Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.44, 57508-57513 [2023-18190]
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices
Customers that choose not to
purchase the BX FPGA Service are not
impacted by the proposal.
The BX FPGA Service will be
available to all customers on a nondiscriminatory basis, and therefore the
proposed fees are not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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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.
This Proposal, a response to customer
demand, is a product of a competitive
marketplace. To date, lower levels of
peak activity at the BX Exchange
relative to the Nasdaq exchange have
been associated with low levels of
customer interest in this product.
Recently, however, BX has heard from
customers interested in using FPGA
technology for BX TotalView. To
address this customer demand, and to
drive liquidity to the BX Exchange by
making it a more attractive trading
venue, BX has decided to offer this
product.
Approval of this Proposal will further
promote competition by providing
market participants additional choices
in the transmission of depth of book
data.
Nothing in the Proposal burdens
inter-market competition (the
competition among self-regulatory
organizations) because approval of the
Proposal does not impose any burden
on the ability of other exchanges to
compete. As noted above, FPGA
technology is generally available and
any exchange has the ability to offer it
if it so chooses.
Nothing in the Proposal burdens
intra-market competition (the
competition among consumers of
exchange data) because the BX FPGA
Service will be available to any
customer under the same fee schedule
as any other customer, and any market
participant that wishes to purchase the
BX FPGA Service can do so on a nondiscriminatory basis.
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.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(ii) of the Act.19
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: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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–2023–020 on the subject line.
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BX–2023–020 and should be
submitted on or before September 13,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–18104 Filed 8–22–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98169; File No. SR–
NYSENAT–2023–17]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.44
August 18, 2023.
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–2023–020. 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,
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 8,
2023, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.44 to provide for a 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.
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
19 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices
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, which is currently designated
as Reserved, to provide for a Retail
Liquidity Program (the ‘‘Program’’). The
purpose of the Program would be to
attract retail order flow to the Exchange
and allow such order flow to receive
potential price improvement at the
midpoint or better. As described in
greater detail below, the Program would
allow ETP Holders to provide potential
price improvement to retail investor
orders in the form of a non-displayed
order that is priced at the less aggressive
of the midpoint of the PBBO or its limit
price, called a Retail Price Improvement
Order (‘‘RPI Order’’).3 When there is an
RPI Order in a particular security that is
eligible to trade at the midpoint of the
PBBO, the Exchange would disseminate
an indicator, known as the Retail
Liquidity Identifier, that such interest
exists.4 Retail Member Organizations
(‘‘RMOs’’) would be able to submit a
Retail Order to the Exchange, which
interacts, to the extent possible, with
available contra-side RPI Orders and
may interact with other liquidity on the
Exchange, depending on the Retail
Order’s instructions.5 The segmentation
in the Program would allow retail order
flow to receive potential price
improvement as a result of that order
3 See
proposed Rule 7.44(a)(3).
proposed Rule 7.44(e). The Exchange notes
that it will seek an exemption from the provisions
of Regulation NMS Rule 602, 17 CFR 242.602(d)
(the ‘‘Quote Rule’’) with respect to its planned
dissemination of a Retail Liquidity Identifier to
allow it to disseminate the Retail Liquidity
Identifier to indicate the presence of RPI Order
interest without including such interest in the
Exchange’s quotation. The Exchange will not
implement the proposed Program unless and until
its request for exemption from the requirements of
the Quote Rule has been granted.
5 See proposed Rules 7.44(a)(1), 7.44(a)(2), and
7.44(f).
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4 See
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flow being deemed more desirable by
liquidity providers.
The rules providing for the proposed
Program are structured similarly to the
Retail Liquidity Programs currently
offered by its affiliated exchanges, New
York Stock Exchange, LLC (‘‘NYSE’’)
and NYSE Arca, Inc. (‘‘NYSE Arca’’)
except for differences as further
described below relating to RPI Orders
and Retail Orders, and uses the same
terminology as is used in the approved
rules governing the NYSE and NYSE
Arca Retail Liquidity Programs.6
Accordingly, proposed Rule 7.44 is
based on NYSE Rule 7.44 and NYSE
Arca Rule 7.44–E, except as described in
further detail below to reflect that the
proposed Program would differ
substantively from the NYSE and NYSE
Arca Retail Liquidity Programs in that it
would primarily seek to provide retail
order flow with price improvement
opportunities at the midpoint or better.7
The Exchange notes that several other
equities exchanges also offer retail price
improvement programs, one of which
offers trading opportunities at the
midpoint, similar to the Program, as
proposed.8
Definitions
The Exchange proposes to adopt the
following definitions for the Program
under proposed Rule 7.44(a).9
6 See NYSE Rule 7.44; NYSE Arca Rule 7.44–E.
The Exchange notes that NYSE Arca has proposed
to decommission its Retail Liquidity Program in a
separate rule filing. See SR–NYSEARCA–2023–55.
The Exchange proposes to implement the Program
in the third quarter of 2023, in tandem with the
discontinuation of the NYSE Arca Retail Liquidity
Program, on a date to be announced by Trader
Update.
7 The Exchange notes that it is not seeking an
exemption under Rule 612 of Regulation NMS, 17
CFR 242.612 (the ‘‘Sub-Penny Rule’’) because it will
not accept or rank orders priced greater than $1.00
per share in an increment smaller than $0.01. The
Program will thus differ from the NYSE and NYSE
Arca Retail Liquidity Programs in this respect, as
both of those programs operate pursuant to
exemptive relief granted by the Commission from
the requirements of the Sub-Penny Rule.
8 See, e.g., Investors Exchange LLC (‘‘IEX’’) Rule
11.232 (describing the IEX Retail Program, which is
designed to provide retail order flow with price
improvement opportunities at the midpoint); Cboe
BYX Exchange, Inc. (‘‘BYX’’) Rule 11.24 (setting
forth BYX’s Retail Price Improvement Program);
Nasdaq BX, Inc. (‘‘BX’’) Rule 4780 (setting forth
BX’s Retail Price Improvement Program). The
Exchange further notes that Nasdaq BX, like the
Exchange, utilizes a ‘‘taker-maker’’ or inverted fee
model; accordingly, offering a retail price
improvement program on an exchange that operates
with such a model is not novel.
9 The Exchange notes that it does not propose that
the Program include a role for Retail Liquidity
Providers (‘‘RLPs’’), unlike the NYSE and NYSE
Arca Retail Liquidity Programs. See NYSE Rules
7.44(a)(1), 7.44(a)(4)(D), 7.44(c)—(g), 7.44(i); NYSE
Arca Rules 7.44–E(a)(1), 7.44–E(a)(4)(C), 7.44–E(c)—
(g), 7.44–E(i). The Exchange believes that the
Program can operate effectively without RLPs,
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57509
• Proposed Rule 7.44(a)(1) would
define a Retail Member Organization or
RMO as an ETP Holder that is approved
by the Exchange under Rule 7.44 to
submit Retail Orders. Proposed Rule
7.44(a)(1) is substantively identical 10 to
NYSE Rule 7.44(a)(2) and NYSE Arca
Rule 7.44–E(a)(2) and is also
substantially similar to IEX Rule
11.232(a)(1).
• Proposed Rule 7.44(a)(2) would
define a Retail Order as an agency order
or riskless principal order that meets the
criteria of FINRA Rule 5320.03,
originating from a natural person, and
that 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. A Retail Order would
operate in accordance with proposed
Rule 7.44(f) (as described below).
Proposed Rule 7.44(a)(2) is
substantively identical to NYSE Rule
7.44(a)(3) and NYSE Arca Rule 7.44–
E(a)(3) as to the core definition of a
Retail Order and the provision that the
operation of a Retail Order would be
outlined further in a later section of the
rule.11 Proposed Rule 7.44(a)(2) is also
substantially similar to IEX Rule
11.190(b)(15).
