal to modify RPI Orders to function as MPL Orders and the
provisions of Rule 7.44-E(a)(4)(D) are either duplicative of proposed
Rule 7.44-E(a)(3) (as renumbered) or no longer applicable based on the
proposed elimination Type 2 Retail Orders (as further discussed
below).\17\
---------------------------------------------------------------------------
\15\ See Rules 7.31-E(b)(2) (providing that an order with an IOC
Modifier will be traded in whole or in part on the NYSE Arca
Marketplace as soon as such order is received, with any untraded
quantity cancelled); 7.31-E(e)(2) (providing that an ALO Order is a
Non-Routable Limit Order that, unless it receives price improvement,
will not remove liquidity from the NYSE Arca Book); 7.31-E(i)(3)
(providing that the MTS Modifier designates an order with a minimum
trade size and an order with an MTS Modifier will be rejected if the
MTS is less than a round lot or if the MTS is larger than the size
of the order).
\16\ The proposed deletion of Rule 7.44-E(a)(4)(C) is discussed
below in connection with the proposed elimination of RLPs.
\17\ The Exchange also proposes to delete text in Rule 7.44-
E(a)(4)(D) providing that an RPI Order may be an odd lot, round lot,
or mixed lot as extraneous, because Exchange rules provide that
orders are accepted in any size unless otherwise provided. See Rule
7.38-E(a). The Exchange further proposes a conforming change to Rule
7.38-E(a) to delete its reference to Rule 7.44-E, as Rule 7.44-E
does not specify that an order may not be entered as an odd lot or
mixed lot.
---------------------------------------------------------------------------
The Exchange also proposes to modify current Rule 7.44-E(j) (to be
renumbered as Rule 7.44-E(e), as discussed below), which describes the
Retail Liquidity Identifier that is currently disseminated via the
Consolidated Quotation System or the UTP Quote Data Feed, as
applicable, when RPI interest priced at least $0.001 better than the
PBB or PBO for a particular security is available in Exchange systems.
Consistent with the proposed change to modify RPI Orders to operate as
MPL Orders only, the Exchange proposes that new Rule 7.44-E(e) would
provide that the Retail Liquidity Identifier would be disseminated when
RPI interest is eligible to trade at the midpoint of the PBBO. The
dissemination of the Retail Liquidity Identifier would thus alert RMOs
to the availability of trading opportunities at the midpoint of the
PBBO.
Retail Orders
Current Rule 7.44-E(a)(3), which as described below would be
renumbered as Rule 7.44-E(a)(2), defines a Retail Order as an agency
order or a riskless principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person and is submitted to
the Exchange by an 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 other computerized
methodology. Current Rule 7.44-E(a)(3) also provides that a Retail
Order will operate in accordance with Rule 7.44-E(k) and may be an odd
lot, round lot, or mixed lot.\18\
---------------------------------------------------------------------------
\18\ Consistent with the proposed change to Rule 7.44-E(a)(4)(D)
regarding odd lots, round lots, or mixed lots, see id., the Exchange
also proposes to delete the similar provision in current Rule 7.44-
E(a)(3) for the same reasons.
---------------------------------------------------------------------------
Rule 7.44-E(k) currently describes how RMOs can designate how a
Retail Order would interact with available contra-side interest and
provides for Type 1--Retail Orders and Type 2--Retail Orders. Type 1--
Retail Orders are Limit IOC Orders to buy (sell) that will trade only
with available RPI Orders to sell (buy) and all other orders to sell
(buy) with a working price below (above) the PBO (PBB) on the NYSE Arca
Book and will not route. The quantity of a Type 1--Retail Order to buy
(sell) that does not trade with eligible orders to sell (buy) will be
immediately and automatically cancelled. Type 2--Retail Orders may be
Limit Orders designated IOC or Day or Market Orders. A Type 2--Retail
Order IOC is a Limit IOC Order to buy (sell) that will trade first with
available RPI Orders to sell (buy) and all other orders to sell (buy)
with a working price below (above) the PBO (PBB) on the NYSE Arca Book.
Any remaining quantity of the Retail Order will trade with orders to
sell (buy) on the NYSE Arca Book at prices equal to or above
[[Page 5950]]
(below) the PBO (PBB) and will be traded as a Limit IOC Order and will
not route. A Type 2--Retail Order Day is a Limit Order to buy (sell)
that will trade first with available RPI Orders to sell (buy) and all
other orders to sell (buy) with a working price below (above) the PBO
(PBB) on the NYSE Arca Book. Any remaining quantity of the Retail
Order, if marketable, will trade with orders to sell (buy) on the NYSE
Arca Book or route, and if non-marketable, will be ranked in the NYSE
Arca Book as a Limit Order. Finally, a Type 2--Retail Order Market is a
Market Order that will trade first with available RPI Orders to sell
(buy) and all other orders to sell (buy) with a working price below
(above) the NBO (NBB). Any remaining quantity of the Retail Order will
function as a Market Order.
