Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices 35513 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Terms not defined herein are defined in the EPN 

Rules, available at http://www.dtcc.com/∼/media/ 

Files/Downloads/legal/rules/ficc_mbsd_

epnrules.pdf. 

4See EPN Rules Article III (EPN Users), EPN Rule 

1 (Requirements Applicable to EPN Users), supra 

note 3. 

5MBSD maintains two sets of rulebooks. The EPN 

Rules govern MBSD’s EPN Service and the MBSD 

Clearing Rules (the ‘‘MBSD Rules’’) govern MBSD’s 

clearance and settlement service. The MBSD Rules 

are available at http://www.dtcc.com/∼/media/ 

Files/Downloads/legal/rules/ficc_mbsd_rules.pdf. 

Pursuant to the MBSD Rules, the term ‘‘Clearing 

Member’’ means any entity admitted into 

membership pursuant to MBSD Rule 2A. See MBSD 

Rule 1, Definitions. 

Office of the Secretary at (202) 551– 

5400. 

Dated: July 23, 2018. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–16035 Filed 7–24–18; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83682; File No. SR–FICC– 

2018–005] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change To 

Correct Certain References and 

Provide Transparency to Existing 

Processes in the Mortgage-Backed 

Securities Division Electronic Pool 

Notification Rules 

July 20, 2018. 

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 July 13, 

2018, Fixed Income Clearing 

Corporation (‘‘FICC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the clearing agency. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to the FICC MortgageBacked Securities Division (‘‘MBSD’’) 

electronic pool notification (‘‘EPN’’) 

Rules (the ‘‘EPN Rules’’) 3 as described 

below. 

FICC is proposing to correct the EPN 

Rules by amending several references in 

the section of the EPN Rules entitled 

‘‘FICC Mortgage-Backed Securities 

Division (‘‘MBSD’’) EPN Schedule of 

Charges.’’ Specifically, FICC is 

proposing to replace the references to 

‘‘FICC’’ with ‘‘the Corporation.’’ FICC is 

proposing this change because ‘‘FICC’’ 

is not a term that is defined in the EPN 

Rules. In addition, FICC is proposing to 

replace the reference to ‘‘The Depository 

Trust Corporation’’ with ‘‘The 

Depository Trust & Clearing 

Corporation.’’ FICC is proposing this 

change because the reference to ‘‘The 

Depository Trust Corporation’’ is an 

error. 

FICC is also proposing to amend 

Article III (EPN Users) of the EPN Rules 

to set forth MBSD’s existing practices. 

Specifically, FICC is proposing to 

include an EPN User’s ongoing 

obligation to notify FICC if such EPN 

User no longer complies with the 

requirements for admission to 

membership in the EPN Rules (i.e., as 

set forth in Secs. 2 (Approval of 

Applicants) and 3 (Agreements of EPN 

Users) of EPN Rule 1 (Requirements 

Applicable to EPN Users) of Article III 

(EPN Users)). In addition, FICC is 

proposing to amend Article III (EPN 

Users) to define specific circumstances 

where FICC would undertake action to 

determine the status of an EPN User and 

its continued access to the EPN system. 

The proposed change would also state 

that FICC may request that an EPN User 

provide written assurances if FICC 

believes such EPN User may fail to 

comply with the EPN Rules. The 

proposed changes to Article III (EPN 

Users) would necessitate a new defined 

term in Article I (Definitions and 

General Provisions) of the EPN Rules. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

FICC is proposing to correct the EPN 

Rules by amending several references in 

the section of the EPN Rules entitled 

‘‘FICC Mortgage-Backed Securities 

Division (‘‘MBSD’’) EPN Schedule of 

Charges.’’ Specifically, FICC is 

proposing to replace the references to 

‘‘FICC’’ with ‘‘the Corporation.’’ FICC is 

proposing this change because ‘‘FICC’’ 

is not a term that is defined in the EPN 

Rules. In addition, FICC is proposing to 

replace the reference to ‘‘The Depository 

Trust Corporation’’ with ‘‘The 

Depository Trust & Clearing 

Corporation.’’ FICC is proposing this 

change because the reference to ‘‘The 

Depository Trust Corporation’’ is an 

error. 

FICC is also proposing to amend 

Article III (EPN Users) of the EPN Rules 

to set forth MBSD’s existing practices. 

Specifically, FICC is proposing to 

include an EPN User’s ongoing 

obligation to notify FICC if such EPN 

User no longer complies with the 

requirements for admission to 

membership in the EPN Rules (i.e., as 

set forth in Secs. 2 (Approval of 

Applicants) and 3 (Agreements of EPN 

Users) of EPN Rule 1 (Requirements 

Applicable to EPN Users) of Article III 

(EPN Users)). In addition, FICC is 

proposing to amend Article III (EPN 

Users) to define specific circumstances 

where FICC would undertake action to 

determine the status of an EPN User and 

its continued access to the EPN system. 