• Proposed Rule 7.44(a)(3) would
define a Retail Price Improvement Order
including because any ETP Holder may enter RPI
Orders, as proposed, and notes that other exchanges
currently operate retail price improvement
programs that likewise do not include an RLP
function. See, e.g., IEX Rule 11.232 (describing IEX
Retail Price Improvement Program); Nasdaq BX
Rule 4780 (describing Nasdaq BX Retail Price
Improvement Program).
10 The phrase ‘‘substantively identical’’ is used in
this filing to indicate that the proposed rules are the
same as the rules of another exchange except for
non-substantive grammatical or stylistic differences,
including differences in nomenclature or
numbering (for example, whereas the Exchange and
NYSE Arca use the term ‘‘ETP Holder’’ to generally
refer to member firms, NYSE uses the term
‘‘member organization’’).
11 The Exchange notes that NYSE Rule 7.44(a)(3)
and NYSE Arca Rule 7.44–E(a)(3) differ from each
other in two ways. First, NYSE Rule 7.44(a)(3)
provides that a Retail Order is an Immediate or
Cancel Order. NYSE Arca Rule 7.44–E(a)(3) does
not provide the same because the NYSE Arca Retail
Liquidity Program offers Retail Order types that are
not IOC. The Exchange does not propose to include
this detail in Proposed Rule 7.44(a)(2), as the
operation of Retail Orders is further outlined in
proposed Rule 7.44(f). Second, NYSE Arca Rule
7.44–E(a)(3) provides that a Retail Order may be an
odd lot, round lot, or mixed lot. NYSE Rule
7.44(a)(3) previously included the same language,
which NYSE recently proposed to delete as
extraneous. See Securities Exchange Act Release
No. 96944 (February 16, 2023), 88 FR 11499
(February 23, 2023) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Modify
Rule 7.44 Relating to the Retail Liquidity Program).
Proposed Rule 7.44(a)(2) would be consistent with
NYSE Rule 7.44(a)(3) rather than NYSE Arca Rule
7.44–E(a)(3) in this regard.
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or RPI as an MPL Order 12 that is eligible
to trade only with incoming Retail
Orders submitted by an RMO. This
proposed rule would also provide that
an RPI may not be designated IOC, ALO,
or with an MTS Modifier.13 Proposed
Rule 7.44(a)(3) further provides that an
RPI remains non-displayed in its
entirety and is ranked Priority 3—NonDisplay Orders.
The definition of an RPI as a nondisplayed order that trades only with
Retail Orders is consistent with NYSE
Rule 7.44(a)(4) and NYSE Arca Rule
7.44–E(a)(4). However, proposed Rule
7.44(a)(3) differs substantively from the
definition of RPI Orders under NYSE
Rule 7.44(a)(4) and NYSE Arca Rule
7.44–E(a)(4) in that RPI Orders in the
Program will only be MPL Orders, in
accordance with the goal of the Program
to provide potential price improvement
to retail orders at the midpoint or better.
The Exchange notes that it would not be
novel for RPI Orders to function as MPL
Orders to offer retail orders trading
opportunities at the midpoint. NYSE
Arca Rule 7.44–E(a)(4) currently
provides that RPI Orders in the NYSE
Arca Retail Liquidity Program may be
designated as either Limit Orders or
MPL Orders, and, similar to the
Program, as proposed, the IEX Retail
Price Improvement Program provides
for Retail Liquidity Provider Orders that
12 An MPL Order is 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. An MPL Order is
ranked Priority 3—Non-Display Orders and may be
entered during any Exchange trading session. See
Rule 7.31(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(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(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(d)(3)(C). An MPL Order may be
designated IOC (‘‘MPL–IOC Order’’) and, subject to
such IOC instructions, will follow the same trading
and priority rules as an MPL Order except that an
MPL–IOC Order will be rejected if there is no PBBO
or the PBBO is locked or crossed. See Rule
7.31(d)(3)(D).
13 See Rules 7.31(b)(2) (providing that an order
with an IOC Modifier will be traded in whole or in
part on the Exchange as soon as such order is
received, with any untraded quantity cancelled);
7.31(e)(2) (providing that an ALO Order is a NonRoutable Limit Order that, unless it receives price
improvement, will not remove liquidity from the
Exchange Book); 7.31(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).
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are non-displayed orders priced at the
less aggressive of the midpoint price or
the order’s limit price and interact with
eligible retail orders in price-time
priority at the midpoint price.14
RMO Qualifications and Application
Process
As noted above, Retail Orders may be
submitted by RMOs. Under proposed
Rule 7.44(b)(1), any ETP Holder could
qualify as an RMO if it conducts retail
business or routes retail orders on behalf
of another broker-dealer. For purposes
of this rule, the Exchange proposes that
conducting a retail business includes
carrying retail customer accounts on a
fully disclosed basis. Proposed Rule
7.44(b)(2) would provide that, to
become an RMO, an ETP Holder must
submit: (1) an application form; (2)
supporting documentation sufficient to
demonstrate the retail nature and
characteristics of the applicant’s order
flow; 15 and (3) an attestation, in a form
prescribed by the Exchange, that any
order submitted by the ETP Holder as a
Retail Order would meet the
qualifications for such orders under
Rule 7.44. Proposed Rule 7.44(b)(3)
would provide that the Exchange would
notify an applicant of its decision in
writing after an applicant submits the
application form, supporting
documentation, and attestation.
Proposed Rule 7.44(b)(4) would provide
that a disapproved applicant may
request an appeal of such disapproval
by the Exchange as provided in
proposed Rule 7.44(d) (discussed
further below) and/or reapply for RMO
status 90 days after the disapproval
notice issued by the Exchange. An RMO
may also voluntarily withdraw from
such status at any time by giving written
notice to the Exchange, as set forth in
proposed Rule 7.44(b)(5).
An RMO must have written policies
and procedures reasonably designed to
assure that it will only designate orders
as Retail Orders if all requirements of a
Retail Order are met, pursuant to
proposed Rule 7.44(b)(6). Such written
policies and procedures must require
the ETP Holder to (i) exercise due
14 See NYSE Arca Rule 7.44–E(a)(4)(D) (‘‘An RPI
must be designated as either a Limit Non-Displayed
Order or MPL Order. . . .’’); IEX Rule 11.190(b)(14)
(defining Retail Liquidity Provider Order as a
Midpoint Peg order that is only eligible to execute
against retail orders through the execution process
described in IEX Rule 11.232(e)).
15 Proposed Rule 7.44(b)(2) would further provide
that such supporting documentation may include
sample marketing literature, website screenshots,
other publicly disclosed materials describing the
ETP Holder’s retail order flow, and any other
documentation and information requested by the
Exchange in order to confirm that the applicant’s
order flow would meet the requirements of the
Retail Order definition.
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diligence before entering a Retail Order
to assure that entry as a Retail Order is
in compliance with the requirements of
Rule 7.44, and (ii) monitor whether
orders entered as Retail Orders meet the
applicable requirements. If the RMO
represents Retail Orders from another
broker-dealer customer, the RMO’s
supervisory procedures must be
reasonably designed to assure that the
orders it receives from such brokerdealer customer that it designates as
Retail Orders meet the definition of a
Retail Order. The RMO must (i) obtain
an annual written representation, in a
form acceptable to the Exchange, from
each broker-dealer customer that sends
its orders to be designated as Retail
Orders that entry of such orders as
Retail Orders will be in compliance
with the requirements of this rule, and
(ii) monitor whether its broker-dealer
customer’s Retail Order flow continues
to meet the applicable requirements.