To effect the change that Retail Orders in the Program would be
eligible to trade at the midpoint or better, the Exchange proposes to
amend Rule 7.44-E(k) (which is proposed to be renumbered as Rule 7.44-
E(f)). In new Rule 7.44-E(f), the Exchange proposes to both rename the
section ``Retail Order Operation'' rather than ``Retail Order
Designation'' and reflect the Exchange's proposal to offer only one
type of Retail Order, which, as noted above, would function as an MPL
Order.\19\ The Exchange proposes to delete text in current Rule 7.44-
E(k) providing that an RMO may designate how a Retail Order would trade
with contra-side interest, as such text would no longer apply with only
one type of Retail Order. The Exchange also proposes to move text in
current Rule 7.44-E(k)(1) into new Rule 7.44-E(f) and to modify the
description of a Type 1 Retail Order in current Rule 7.44-E(k)(1) to
describe the only Retail Order that would be available, as proposed.
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\19\ See note 14, supra and accompanying text.
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New Rule 7.44-E(f) would thus provide that a Retail Order to buy
(sell) would be an MPL IOC Order with a working price at the lower
(higher) of the midpoint of the PBBO or its limit price and that will
trade only with available RPI Orders to sell (buy) and all other orders
to sell (buy) with a working price below (above) or equal to the
midpoint of the PBBO on the NYSE Arca Book and will not route. New Rule
7.44-E(f) would also continue to provide that the quantity of a Retail
Order to buy (sell) that does not trade with eligible orders to sell
(buy) will be immediately and automatically cancelled. The Exchange
proposes to delete references to Type 1 Retail Orders in current Rule
7.44-E(k)(1), as the proposed change would result in only one type of
Retail Order. The Exchange also proposes to update the remainder of
current Rule 7.44-E(k)(1) such that new Rule 7.44-E(f) would provide
that the quantity of a Retail Order to buy (sell) that does not trade
with eligible orders to sell (buy) will be rejected on arrival if there
is no PBBO or the PBBO is locked or crossed. The Exchange believes this
proposed change would simplify the Program by offering only one type of
Retail Order and, similar to the proposed change to RPI Orders, would
modify the Program to provide price improvement opportunities for
Retail Orders priced at the midpoint or better.
The Exchange further proposes to add new text to new Rule 7.44-E(f)
to provide additional options to ETP Holders with respect to Retail
Orders. First, the Exchange proposes to add text to new Rule 7.44-E(f)
providing that a Retail Order may be designated with an MTS Modifier,
at the ETP Holder's option.\20\ The Exchange also proposes to add text
to new Rule 7.44-E(f) to introduce a new ``No Retail Modifier'' for use
at an ETP Holder's discretion. Proposed Rule 7.44-E(f) would provide
that the No Retail Modifier is available for use with MPL Orders and
MPL-ALO Orders only, and orders designated with the No Retail Modifier
would not trade with Retail Orders.\21\ Specifically, as proposed, an
incoming Retail Order would not interact with an MPL Order or MPL-ALO
Order designated with the No Retail Modifier and may trade through such
MPL Order or MPL-ALO Order.
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\20\ Consistent with this proposed change, the Exchange proposes
to delete text in Rule 7.44-E(k) currently providing that a Retail
Order may not be designated with a minimum trade size.
\21\ The Exchange also proposes to modify Rule 7.31-E(d)(3),
which defines MPL Orders, to add new subparagraph (G) regarding the
No Retail Modifier. Subparagraph (G) would, consistent with the
proposed addition to new Rule 7.44-E(f), provide that MPL Orders and
MPL-ALO Orders may be designated with a No Retail Modifier and that
orders so designated would not trade with Retail Orders. The
Exchange proposes to offer the No Retail Modifier to provide ETP
Holders with the ability to designate their MPL Orders and MPL-ALO
Orders to not interact with Retail Orders, which some ETP Holders
may choose to do based on their desired trading strategy.
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The Exchange also proposes to delete current Rule 7.44-E(k)(2),
which currently describes Type 2 Retail Orders, as such order types
would no longer be offered, as proposed.\22\
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\22\ The Exchange also proposes a conforming change in the final
paragraph of new Rule 7.44-E(g) to reflect the proposed elimination
of Type 2 Retail Orders. The Exchange proposes to delete the second
sentence in the final paragraph of current Rule 7.44-E(l), which
relates to Type 2 Market Retail Orders, as such rule text would no
longer have application following the elimination of Type 2 Retail
Orders.