The proposed change would also state 

that FICC may request that an EPN User 

provide written assurances if FICC 

believes such EPN User may fail to 

comply with the EPN Rules. The 

proposed changes to Article III (EPN 

Users) would necessitate a new defined 

term in Article I (Definitions and 

General Provisions) of the EPN Rules. 

The proposed changes are described 

below. 

1. MBSD’s EPN Service 

MBSD’s electronic pool notification 

service (referred to in the EPN Rules as 

the ‘‘EPN Service’’) enables users to 

reduce risk and streamline their 

operations by providing an automated 

manner for market participants that 

have an obligation to deliver pools 

(‘‘pool sellers’’) to transmit pool 

information efficiently and reliably to 

their counterparties (‘‘pool buyers’’) in 

real time. Market participants that wish 

to utilize the EPN Service are required 

to submit an application to MBSD. The 

application process and the use of the 

EPN Service are governed by the EPN 

Rules.4 MBSD’s Clearing Members are 

required to be EPN Users; however, one 

can be an EPN User and not a Clearing 

Member.5


sradovich on DSK3GMQ082PROD with NOTICES
35514 Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 Id. 

2. Proposed Changes To Make 

Corrections to the EPN Rules 

FICC is proposing to correct several 

references in the EPN Rules because the 

proposed changes would help to ensure 

that the EPN Rules are clear and 

accurate. Specifically, FICC is proposing 

to correct the section entitled ‘‘FICC 

Mortgage-Backed Securities Division 

(‘‘MBSD’’) EPN Schedule of Charges’’ in 

order to replace the references to 

‘‘FICC’’ with ‘‘the Corporation.’’ FICC is 

proposing this change because ‘‘FICC’’ 

is not a term that is defined in the EPN 

Rules. In addition, FICC is also 

proposing to replace the reference to 

‘‘The Depository Trust Corporation’’ 

with ‘‘The Depository Trust & Clearing 

Corporation.’’ FICC is proposing this 

change because the reference to ‘‘The 

Depository Trust Corporation’’ is an 

error. 

3. Proposed Changes To Amend the 

EPN Rules To Include an EPN User’s 

Ongoing Reporting Obligations 

FICC’s existing practice is to require 

EPN Users to report certain information 

to FICC. In addition, if FICC learns of 

information that leads FICC to believe 

an EPN User is not in compliance with 

the EPN Rules, FICC will assess whether 

such EPN User is in compliance with 

the EPN Rules and may request that an 

EPN User provide written assurances 

that such EPN User will not violate the 

EPN Rules. FICC is proposing to amend 

the EPN Rules to reflect these practices. 

First, FICC is proposing to amend 

EPN Rule 1 (Requirements Applicable to 

EPN Users) of Article III (EPN Users) to 

include a provision that would be 

numbered ‘‘Sec. 8. General Continuance 

Standards.’’ This section would state 

that an EPN User shall promptly inform 

FICC, both orally and in writing, if such 

EPN User no longer complies with any 

of the requirements for admission to 

membership set forth in the EPN Rules 

(i.e., as set forth in Secs. 2 (Approval of 

Applicants) and 3 (Agreements of EPN 

Users) of EPN Rule 1 (Requirements 

Applicable to EPN Users) of Article III 

(EPN Users)). The referenced 

notification must take place within two 

Business Days from the date on which 

the EPN User first learns of its noncompliance. 

Next, FICC is proposing to amend the 

EPN Rules to have the new ‘‘General 

Continuance Standards’’ state that an 

EPN User shall notify FICC within two 

Business Days of learning of an 

investigation or proceeding to which it 

is, or is becoming, subject that would 

cause the EPN User to fall out of 

compliance with any of the 

requirements for membership set forth 

in the EPN Rules (i.e., as set forth in 

Secs. 2 (Approval of Applicants) and 3 

(Agreements of EPN Users) of EPN Rule 

1 (Requirements Applicable to EPN 

Users) of Article III (EPN Users)). 

However, the EPN User would not be 

required to notify FICC if doing so 

would cause the EPN User to violate an 

applicable law, rule, or regulation. 