Proposed Rule 7.44(b) is substantively
identical to NYSE Rule 7.44(b) and
NYSE Arca Rule 7.44–E(b) and is also
substantially similar to IEX Rule
11.232(b).
Failure of RMO To Abide by Retail
Order Requirements
Proposed Rule 7.44(c) addresses an
RMO’s failure to abide by Retail Order
requirements. If an RMO designated
orders submitted to the Exchange as
Retail Orders and the Exchange
determined, in its sole discretion, that
those orders failed to meet the
requirements of Retail Orders, the
Exchange could disqualify an ETP
Holder from its status as an RMO. When
disqualification determinations are
made, the Exchange would provide a
written disqualification notice to the
ETP Holder. A disqualified RMO could
appeal the disqualification as provided
in proposed Rule 7.44(d), discussed
below, and/or reapply for RMO status
90 days after the disqualification notice
was issued by the Exchange.
Proposed Rule 7.44(c) is substantively
identical to NYSE Rule 7.44(h) and
NYSE Arca Rule 7.44–E(h) and is also
substantially similar to IEX Rule
11.232(c).
Appeal of Disapproval or
Disqualification
Proposed Rule 7.44(d) provides
appeal rights to ETP Holders that are
disapproved or disqualified as RMOs. If
an ETP Holder disputes the Exchange’s
decision to disapprove it under
proposed Rule 7.44(b) or disqualify it
under proposed Rule 7.44(c), such ETP
Holder could request, within five
business days after notice of the
decision was issued by the Exchange,
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the Retail Liquidity Program Panel
(‘‘RLP Panel’’) review the decision to
determine if it was correct.
The RLP Panel would consist of the
NYSE’s Chief Regulatory Officer
(‘‘CRO’’), or a designee of the CRO, and
two qualified Exchange employees. The
RLP Panel would review the facts and
render a decision within the time frame
prescribed by the Exchange. The RLP
Panel may overturn or modify an action
taken by the Exchange, and all
determinations by the RLP Panel would
constitute final action by the Exchange
on the matter at issue.
Proposed Rule 7.44(d) is substantively
identical to NYSE Rule 7.44(i) and
NYSE Arca Rule 7.44–E(i) and is also
substantially similar to IEX Rule
11.232(d).
Retail Liquidity Identifier
Proposed Rule 7.44(e) would provide
for the Retail Liquidity Identifier, which
is an identifier disseminated by the
Exchange through proprietary data feeds
and through the Consolidated Quotation
System or the UTP Quote Data Feed, as
applicable, when RPI interest eligible to
trade at the midpoint of the PBBO for a
particular security is available in
Exchange systems. The Retail Liquidity
Identifier would reflect the symbol for
the particular security and the side (buy
or sell) of the RPI interest but would not
include the price or size of the RPI
interest.
Proposed Rule 7.44(e) is the same as
NYSE Rule 7.44(j), aside from
differences to reflect that the Program’s
Retail Liquidity Identifier would
indicate when RPI interest is available
at the midpoint of the PBBO, consistent
with the goal of the Program to offer
trading opportunities to Retail Orders at
the midpoint or better.
Retail Order Designation
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Proposed Rule 7.44(f) would describe
the operation of Retail Orders in the
Program. A Retail Order may be
designated with an MTS Modifier.16
Proposed Rule 7.44(f) provides for two
16 The Exchange notes that the availability of an
MTS Modifier with retail orders is not novel, as it
is currently offered on other exchanges operating
retail price improvement programs. See, e.g.,
Investors Exchange LLC Rules 11.190(b)(9)(G),
11.190(b)(10)(G), and 11.232(a)(2) (providing that a
Retail order may be a Discretionary Peg order or
Midpoint Peg order, either of which may be
designated with a minimum trade size). In addition,
the Commission recently noticed for immediate
effectiveness a proposed rule change by the NYSE
to permit Retail Orders to be designated with an
MTS Modifier. See Securities Exchange Act Release
No. 96944 (February 16, 2023), 88 FR 11499
(February 23, 2023) (SR–NYSE–2023–11) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change To Modify Rule 7.44 Relating to the
Retail Liquidity Program).
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types of Retail Orders, and an RMO
would be able to designate how a Retail
Order will trade with available contraside interest.
Proposed Rule 7.44(f)(1) would define
the Type 1 Retail Order. A Type 1 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 Exchange Book. A Type 1
Retail Order would not route, and 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. A Type 1
Retail Order would be cancelled on
arrival if there is no PBBO or the PBBO
is locked or crossed.
Proposed Rule 7.44(f)(1) is similar to
NYSE Rule 7.44(k) and NYSE Arca Rule
7.44–E(k)(1) except that the Type 1
Retail Order, as proposed, would differ
from the NYSE Retail Order and the
NYSE Arca Type 1 Retail Order in that
it would be an MPL Order (rather than
a Limit Order), to reflect the intent of
the Program to provide potential price
improvement opportunities for retail
order flow at the midpoint or better. The
Type 1 Retail Order, as an order eligible
to trade at the midpoint or better,
accordingly also shares characteristics
with the existing MPL Order type
available on the Exchange and is similar
to the retail order in IEX’s Retail Price
Improvement Program.17
Proposed Rule 7.44(f)(2) would define
the Type 2 Retail Order. A Type 2 Retail
Order to buy (sell) would be a Limit IOC
Order that trades first with available RPI
Orders to sell (buy) (which, as noted
above, are orders with a working price
at the lower (higher) of the midpoint of
the PBBO or their limit price) and with
all other orders to sell (buy) with a
working price below (above) the PBO
(PBB) on the Exchange Book. Any
remaining quantity of a Type 2 Retail
Order would then trade with orders to
sell (buy) on the Exchange Book at
prices equal to or above (below) the PBO
(PBB) as a Limit IOC Order and would
not route. Any untraded quantity would
be immediately and automatically
cancelled. Retail Orders designated by
the submitting RMO as Type 2 thus
differ from Type 1 Retail Orders because
17 See note 13, supra (describing the MPL Order);
IEX Rule 11.232(a)(2) (providing that a retail order
must be 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 00106
Fmt 4703
Sfmt 4703
57511
they would be able to trade with all
contra-side orders inside the PBBO and
then would have the opportunity to
trade as a Limit IOC Order, as such
order is defined in Rule 7.31.
Proposed Rule 7.44(f)(2) is identical to
NYSE Arca Rule 7.44–E(k)(2)(A) except
that proposed Rule 7.44(f)(2) references
the Exchange Book rather than the
NYSE Arca Book.
Priority and Order Allocation
Proposed Rule 7.44(g) would set forth
priority and allocation rules for the
Program. RPI Orders in the same
security would be ranked together with
all other interest ranked as Priority 3—
Non-Display Orders, and odd lot orders
ranked as Priority 2—Display Orders
would have priority over orders ranked
Priority 3—Non-Display Orders at each
price. Any remaining unexecuted RPI
interest would remain available to trade
with other incoming Retail Orders. Any
remaining unfilled quantity of the Retail
Order would cancel in accordance with
proposed Rule 7.44(f), as described
above.
Proposed Rule 7.44(g) would also
include the following examples to
illustrate priority and allocation of
orders in the Program.
Examples of priority and order
allocation are as follows:
PBBO for security ABC is $10.00–$10.10.
User 1 enters a Retail Price Improvement
Order to buy ABC at $10.06 for 500.
User 2 then enters a Retail Price
Improvement Order to buy ABC at $10.09 for
400.
User 3 then enters a Retail Price
Improvement Order to buy ABC at $10.04 for
500.