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Finally, the Exchange proposes to modify Rule 7.44-E(l) (proposed
to be renumbered as Rule 7.44-E(g)), which currently describes priority
and order allocation of RPI Orders and Retail Orders, to reflect the
changes described above. Under current Rule 7.44-E(l), RPI Orders in
the same security will be ranked together with all other interest
ranked as Priority 3--Non-Display Orders. Odd-lot orders ranked as
Priority 2--Display Orders will have priority over orders ranked
Priority 3--Non-Display Orders at each price. Any remaining unexecuted
RPI interest will remain available to trade with other incoming Retail
Orders. Currently, any remaining unfilled quantity of the Retail Order
will cancel, execute, or post to the NYSE Arca Book in accordance with
Rule 7.44-E(k).
The Exchange proposes to delete text from the last sentence of the
first paragraph under current Rule 7.44-E(l) referring to an unfilled
quantity of a Retail Order executing or posting to the NYSE Arca Book.
The Exchange proposes to eliminate this text because Retail Orders
would, as proposed, function as IOC orders only, and any remaining
unfilled quantity of a Retail Order would thus be cancelled. The
Exchange also proposes to delete the examples currently provided in
Rule 7.44-E(l) to illustrate priority and order allocation of RPI
Orders and Retail Orders. With the changes proposed in this filing to
modify RPI Orders and Retail Orders to function only as MPL Orders and
to offer only one type of Retail Order, RPI Orders and Retail Orders
would simply trade according to price/time priority as described in
Rule 7.36-E. The Exchange thus believes that new Rule 7.44-E(g) clearly
describes the ranking and priority of RPI Orders and Retail Orders and
that no examples are needed to further illustrate how such orders would
trade. The Exchange believes that removing unnecessary examples from
current Rule 7.44-E(l) would improve the clarity of the rule.
Proposed Elimination of Retail Liquidity Providers
NYSE Arca Rules 7.44-E(a)(1), 7.44-E(a)(4)(C), and 7.44-E(c)
through (i) currently set forth rules pertaining to RLPs:
Rule 7.44-E(a)(1) provides that RLPs are ETP Holders that
are approved by the Exchange and required to submit RPIs.
Rule 7.44-E(a)(4)(C) describes how RLPs may enter RPIs for
their assigned and non-assigned securities.
Rule 7.44-E(c) describes how an ETP Holder may qualify to
become an RLP.
[[Page 5951]]
Rule 7.44-E(d) sets forth the process by which an ETP
Holder may apply to become an RLP, subject to the Exchange's approval
of such application.
Rule 7.44-E(e) provides for an RLP's voluntary withdrawal
from RLP status.
Rule 7.44-E(f) sets forth an RLP's obligations with
respect to entering RPIs.
Rule 7.44-E(g) describes action the Exchange may take with
respect to an RLP that fails to meet the requirements of Rule 7.44-E.
Rule 7.44-E(i) describes the process through which an ETP
Holder may appeal the Exchange's decision to disapprove or disqualify
it as an RLP.
The Exchange proposes to modify the Program to eliminate the role
of RLPs, as there are no ETP Holders currently registered as RLPs.
Accordingly, the Exchange does not believe that modifying Rule 7.44-E
to remove text providing for the RLP function would impact the
effectiveness of the Program and notes that other exchanges currently
operate retail price improvement programs that do not include an RLP
function.\23\ To effect this change, the Exchange proposes to delete
Rules 7.44-E(a)(1), 7.44-E(a)(4)(C), and 7.44-E(c) through (g) in their
entirety and to modify Rule 7.44-E(i) to remove text relating to the
disapproval or disqualification of an RLP.\24\ The Exchange also
proposes to renumber current Rules 7.44-E(a)(2) through (4) as Rules
7.44-E(a)(1) through (3) to reflect the deletion of current Rule 7.44-
E(a)(1) and to renumber Rules 7.44-E(h) through (l) as Rules 7.44-E(c)
through (g) to reflect the proposed deletion of current Rules 7.44-E(c)
through (g).\25\ The Exchange believes that the proposed change would
simplify and add clarity to its Rules by removing the description of an
unutilized aspect of the Program.
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\23\ See, e.g., Investors Exchange LLC (``IEX'') Rule 11.232
(describing IEX Retail Price Improvement Program); Nasdaq BX, Inc.
(``Nasdaq BX'') Rule 4780 (describing Nasdaq BX Retail Price
Improvement Program).