4. Proposed Changes To Amend the 

EPN Rules To Define Circumstances 

Under Which FICC May Determine an 

EPN User’s Compliance With the EPN 

Rules 

FICC is also proposing that the new 

‘‘General Continuance Standards’’ state 

that FICC would undertake action to 

determine the status of an EPN User and 

its continued access to the EPN system 

if: 

(a) An EPN User fails to maintain the 

requirements for admission to 

membership, including but not limited 

to operational testing and related 

reporting requirements imposed by 

FICC from time to time; 

(b) an EPN User violates any EPN 

Rule or other agreement with FICC; 

(c) an EPN User fails to satisfy in a 

timely manner any obligation to FICC; 

(d) there is a Reportable Event (as 

defined below); or 

(e) FICC otherwise deems it necessary 

or advisable, in order to protect FICC, its 

other EPN Users, or its creditors or 

investors, to safeguard securities and 

funds in the custody or control of FICC, 

or to promote the prompt and accurate 

processing, clearance or settlement of 

securities transactions. 

In connection with clause (d) above, 

FICC proposes to define a reportable 

event (‘‘Reportable Event’’) in EPN Rule 

1 (Definitions) of Article I (Definitions 

and General Provisions) as an event that 

would effect a change in control of an 

EPN User or could have a substantial 

impact on such EPN User’s business 

and/or financial condition, including, 

but not limited to: (i) Material 

organizational changes including 

mergers, acquisitions, changes in 

corporate form, name changes, changes 

in the ownership of an EPN User or its 

affiliates, and material changes in 

management, and (ii) status as a 

defendant in litigation, which could 

reasonably impact the EPN User’s 

financial condition or ability to conduct 

business. The proposed ‘‘General 

Continuance Standards’’ section would 

also require an EPN User to submit 

written notice to FICC of a Reportable 

Event at least 90 calendar days prior to 

the effective date of such Reportable 

Event unless the EPN User demonstrates 

that it could not have reasonably done 

so, and provided notice, both orally and 

in writing, to FICC as soon as possible. 

Additionally, FICC is proposing that 

the proposed ‘‘General Continuance 

Standards’’ section state that, if FICC 

has reason to believe that an EPN User 

may fail to comply with any of the EPN 

Rules, FICC may require the EPN User 

to provide written assurances. 

Specifically, FICC may require such 

assurances, within such timeframe, in 

such detail, and pursuant to such 

manner as FICC shall determine, in 

writing of a credible nature that the EPN 

User shall not, in fact, violate any of the 

EPN Rules. These assurances could 

include, but would not be limited to, 

notarized statements, affidavits and/or 

officers’ certificates. 

In order to accommodate the 

proposed ‘‘General Continuance 

Standards’’ section as described in this 

subsection 4 and in subsection 3 above, 

FICC is proposing to change the 

numbering of the existing 

‘‘Confidentiality’’ provision in EPN Rule 

1 (Requirements Applicable to EPN 

Users) of Article III (EPN Users) from 

‘‘Sec. 8’’ to ‘‘Sec. 9.’’ 

2. Statutory Basis 

Section 17A(b)(3)(F) of the Act 

requires, in part, that the EPN Rules be 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions.6

The proposed change to correct 

references in the section of the EPN 

Rules entitled ‘‘FICC Mortgage-Backed 

Securities Division (‘‘MBSD’’) EPN 

Schedule of Charges’’ (as described 

above in subsection 2 of Item II(A)1) 

would help to ensure that the EPN Rules 

are accurate and clear to EPN Users. As 

such, FICC believes that the proposed 

change would allow EPN Users to have 

a better understanding of the EPN Rules 

and thereby assist in promoting the 

prompt and accurate clearance and 

settlement of securities transactions, 

consistent with Section 17A(b)(3)(F) of 

the Act.7

The proposed changes to (i) include 

an EPN User’s ongoing obligation to 

notify FICC if such EPN User no longer 

complies with the requirements for 

admission to membership as set forth in 

the EPN Rules (as described above in 

subsection 3 of Item II(A)1), (ii) define 

specific circumstances where FICC 

would undertake action to determine 

the status of an EPN User and its 

continued access to the EPN system (as 

described above in subsection 4 of Item 

II(A)1), and (iii) state that FICC may 

request that an EPN User provide 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices 35515 

8 Id. 

9 17 CFR 240.17Ad–22(e)(18). 

10 Id. 

11 17 CFR 240.17Ad–22(e)(23)(i). 