An incoming Type 1 Retail Order to sell
ABC for 1,000 at $10.00 would trade first
with User 1’s bid for 500 at $10.05. The
Retail Order would then trade with User 2’s
bid for 400 at $10.05, because User 2’s bid
is ranked at the same price as User 1’s but
arrived later. User 3 would not be filled
because the limit price of its order is not
priced to execute at or above the current
midpoint price of $10.05, and the remaining
100 shares of the Retail Order would be
cancelled back to the Retail Member
Organization. The Retail Order trades with
RPI Orders in price/time priority, as
illustrated by this example.
The result would be the same as the above
if User 1’s order was instead either an MPL
Order to buy ABC at $10.06 for 500 or a nondisplayed order to buy ABC at $10.05 for 500.
The incoming Retail Order would trade first
with User 1 for 500 at $10.05, then with User
2 for 400 at $10.05. User 3 would not be
filled because the limit price of its order is
not priced to execute at or above the current
midpoint price of $10.05, and the remaining
100 shares of the Retail Order would be
cancelled back to the Retail Member
Organization.
As a final example, assume the original
facts, except that User 3’s order was not an
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RPI Order, but rather, a non-displayed order
to buy ABC at $10.09 for 400 and User 4
enters a displayed odd lot limit order to buy
ABC at $10.05 for 60. The incoming Retail
Order to sell for 1,000 would trade first with
User 3’s bid for 400 at $10.09, because it is
the best-priced bid, then with User 4’s bid for
60 at $10.05 because it is the next best-priced
bid and is ranked Priority 2—Display Orders
and has priority over same-priced nondisplayed orders (RPIs and non-displayed
limit orders). The incoming Retail Order
would then trade with User 1’s bid for 500
at $10.05 and, finally, with User 2 for 40 at
$10.05, at which point the entire size of the
Retail Order to sell 1,000 would be depleted.
The balance of User 2’s bid would remain on
the Exchange Book and be eligible to trade
with the next incoming Retail Order to sell.
To demonstrate how a Type 2 Retail Order
would trade with available Exchange interest,
assume the following facts:
PBBO for security DEF is $19.99—$20.03.
User 1 enters a Limit Order to buy DEF at
$20.00 for 100 (updated PBBO 20.00 × 20.03.)
User 2 then enters a Retail Price
Improvement Order to buy DEF at $20.03 for
100.
User 3 then enters an MPL Order to buy
DEF at $21.00 for 100.
User 4 then enters a Non-Displayed Order
to buy DEF at $20.01 for 100.
User 5 then enters a Non-Displayed Order
to buy DEF at $20.02 for 100.
An incoming Type 2 Retail Order to sell
DEF for 1,000 at $20.00 would trade first
with User 5’s bid for 100 at $20.02, because
it is the best-priced bid. The incoming Retail
Order would then trade with User 2’s bid for
100 at $20.015, because it is the next bestpriced bid, then with User 3’s bid for 100 at
$20.015, because User 3’s bid is ranked at the
same price as User 2’s but arrived later. The
incoming Retail Order would then trade with
User 4’s bid for 100 at $20.01 because it is
the next best-priced bid. Finally, the Retail
Order would trade with User 1’s bid for 100
at $20.00. The remaining 500 shares of the
Retail Order would be cancelled back to the
Retail Member Organization.
Finally, proposed Rule 7.44(g) would
limit the Program to trades occurring at
prices equal to or greater than $1.00 per
share and provide that Exchange
systems will reject Retail Orders and
RPI Orders priced below $1.00. The
Program will operate only during the
Core Trading Session and Retail Orders
will be accepted during Core Trading
Hours only.
Proposed Rule 7.44(g) is substantially
the same as NYSE Arca Rule 7.44–E(l)
except that it provides that remaining
unfilled quantities of Retail Orders
would cancel only (because all Retail
Orders in the Program, as proposed,
would be IOC Orders) and is also
substantially the same as NYSE Rule
7.44(l) except to the extent the NYSE
rule refers to the allocation of Retail
Orders pursuant to NYSE Rule 7.37(b).
The examples of priority and allocation
provided in proposed Rule 7.44(g) are
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17:27 Aug 22, 2023
Jkt 259001
structured similarly to those that appear
in NYSE Arca Rule 7.44–E(l), with
differences to reflect that RPI Orders
and Type 1 Retail Orders in the Program
would function as MPL Orders.
*
*
*
*
*
Subject to effectiveness of this
proposed rule change, the Exchange will
implement this change no later than in
the third 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,18
in general, and furthers the objectives of
section 6(b)(5),19 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 the proposed
change 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 proposed Rule 7.44 is based on
NYSE Rule 7.44 and NYSE Arca Rule
7.44–E providing for the NYSE and
NYSE Arca Retail Liquidity Programs,
respectively, and is also substantially
similar to rules providing for the IEX
Retail Price Improvement Program.
Proposed Rule 7.44 sets forth
definitions, order types, processes for
RMO application, qualification,
disapproval and disqualification for the
Program, and the operation, priority,
and allocation of orders in the Program
that are based on rules previously
approved by the Commission for retail
price improvement programs currently
offered by equities exchanges.
Accordingly, the Exchange also believes
the proposed change 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
by promoting consistency among
exchange rules setting forth retail price
improvement programs, which could
encourage retail investors to direct order
flow to the Program to seek out price
improvement opportunities.
18 15
19 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00107
Fmt 4703
The Exchange also believes that the
proposed change 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 it
is intended to attract retail order flow to
the Exchange, including by facilitating
opportunities for such order flow to
receive potential price improvement at
the midpoint or better. The proposed
change would also promote competition
for retail order flow among execution
venues, which would benefit retail
investors by creating additional price
improvement opportunities for
marketable retail order flow on a public
exchange. In particular, the Exchange
believes that providing for RPI Orders
and Retail Orders that function as MPL
Orders could provide more
deterministic price improvement
opportunities for Retail Orders, thereby
attracting additional retail order flow to
the Exchange. In addition, the Exchange
believes that also offering a Retail Order
to buy (sell) that could trade with orders
to sell (buy) on the Exchange Book at
prices equal to or above (below) the PBO
(PBB) (after trading with RPI Orders and
interest on the Exchange Book with a
working price below (above) the PBO
(PBB)) could provide for additional
trading opportunities for Retail Orders
designated as Type 2 by the RMO. The
Exchange notes that this type of Retail
Order is currently offered in the NYSE
Arca Retail Liquidity Program. The
Exchange also believes that the
proposed change would allow it to
compete with other exchanges that
similarly promote additional trading
opportunities for retail order flow at the
midpoint.20
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 encourage competition by
promoting additional trading
opportunities at the midpoint and
supporting price improvement
opportunities at the midpoint of the
PBBO or better for retail investors. 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
20 See
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E:\FR\FM\23AUN1.SGM
note 9, supra.
23AUN1
Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices
provide additional trading opportunities
at the midpoint.21
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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to section
19(b)(3)(A)(iii) of the Act 22 and Rule
19b–4(f)(6) thereunder.23 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 24 and Rule 19b–4(f)(6)(iii)
thereunder.25
A proposed rule change filed under
Rule 19b–4(f)(6) 26 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),27 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated that it
anticipates that it will be
technologically ready to implement the
Program within 30 days of the date of
filing, and a waiver of the 30-day
operative delay would allow the
Exchange to provide beneficial price
improvement opportunities to retail
investors as soon as practicable. Further,
the Exchange stated that waiver of the
operative delay would encourage
21 See
note 9, supra.
U.S.C. 78s(b)(3)(A)(iii).
23 17 CFR 240.19b–4(f)(6).