\24\ In Rule 7.44-E(i) (which is proposed to be renumbered as
Rule 7.44-E(d)), the Exchange proposes to delete references to Rules
7.44-E(d) and 7.44-E(g), which currently provide for the process by
which an ETP Holder may apply to become an RLP and actions the
Exchange may take with respect to an RLP that fails to meet the
requirements of Rule 7.44-E, respectively. The Exchange also
proposes a conforming change to replace the reference to Rule 7.44-
E(h) with a reference to Rule 7.44-E(c) to reflect the proposed
renumbering of Rules 7.44-E(h) through (l). The Exchange also
proposes to delete current Rule 7.44-E(i)(1)(A) (which describes the
reassignment of securities from an RLP that has been disqualified)
because the rule would no longer have application. The Exchange
further proposes to delete the defined term ``appellant'' in current
Rule 7.44-E(i)(1), as such term would no longer be used following
the elimination of Rule 7.44-E(i)(1)(A).
\25\ The Exchange also proposes conforming changes to renumbered
Rules 7.44-E(a)(2) (Retail Order) and 7.44-E(g) (Priority and Order
Allocation) to update references to Rule 7.44-E(k) to refer instead
to Rule 7.44-E(f), to account for the proposed renumbering described
above in connection with the elimination of RLPs.
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Subject to approval of this proposed rule change, the Exchange will
implement this change no later than in the second quarter of 2023 and
announce the implementation date by Trader Update.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) of the
Act,\26\ in general, and furthers the objectives of section
6(b)(5),\27\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, 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.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes to both Retail
Orders and RPI Orders in the Program would promote just and equitable
principles of trade and remove impediments to, and perfect the
mechanism of, a free and open market and a national market system
because modifying RPI Orders and Retail Orders to function as MPL
Orders would further the purpose of the Program by providing Retail
Orders with price improvement opportunities at the midpoint or better.
The Exchange believes that providing more deterministic price
improvement opportunities for Retail Orders would attract additional
retail order flow to the Exchange. The Exchange also believes that the
proposed change to the Program would allow it to compete with other
exchanges that operate retail price improvement programs that are
priced at the midpoint.\28\ The Exchange believes that the proposed
change to streamline how Retail Orders function would also promote just
and equitable principles of trade and remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system by simplifying the operation of the Program.
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\28\ See, e.g., IEX Rule 11.232 (providing for Retail Price
Improvement Program with Retail Order defined as a Discretionary Peg
order or Midpoint Peg order with a Time-in-Force of IOC or FOK, that
is only eligible to trade at a price between the NBB and the
Midpoint Price (for bids) or between the NBO and the Midpoint Price
(for offers)).
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The Exchange also believes that the proposed change to eliminate
RLPs as a class under the Program would promote just and equitable
principles of trade, remove impediments to, and perfect the mechanism
of, a free and open market and a national market system, and protect
investors and the public interest because there are no ETP Holders
currently registered as RLPs and, accordingly, deleting rule text
providing for RLPs would not have any impact on any existing ETP
Holders. Moreover, because any ETP Holder may enter RPI Orders,
eliminating RLPs as a class would not impact the ability of ETP Holders
to enter RPI Orders on the Exchange. The Exchange further notes that
other exchanges currently operate retail price improvement programs
that do not include RLPs.\29\
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\29\ See note 23, supra.
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed change could promote competition by modifying RPI Orders
and Retail Orders to function as MPL Orders, thereby encouraging
additional trading opportunities at the midpoint and supporting price
improvement opportunities at the midpoint of the PBBO or better for
retail investors. The Exchange also believes that the proposed change
to eliminate the RLP function would not impose any burden on
competition, as no ETP Holders are currently registered as RLPs. The
Exchange further believes that the proposed change could promote
competition between the Exchange and other exchanges that offer retail
price improvement programs, including an exchange that operates a
retail price improvement program intended to provide additional trading
opportunities at the midpoint.\30\
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\30\ See note 28, supra; see also, e.g., Nasdaq BX Rule 4780
(describing BX's Retail Price Improvement Program); Cboe BYX
Exchange, Inc. (``BYX'') Rule 11.24 (describing BYX's Retail Price
Improvement Program).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 5952]]
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 (i) as the Commission may
designate up to 90 days of such date 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 shall:
(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. 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-NYSEARCA-2023-06 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-NYSEARCA-2023-06. 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 10:00 a.m. and
3:00 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-NYSEARCA-2023-06 and should be submitted
on or before February 21, 2023.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01743 Filed 1-27-23; 8:45 am]
BILLING CODE 8011-01-P