12 Id. 

written assurances if FICC believes such 

EPN User may fail to comply with the 

EPN Rules (as described above in 

subsection 4 of Item II(A)1) would 

provide clarity to EPN Users by setting 

forth in the EPN Rules FICC’s existing 

practice. FICC believes this clarity 

would help to ensure that EPN Users are 

fully aware of their rights and 

obligations. The proposed changes 

would also help to ensure that FICC is 

promptly made aware in the event that 

an EPN User’s access to the EPN Service 

should be reassessed due to an EPN 

User’s possible violation of the EPN 

Rules. Because the proposed rule 

changes are designed to help ensure that 

EPN Users remain compliant with the 

EPN Rules, FICC believes that the 

proposed changes would help FICC 

protect the EPN Service. As the EPN 

Service is an important aspect of 

MBSD’s clearance and settlement 

services, these proposed changes would 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, consistent with Section 

17A(b)(3)(F) of the Act.8

Rule 17Ad–22(e)(18) under the Act 

requires, in part, that FICC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to monitor 

compliance with participation 

requirements on an ongoing basis.9 As 

described above, the proposed rule 

changes to amend the EPN Rules to (i) 

include an EPN User’s ongoing 

reporting obligations (as described 

above in subsection 3 of Item II(A)1) and 

(ii) define circumstances under which 

FICC may determine an EPN User’s 

compliance with the EPN Rules (as 

described above in subsection 4 of Item 

II(A)1) would help to ensure that FICC 

is promptly made aware in the event 

that an EPN User’s access to the EPN 

Service should be reassessed due to an 

EPN User’s possible violation of EPN 

Rules. Because the proposed changes 

give FICC the ability to monitor an EPN 

User’s compliance with the EPN Rules, 

FICC believes the proposed changes to 

(i) include an EPN User’s ongoing 

reporting obligations and (ii) define 

circumstances under which FICC may 

determine an EPN User’s compliance 

with the EPN Rules are consistent with 

Rule 17Ad–22(e)(18).10

Rule 17Ad–22(e)(23)(i) under the Act 

requires, in part, that FICC establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to provide for 

publicly disclosing all relevant rules 

and material procedures.11 As described 

above, the proposed rule changes to 

amend the EPN Rules to (i) make 

corrections (as described above in 

subsection 2 of Item II(A)1), (ii) include 

an EPN User’s ongoing reporting 

obligations (as described above in 

subsection 3 of Item II(A)1), and (iii) 

define circumstances under which FICC 

may determine an EPN User’s 

compliance with the EPN Rules (as 

described above in subsection 4 of Item 

II(A)1) would better publicly disclose all 

relevant and material procedures 

regarding the EPN Service. Therefore, 

FICC believes the proposed changes to 

correct and codify FICC’s existing 

practices in the EPN Rules are 

consistent with Rule 17Ad– 

22(e)(23)(i).12

(B) Clearing Agency’s Statement on 

Burden on Competition 

FICC does not believe that the 

proposed changes to correct references 

in the section of the EPN Rules entitled 

‘‘FICC Mortgage-Backed Securities 

Division (‘‘MBSD’’) EPN Schedule of 

Charges’’ (as described above in 

subsection 2 of Item II(A)1) would 

impact competition because the 

proposed changes correct errors in the 

EPN Rules and do not affect FICC’s 

operations or the rights and obligations 

of EPN Users. 

FICC does not believe that the 

proposed changes to (i) include an EPN 

User’s ongoing obligation to notify FICC 

if such EPN User no longer complies 

with the requirements for admission to 

membership in the EPN Rules (as 

described above in subsection 3 of Item 

II(A)1), (ii) define specific 

circumstances where FICC would 

undertake action to determine the status 

of an EPN User and its continued access 

to the EPN system (as described above 

in subsection 4 of Item II(A)1), and (iii) 

state that FICC may request that an EPN 

User provide written assurances if FICC 

believes such EPN User may fail to 

comply with the EPN Rules (as 

described above in subsection 4 of Item 

II(A)1) would impact competition 

because the proposed changes would 

codify FICC’s existing practices in the 

EPN Rules. The proposed changes 

would apply equally to all EPN Users 

and would not affect FICC’s operations. 

As a result, FICC believes the proposed 

rule change would not have any impact 

on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

FICC has not received or solicited any 

written comments relating to this 

proposal. FICC will notify the 

Commission of any written comments 

received by FICC. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FICC–2018–005 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–FICC–2018–005. 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 (http://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 


sradovich on DSK3GMQ082PROD with NOTICES
35516 Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices 

13 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 73702 

(November 28, 2014), 79 FR 72049 (December 4, 

2014) (SR–BX–2014–048) (‘‘RPI Approval Order’’). 

4See id. 

5A ‘‘Retail Order’’ is defined in BX Rule 

4780(a)(2) by referencing BX Rule 4702, and BX 

Rule 4702(b)(6) says it is an order type with a nondisplay order attribute submitted to the Exchange 

by a RMO. A Retail Order must be an agency order, 

or riskless principal order that satisfies the criteria 

of FINRA Rule 5320.03. The Retail Order must 

reflect trading interest of a natural person with no 

change made to the terms of the underlying order 

of the natural person with respect to price (except 

in the case of a market order that is changed to a 

marketable limit order) or side of market and that 

does not originate from a trading algorithm or any 

other computerized methodology. 