24 15 U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of 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.
26 17 CFR 240.19b–4(f)(6).
27 17 CFR 240.19b–4(f)(6)(iii).
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22 15
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17:27 Aug 22, 2023
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57513
competition for retail order flow among
execution venues. The Commission
believes that waiver of the operative
delay is consistent with the protection
of investors and the public interest
because it would allow the Exchange to
implement its Program to provide retail
investors with price improvement
opportunities and compete with other
execution venues for retail order flow.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.28
At any time within 60 days of the
filing of such 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
under section 19(b)(2)(B) 29 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSENAT–2023–17 and should be
submitted on or before September 13,
2023.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Sherry R. Haywood,
Assistant Secretary.
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–
NYSENAT–2023–17 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–NYSENAT–2023–17. 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
28 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
29 15 U.S.C. 78s(b)(2)(B).
PO 00000
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[FR Doc. 2023–18190 Filed 8–22–23; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
Delegation of Authority DA 543;
Designation of Chief International
Agreements Officer
By virtue of the authority vested in
the Secretary of State by the laws of the
United States, including 5 U.S.C. 301,
2104, 2105 and 3101, I hereby appoint
Joshua L. Dorosin as an Officer of the
United States.
Pursuant to 1 U.S.C. 112b, and section
1 of the State Department Basic
Authorities Act (22 U.S.C. 2651a), I
hereby designate Joshua L. Dorosin as
the Chief International Agreements
Officer of the Department of State, with
the title of International Agreements
Compliance Officer.
This document will be published in
the Federal Register.
Dated: August 10, 2023.
Antony J. Blinken,
Secretary of State.
[FR Doc. 2023–18098 Filed 8–22–23; 8:45 am]
BILLING CODE 4710–08–P
30 17
E:\FR\FM\23AUN1.SGM
CFR 200.30–3(a)(12).
23AUN1
]]>Agencies
[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Notices]
[Pages 57508-57513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18190]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98169; File No. SR-NYSENAT-2023-17]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 7.44
August 18, 2023.
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 8, 2023, NYSE National, Inc. (``NYSE National'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``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\ 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 to provide for a 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.
[[Page 57509]]
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, which is currently
designated as Reserved, to provide for a Retail Liquidity Program (the
``Program''). The purpose of the Program would be to attract retail
order flow to the Exchange and allow such order flow to receive
potential price improvement at the midpoint or better. As described in
greater detail below, the Program would allow ETP Holders to provide
potential price improvement to retail investor orders in the form of a
non-displayed order that is priced at the less aggressive of the
midpoint of the PBBO or its limit price, called a Retail Price
Improvement Order (``RPI Order'').\3\ When there is an RPI Order in a
particular security that is eligible to trade at the midpoint of the
PBBO, the Exchange would disseminate an indicator, known as the Retail
Liquidity Identifier, that such interest exists.\4\ Retail Member
Organizations (``RMOs'') would be able to submit a Retail Order to the
Exchange, which interacts, to the extent possible, with available
contra-side RPI Orders and may interact with other liquidity on the
Exchange, depending on the Retail Order's instructions.\5\ The
segmentation in the Program would allow retail order flow to receive
potential price improvement as a result of that order flow being deemed
more desirable by liquidity providers.
---------------------------------------------------------------------------
\3\ See proposed Rule 7.44(a)(3).
\4\ See proposed Rule 7.44(e). The Exchange notes that it will
seek an exemption from the provisions of Regulation NMS Rule 602, 17
CFR 242.602(d) (the ``Quote Rule'') with respect to its planned
dissemination of a Retail Liquidity Identifier to allow it to
disseminate the Retail Liquidity Identifier to indicate the presence
of RPI Order interest without including such interest in the
Exchange's quotation. The Exchange will not implement the proposed
Program unless and until its request for exemption from the
requirements of the Quote Rule has been granted.
\5\ See proposed Rules 7.44(a)(1), 7.44(a)(2), and 7.44(f).
---------------------------------------------------------------------------
The rules providing for the proposed Program are structured
similarly to the Retail Liquidity Programs currently offered by its
affiliated exchanges, New York Stock Exchange, LLC (``NYSE'') and NYSE
Arca, Inc. (``NYSE Arca'') except for differences as further described
below relating to RPI Orders and Retail Orders, and uses the same
terminology as is used in the approved rules governing the NYSE and
NYSE Arca Retail Liquidity Programs.\6\ Accordingly, proposed Rule 7.44
is based on NYSE Rule 7.44 and NYSE Arca Rule 7.44-E, except as
described in further detail below to reflect that the proposed Program
would differ substantively from the NYSE and NYSE Arca Retail Liquidity
Programs in that it would primarily seek to provide retail order flow
with price improvement opportunities at the midpoint or better.\7\ The
Exchange notes that several other equities exchanges also offer retail
price improvement programs, one of which offers trading opportunities
at the midpoint, similar to the Program, as proposed.\8\
---------------------------------------------------------------------------
\6\ See NYSE Rule 7.44; NYSE Arca Rule 7.44-E. The Exchange
notes that NYSE Arca has proposed to decommission its Retail
Liquidity Program in a separate rule filing. See SR-NYSEARCA-2023-
55. The Exchange proposes to implement the Program in the third
quarter of 2023, in tandem with the discontinuation of the NYSE Arca
Retail Liquidity Program, on a date to be announced by Trader
Update.
\7\ The Exchange notes that it is not seeking an exemption under
Rule 612 of Regulation NMS, 17 CFR 242.612 (the ``Sub-Penny Rule'')
because it will not accept or rank orders priced greater than $1.00
per share in an increment smaller than $0.01. The Program will thus
differ from the NYSE and NYSE Arca Retail Liquidity Programs in this
respect, as both of those programs operate pursuant to exemptive
relief granted by the Commission from the requirements of the Sub-
Penny Rule.
\8\ See, e.g., Investors Exchange LLC (``IEX'') Rule 11.232
(describing the IEX Retail Program, which is designed to provide
retail order flow with price improvement opportunities at the
midpoint); Cboe BYX Exchange, Inc. (``BYX'') Rule 11.24 (setting
forth BYX's Retail Price Improvement Program); Nasdaq BX, Inc.
(``BX'') Rule 4780 (setting forth BX's Retail Price Improvement
Program). The Exchange further notes that Nasdaq BX, like the
Exchange, utilizes a ``taker-maker'' or inverted fee model;
accordingly, offering a retail price improvement program on an
exchange that operates with such a model is not novel.
---------------------------------------------------------------------------
Definitions
The Exchange proposes to adopt the following definitions for the
Program under proposed Rule 7.44(a).\9\
---------------------------------------------------------------------------
\9\ The Exchange notes that it does not propose that the Program
include a role for Retail Liquidity Providers (``RLPs''), unlike the
NYSE and NYSE Arca Retail Liquidity Programs. See NYSE Rules
7.44(a)(1), 7.44(a)(4)(D), 7.44(c)--(g), 7.44(i); NYSE Arca Rules
7.44-E(a)(1), 7.44-E(a)(4)(C), 7.44-E(c)--(g), 7.44-E(i). The
Exchange believes that the Program can operate effectively without
RLPs, including because any ETP Holder may enter RPI Orders, as
proposed, and notes that other exchanges currently operate retail
price improvement programs that likewise do not include an RLP
function. See, e.g., IEX Rule 11.232 (describing IEX Retail Price
Improvement Program); Nasdaq BX Rule 4780 (describing Nasdaq BX
Retail Price Improvement Program).
---------------------------------------------------------------------------
Proposed Rule 7.44(a)(1) would define a Retail Member
Organization or RMO as an ETP Holder that is approved by the Exchange
under Rule 7.44 to submit Retail Orders. Proposed Rule 7.44(a)(1) is
substantively identical \10\ to NYSE Rule 7.44(a)(2) and NYSE Arca Rule
7.44-E(a)(2) and is also substantially similar to IEX Rule
11.232(a)(1).
---------------------------------------------------------------------------
\10\ The phrase ``substantively identical'' is used in this
filing to indicate that the proposed rules are the same as the rules
of another exchange except for non-substantive grammatical or
stylistic differences, including differences in nomenclature or
numbering (for example, whereas the Exchange and NYSE Arca use the
term ``ETP Holder'' to generally refer to member firms, NYSE uses
the term ``member organization'').
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Proposed Rule 7.44(a)(2) would define a Retail Order as an
agency order or riskless principal order that meets the criteria of
FINRA Rule 5320.03, originating from a natural person, and that 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. A Retail Order would operate in accordance
with proposed Rule 7.44(f) (as described below). Proposed Rule
7.44(a)(2) is substantively identical to NYSE Rule 7.44(a)(3) and NYSE
Arca Rule 7.44-E(a)(3) as to the core definition of a Retail Order and
the provision that the operation of a Retail Order would be outlined
further in a later section of the rule.\11\ Proposed Rule 7.44(a)(2) is
also substantially similar to IEX Rule 11.190(b)(15).
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\11\ The Exchange notes that NYSE Rule 7.44(a)(3) and NYSE Arca
Rule 7.44-E(a)(3) differ from each other in two ways. First, NYSE
Rule 7.44(a)(3) provides that a Retail Order is an Immediate or
Cancel Order. NYSE Arca Rule 7.44-E(a)(3) does not provide the same
because the NYSE Arca Retail Liquidity Program offers Retail Order
types that are not IOC. The Exchange does not propose to include
this detail in Proposed Rule 7.44(a)(2), as the operation of Retail
Orders is further outlined in proposed Rule 7.44(f). Second, NYSE
Arca Rule 7.44-E(a)(3) provides that a Retail Order may be an odd
lot, round lot, or mixed lot. NYSE Rule 7.44(a)(3) previously
included the same language, which NYSE recently proposed to delete
as extraneous. See Securities Exchange Act Release No. 96944
(February 16, 2023), 88 FR 11499 (February 23, 2023) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Rule 7.44 Relating to the Retail Liquidity Program). Proposed Rule
7.44(a)(2) would be consistent with NYSE Rule 7.44(a)(3) rather than
NYSE Arca Rule 7.44-E(a)(3) in this regard.
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Proposed Rule 7.44(a)(3) would define a Retail Price
Improvement Order
[[Page 57510]]
or RPI as an MPL Order \12\ that is eligible to trade only with
incoming Retail Orders submitted by an RMO. This proposed rule would
also provide that an RPI may not be designated IOC, ALO, or with an MTS
Modifier.\13\ Proposed Rule 7.44(a)(3) further provides that an RPI
remains non-displayed in its entirety and is ranked Priority 3--Non-
Display Orders.
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\12\ An MPL Order is 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. An MPL
Order is ranked Priority 3--Non-Display Orders and may be entered
during any Exchange trading session. See Rule 7.31(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(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(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(d)(3)(C). An MPL Order may be designated IOC
(``MPL-IOC Order'') and, subject to such IOC instructions, will
follow the same trading and priority rules as an MPL Order except
that an MPL-IOC Order will be rejected if there is no PBBO or the
PBBO is locked or crossed. See Rule 7.31(d)(3)(D).
\13\ See Rules 7.31(b)(2) (providing that an order with an IOC
Modifier will be traded in whole or in part on the Exchange as soon
as such order is received, with any untraded quantity cancelled);
7.31(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 Exchange Book); 7.31(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).
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The definition of an RPI as a non-displayed order that trades only
with Retail Orders is consistent with NYSE Rule 7.44(a)(4) and NYSE
Arca Rule 7.44-E(a)(4). However, proposed Rule 7.44(a)(3) differs
substantively from the definition of RPI Orders under NYSE Rule
7.44(a)(4) and NYSE Arca Rule 7.44-E(a)(4) in that RPI Orders in the
Program will only be MPL Orders, in accordance with the goal of the
Program to provide potential price improvement to retail orders at the
midpoint or better. The Exchange notes that it would not be novel for
RPI Orders to function as MPL Orders to offer retail orders trading
opportunities at the midpoint. NYSE Arca Rule 7.44-E(a)(4) currently
provides that RPI Orders in the NYSE Arca Retail Liquidity Program may
be designated as either Limit Orders or MPL Orders, and, similar to the
Program, as proposed, the IEX Retail Price Improvement Program provides
for Retail Liquidity Provider Orders that are non-displayed orders
priced at the less aggressive of the midpoint price or the order's
limit price and interact with eligible retail orders in price-time
priority at the midpoint price.\14\
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\14\ See NYSE Arca Rule 7.44-E(a)(4)(D) (``An RPI must be
designated as either a Limit Non-Displayed Order or MPL Order. . .
.''); IEX Rule 11.190(b)(14) (defining Retail Liquidity Provider
Order as a Midpoint Peg order that is only eligible to execute
against retail orders through the execution process described in IEX
Rule 11.232(e)).
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RMO Qualifications and Application Process
As noted above, Retail Orders may be submitted by RMOs. Under
proposed Rule 7.44(b)(1), any ETP Holder could qualify as an RMO if it
conducts retail business or routes retail orders on behalf of another
broker-dealer. For purposes of this rule, the Exchange proposes that
conducting a retail business includes carrying retail customer accounts
on a fully disclosed basis. Proposed Rule 7.44(b)(2) would provide
that, to become an RMO, an ETP Holder must submit: (1) an application
form; (2) supporting documentation sufficient to demonstrate the retail
nature and characteristics of the applicant's order flow; \15\ and (3)
an attestation, in a form prescribed by the Exchange, that any order
submitted by the ETP Holder as a Retail Order would meet the
qualifications for such orders under Rule 7.44. Proposed Rule
7.44(b)(3) would provide that the Exchange would notify an applicant of
its decision in writing after an applicant submits the application
form, supporting documentation, and attestation. Proposed Rule
7.44(b)(4) would provide that a disapproved applicant may request an
appeal of such disapproval by the Exchange as provided in proposed Rule
7.44(d) (discussed further below) and/or reapply for RMO status 90 days
after the disapproval notice issued by the Exchange. An RMO may also
voluntarily withdraw from such status at any time by giving written
notice to the Exchange, as set forth in proposed Rule 7.44(b)(5).
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\15\ Proposed Rule 7.44(b)(2) would further provide that such
supporting documentation may include sample marketing literature,
website screenshots, other publicly disclosed materials describing
the ETP Holder's retail order flow, and any other documentation and
information requested by the Exchange in order to confirm that the
applicant's order flow would meet the requirements of the Retail
Order definition.
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An RMO must have written policies and procedures reasonably
designed to assure that it will only designate orders as Retail Orders
if all requirements of a Retail Order are met, pursuant to proposed
Rule 7.44(b)(6). Such written policies and procedures must require the
ETP Holder to (i) exercise due diligence before entering a Retail Order
to assure that entry as a Retail Order is in compliance with the
requirements of Rule 7.44, and (ii) monitor whether orders entered as
Retail Orders meet the applicable requirements. If the RMO represents
Retail Orders from another broker-dealer customer, the RMO's
supervisory procedures must be reasonably designed to assure that the
orders it receives from such broker-dealer customer that it designates
as Retail Orders meet the definition of a Retail Order. The RMO must
(i) obtain an annual written representation, in a form acceptable to
the Exchange, from each broker-dealer customer that sends its orders to
be designated as Retail Orders that entry of such orders as Retail
Orders will be in compliance with the requirements of this rule, and
(ii) monitor whether its broker-dealer customer's Retail Order flow
continues to meet the applicable requirements.