6The term Protected Quotation is defined in 

Chapter XII, Sec. 1(19) and has the same meaning 

as is set forth in Regulation NMS Rule 600(b)(58). 

The Protected NBBO is the best-priced protected 

bid and offer. Generally, the Protected NBBO and 

the national best bid and offer (‘‘NBBO’’) will be the 

same. However, a market center is not required to 

route to the NBBO if that market center is subject 

to an exception under Regulation NMS Rule 

611(b)(1) or if such NBBO is otherwise not available 

for an automatic execution. In such case, the 

Protected NBBO would be the best-priced protected 

bid or offer to which a market center must route 

interest pursuant to Regulation NMS Rule 611. 

7See RPI Approval Order, supra note 3 at 72053. 

8 Id. at 72049. 

9See Securities Exchange Act Release No. 76490 

(November 20, 2015), 80 FR 74165 (November 27, 

2015) (SR–BX–2015–073); Securities Exchange Act 

Release No. 79446 (December 1, 2016), 81 FR 88290 

(December 7, 2016) (SR–BX–2016–065); Securities 

Exchange Act Release No. 82192 (December 1, 

2017), 82 FR 57809 (December 7, 2017) (SR–BX– 

2017–055); and Securities Exchange Act Release 

No. 83539 (June 28, 2018), 83 FR 31203 (July 3, 

2018) (SR–BX–2018–026). 

10See RPI Approval Order, supra note 3 at 72051. 

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 FICC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). 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–FICC– 

2018–005 and should be submitted on 

or before August 16, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–15943 Filed 7–25–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83681; File No. SR–BX– 

2018–025] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing of Proposed 

Rule Change To Make Permanent the 

Pilot Program for the Exchange’s 

Retail Price Improvement Program 

July 20, 2018. 

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 July 9, 

2018, Nasdaq BX, Inc. (‘‘BX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to a proposal 

to make permanent the pilot program for 

the Exchange’s Retail Price 

Improvement (‘‘RPI’’) Program (the 

‘‘Program’’), which is set to expire the 

earlier of approval of the filing to make 

this rule permanent or December 31, 

2018. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqbx.cchwallstreet.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 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to make 

permanent the Exchange’s pilot RPI 

Program,3 currently scheduled to expire 

the earlier of approval of the filing to 

make this rule permanent or December 

31, 2018. 

Background 

In November 2014, the Commission 

approved the RPI Program on a pilot 

basis.4 The Program is designed to 

attract retail order flow to the Exchange, 

and allow such order flow to receive 

potential price improvement. The 

Program is currently limited to trades 

occurring at prices equal to or greater 

than $1.00 per share. Under the 

Program, a class of market participant 

called a Retail Member Organization 

(‘‘RMO’’) is eligible to submit certain 

retail order flow (‘‘Retail Orders’’) 5 to 

the Exchange. BX members 

(‘‘Members’’) are permitted to provide 

potential price improvement for Retail 

Orders in the form of non-displayed 

interest that is priced more aggressively 

than the Protected National Best Bid or 

Offer (‘‘Protected NBBO’’).6

The Program was approved by the 

Commission on a pilot basis running 

one-year from the date of 

implementation.7 The Commission 

approved the Program on November 28, 

2014.8 The Exchange implemented the 

Program on December 1, 2014 and the 

pilot has since been extended for a oneyear period twice, as well as for a sixmonth period, with it now scheduled to 

expire the earlier of approval of the 

filing to make this rule permanent or 

December 31, 2018.9

Specifically, BX Rule 4780(h) will be 

amended to delete that the Program is 

a pilot and that is scheduled to expire 

the earlier of approval of the filing to 

make this rule permanent or December 

31, 2018. BX Rule 4780(h) will continue 

to say that the Program will be limited 

to securities whose Bid Price on the 

Exchange is greater than or equal to 

$1.00 per share. 

The SEC approved the Program pilot, 

in part, because it concluded, ‘‘the 

Program is reasonably designed to 

benefit retail investors by providing 

price improvement to retail order 

flow.’’ 10 The Commission also found 

that ‘‘while the Program would treat 

retail order flow differently from order 

flow submitted by other market 

participants, such segmentation would 

not be inconsistent with Section 6(b)(5) 

of the Act, which requires that the rules 


sradovich on DSK3GMQ082PROD with NOTICES