Proposed Rule 7.44(b) is substantively identical to NYSE Rule
7.44(b) and NYSE Arca Rule 7.44-E(b) and is also substantially similar
to IEX Rule 11.232(b).
Failure of RMO To Abide by Retail Order Requirements
Proposed Rule 7.44(c) addresses an RMO's failure to abide by Retail
Order requirements. If an RMO designated orders submitted to the
Exchange as Retail Orders and the Exchange determined, in its sole
discretion, that those orders failed to meet the requirements of Retail
Orders, the Exchange could disqualify an ETP Holder from its status as
an RMO. When disqualification determinations are made, the Exchange
would provide a written disqualification notice to the ETP Holder. A
disqualified RMO could appeal the disqualification as provided in
proposed Rule 7.44(d), discussed below, and/or reapply for RMO status
90 days after the disqualification notice was issued by the Exchange.
Proposed Rule 7.44(c) is substantively identical to NYSE Rule
7.44(h) and NYSE Arca Rule 7.44-E(h) and is also substantially similar
to IEX Rule 11.232(c).
Appeal of Disapproval or Disqualification
Proposed Rule 7.44(d) provides appeal rights to ETP Holders that
are disapproved or disqualified as RMOs. If an ETP Holder disputes the
Exchange's decision to disapprove it under proposed Rule 7.44(b) or
disqualify it under proposed Rule 7.44(c), such ETP Holder could
request, within five business days after notice of the decision was
issued by the Exchange,
[[Page 57511]]
the Retail Liquidity Program Panel (``RLP Panel'') review the decision
to determine if it was correct.
The RLP Panel would consist of the NYSE's Chief Regulatory Officer
(``CRO''), or a designee of the CRO, and two qualified Exchange
employees. The RLP Panel would review the facts and render a decision
within the time frame prescribed by the Exchange. The RLP Panel may
overturn or modify an action taken by the Exchange, and all
determinations by the RLP Panel would constitute final action by the
Exchange on the matter at issue.
Proposed Rule 7.44(d) is substantively identical to NYSE Rule
7.44(i) and NYSE Arca Rule 7.44-E(i) and is also substantially similar
to IEX Rule 11.232(d).
Retail Liquidity Identifier
Proposed Rule 7.44(e) would provide for the Retail Liquidity
Identifier, which is an identifier disseminated by the Exchange through
proprietary data feeds and through the Consolidated Quotation System or
the UTP Quote Data Feed, as applicable, when RPI interest eligible to
trade at the midpoint of the PBBO for a particular security is
available in Exchange systems. The Retail Liquidity Identifier would
reflect the symbol for the particular security and the side (buy or
sell) of the RPI interest but would not include the price or size of
the RPI interest.
Proposed Rule 7.44(e) is the same as NYSE Rule 7.44(j), aside from
differences to reflect that the Program's Retail Liquidity Identifier
would indicate when RPI interest is available at the midpoint of the
PBBO, consistent with the goal of the Program to offer trading
opportunities to Retail Orders at the midpoint or better.
Retail Order Designation
Proposed Rule 7.44(f) would describe the operation of Retail Orders
in the Program. A Retail Order may be designated with an MTS
Modifier.\16\ Proposed Rule 7.44(f) provides for two types of Retail
Orders, and an RMO would be able to designate how a Retail Order will
trade with available contra-side interest.
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\16\ The Exchange notes that the availability of an MTS Modifier
with retail orders is not novel, as it is currently offered on other
exchanges operating retail price improvement programs. See, e.g.,
Investors Exchange LLC Rules 11.190(b)(9)(G), 11.190(b)(10)(G), and
11.232(a)(2) (providing that a Retail order may be a Discretionary
Peg order or Midpoint Peg order, either of which may be designated
with a minimum trade size). In addition, the Commission recently
noticed for immediate effectiveness a proposed rule change by the
NYSE to permit Retail Orders to be designated with an MTS Modifier.
See Securities Exchange Act Release No. 96944 (February 16, 2023),
88 FR 11499 (February 23, 2023) (SR-NYSE-2023-11) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify Rule
7.44 Relating to the Retail Liquidity Program).
---------------------------------------------------------------------------
Proposed Rule 7.44(f)(1) would define the Type 1 Retail Order. A
Type 1 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 Exchange Book. A
Type 1 Retail Order would not route, and 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. A Type 1
Retail Order would be cancelled on arrival if there is no PBBO or the
PBBO is locked or crossed.
Proposed Rule 7.44(f)(1) is similar to NYSE Rule 7.44(k) and NYSE
Arca Rule 7.44-E(k)(1) except that the Type 1 Retail Order, as
proposed, would differ from the NYSE Retail Order and the NYSE Arca
Type 1 Retail Order in that it would be an MPL Order (rather than a
Limit Order), to reflect the intent of the Program to provide potential
price improvement opportunities for retail order flow at the midpoint
or better. The Type 1 Retail Order, as an order eligible to trade at
the midpoint or better, accordingly also shares characteristics with
the existing MPL Order type available on the Exchange and is similar to
the retail order in IEX's Retail Price Improvement Program.\17\
---------------------------------------------------------------------------
\17\ See note 13, supra (describing the MPL Order); IEX Rule
11.232(a)(2) (providing that a retail order must be 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)).
---------------------------------------------------------------------------
Proposed Rule 7.44(f)(2) would define the Type 2 Retail Order. A
Type 2 Retail Order to buy (sell) would be a Limit IOC Order that
trades first with available RPI Orders to sell (buy) (which, as noted
above, are orders with a working price at the lower (higher) of the
midpoint of the PBBO or their limit price) and with all other orders to
sell (buy) with a working price below (above) the PBO (PBB) on the
Exchange Book. Any remaining quantity of a Type 2 Retail Order would
then trade with orders to sell (buy) on the Exchange Book at prices
equal to or above (below) the PBO (PBB) as a Limit IOC Order and would
not route. Any untraded quantity would be immediately and automatically
cancelled. Retail Orders designated by the submitting RMO as Type 2
thus differ from Type 1 Retail Orders because they would be able to
trade with all contra-side orders inside the PBBO and then would have
the opportunity to trade as a Limit IOC Order, as such order is defined
in Rule 7.31.
Proposed Rule 7.44(f)(2) is identical to NYSE Arca Rule 7.44-
E(k)(2)(A) except that proposed Rule 7.44(f)(2) references the Exchange
Book rather than the NYSE Arca Book.
Priority and Order Allocation
Proposed Rule 7.44(g) would set forth priority and allocation rules
for the Program. RPI Orders in the same security would be ranked
together with all other interest ranked as Priority 3--Non-Display
Orders, and odd lot orders ranked as Priority 2--Display Orders would
have priority over orders ranked Priority 3--Non-Display Orders at each
price. Any remaining unexecuted RPI interest would remain available to
trade with other incoming Retail Orders. Any remaining unfilled
quantity of the Retail Order would cancel in accordance with proposed
Rule 7.44(f), as described above.
Proposed Rule 7.44(g) would also include the following examples to
illustrate priority and allocation of orders in the Program.
Examples of priority and order allocation are as follows:
PBBO for security ABC is $10.00-$10.10.
User 1 enters a Retail Price Improvement Order to buy ABC at
$10.06 for 500.
User 2 then enters a Retail Price Improvement Order to buy ABC
at $10.09 for 400.
User 3 then enters a Retail Price Improvement Order to buy ABC
at $10.04 for 500.
An incoming Type 1 Retail Order to sell ABC for 1,000 at $10.00
would trade first with User 1's bid for 500 at $10.05. The Retail
Order would then trade with User 2's bid for 400 at $10.05, because
User 2's bid is ranked at the same price as User 1's but arrived
later. User 3 would not be filled because the limit price of its
order is not priced to execute at or above the current midpoint
price of $10.05, and the remaining 100 shares of the Retail Order
would be cancelled back to the Retail Member Organization. The
Retail Order trades with RPI Orders in price/time priority, as
illustrated by this example.
The result would be the same as the above if User 1's order was
instead either an MPL Order to buy ABC at $10.06 for 500 or a non-
displayed order to buy ABC at $10.05 for 500. The incoming Retail
Order would trade first with User 1 for 500 at $10.05, then with
User 2 for 400 at $10.05. User 3 would not be filled because the
limit price of its order is not priced to execute at or above the
current midpoint price of $10.05, and the remaining 100 shares of
the Retail Order would be cancelled back to the Retail Member
Organization.
As a final example, assume the original facts, except that User
3's order was not an
[[Page 57512]]
RPI Order, but rather, a non-displayed order to buy ABC at $10.09
for 400 and User 4 enters a displayed odd lot limit order to buy ABC
at $10.05 for 60. The incoming Retail Order to sell for 1,000 would
trade first with User 3's bid for 400 at $10.09, because it is the
best-priced bid, then with User 4's bid for 60 at $10.05 because it
is the next best-priced bid and is ranked Priority 2--Display Orders
and has priority over same-priced non-displayed orders (RPIs and
non-displayed limit orders). The incoming Retail Order would then
trade with User 1's bid for 500 at $10.05 and, finally, with User 2
for 40 at $10.05, at which point the entire size of the Retail Order
to sell 1,000 would be depleted. The balance of User 2's bid would
remain on the Exchange Book and be eligible to trade with the next
incoming Retail Order to sell.
To demonstrate how a Type 2 Retail Order would trade with
available Exchange interest, assume the following facts:
PBBO for security DEF is $19.99--$20.03.
User 1 enters a Limit Order to buy DEF at $20.00 for 100
(updated PBBO 20.00 x 20.03.)
User 2 then enters a Retail Price Improvement Order to buy DEF
at $20.03 for 100.
User 3 then enters an MPL Order to buy DEF at $21.00 for 100.
User 4 then enters a Non-Displayed Order to buy DEF at $20.01
for 100.
User 5 then enters a Non-Displayed Order to buy DEF at $20.02
for 100.
An incoming Type 2 Retail Order to sell DEF for 1,000 at $20.00
would trade first with User 5's bid for 100 at $20.02, because it is
the best-priced bid. The incoming Retail Order would then trade with
User 2's bid for 100 at $20.015, because it is the next best-priced
bid, then with User 3's bid for 100 at $20.015, because User 3's bid
is ranked at the same price as User 2's but arrived later. The
incoming Retail Order would then trade with User 4's bid for 100 at
$20.01 because it is the next best-priced bid. Finally, the Retail
Order would trade with User 1's bid for 100 at $20.00. The remaining
500 shares of the Retail Order would be cancelled back to the Retail
Member Organization.
Finally, proposed Rule 7.44(g) would limit the Program to trades
occurring at prices equal to or greater than $1.00 per share and
provide that Exchange systems will reject Retail Orders and RPI Orders
priced below $1.00. The Program will operate only during the Core
Trading Session and Retail Orders will be accepted during Core Trading
Hours only.
Proposed Rule 7.44(g) is substantially the same as NYSE Arca Rule
7.44-E(l) except that it provides that remaining unfilled quantities of
Retail Orders would cancel only (because all Retail Orders in the
Program, as proposed, would be IOC Orders) and is also substantially
the same as NYSE Rule 7.44(l) except to the extent the NYSE rule refers
to the allocation of Retail Orders pursuant to NYSE Rule 7.37(b). The
examples of priority and allocation provided in proposed Rule 7.44(g)
are structured similarly to those that appear in NYSE Arca Rule 7.44-
E(l), with differences to reflect that RPI Orders and Type 1 Retail
Orders in the Program would function as MPL Orders.
* * * * *
Subject to effectiveness of this proposed rule change, the Exchange
will implement this change no later than in the third 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,\18\ in general, and furthers the objectives of section
6(b)(5),\19\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes the proposed change 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 proposed Rule 7.44 is
based on NYSE Rule 7.44 and NYSE Arca Rule 7.44-E providing for the
NYSE and NYSE Arca Retail Liquidity Programs, respectively, and is also
substantially similar to rules providing for the IEX Retail Price
Improvement Program. Proposed Rule 7.44 sets forth definitions, order
types, processes for RMO application, qualification, disapproval and
disqualification for the Program, and the operation, priority, and
allocation of orders in the Program that are based on rules previously
approved by the Commission for retail price improvement programs
currently offered by equities exchanges. Accordingly, the Exchange also
believes the proposed change 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 by promoting consistency among
exchange rules setting forth retail price improvement programs, which
could encourage retail investors to direct order flow to the Program to
seek out price improvement opportunities.
The Exchange also believes that the proposed change 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 it is intended to attract retail order flow to the
Exchange, including by facilitating opportunities for such order flow
to receive potential price improvement at the midpoint or better. The
proposed change would also promote competition for retail order flow
among execution venues, which would benefit retail investors by
creating additional price improvement opportunities for marketable
retail order flow on a public exchange. In particular, the Exchange
believes that providing for RPI Orders and Retail Orders that function
as MPL Orders could provide more deterministic price improvement
opportunities for Retail Orders, thereby attracting additional retail
order flow to the Exchange. In addition, the Exchange believes that
also offering a Retail Order to buy (sell) that could trade with orders
to sell (buy) on the Exchange Book at prices equal to or above (below)
the PBO (PBB) (after trading with RPI Orders and interest on the
Exchange Book with a working price below (above) the PBO (PBB)) could
provide for additional trading opportunities for Retail Orders
designated as Type 2 by the RMO. The Exchange notes that this type of
Retail Order is currently offered in the NYSE Arca Retail Liquidity
Program. The Exchange also believes that the proposed change would
allow it to compete with other exchanges that similarly promote
additional trading opportunities for retail order flow at the
midpoint.\20\
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\20\ See note 9, 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 encourage competition by promoting additional
trading opportunities at the midpoint and supporting price improvement
opportunities at the midpoint of the PBBO or better for retail
investors. 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
[[Page 57513]]
provide additional trading opportunities at the midpoint.\21\
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\21\ See note 9, supra.
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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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6)(iii) thereunder.\25\
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\22\ 15 U.S.C. 78s(b)(3)(A)(iii).
\23\ 17 CFR 240.19b-4(f)(6).
\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange stated that
it anticipates that it will be technologically ready to implement the
Program within 30 days of the date of filing, and a waiver of the 30-
day operative delay would allow the Exchange to provide beneficial
price improvement opportunities to retail investors as soon as
practicable. Further, the Exchange stated that waiver of the operative
delay would encourage competition for retail order flow among execution
venues. The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest
because it would allow the Exchange to implement its Program to provide
retail investors with price improvement opportunities and compete with
other execution venues for retail order flow. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\28\
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such 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 under
section 19(b)(2)(B) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\29\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSENAT-2023-17 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-NYSENAT-2023-17. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSENAT-2023-17 and should
be submitted on or before September 13, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18190 Filed 8-22-23; 8:45 am]
BILLING CODE 8011-01-P
