41128 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 68303 

(November 27, 2012), 77 FR 71652 (December 3, 

2012) (‘‘RPI Approval Order’’) (SR–BYX–2012–019). 

4The Exchange will periodically notify the 

membership regarding the securities included in 

the Program through an information circular. 

5A ‘‘User’’ is defined in Rule 1.5(cc) as any 

member or sponsored participant of the Exchange 

who is authorized to obtain access to the System. 

6A ‘‘Retail Order’’ is defined in Rule 11.24(a)(2) 

as an agency order that originates from a natural 

person and is submitted to the Exchange by a RMO, 

provided that no change is made to the terms of the 

order with respect to price or side of market and 

the order does not originate from a trading 

algorithm or any computerized methodology. See 

Rule 11.24(a)(2). 

7The term Protected Quotation is defined in BYX 

Rule 1.5(t) and has the same meaning as is set forth 

in Regulation NMS Rule 600(b)(58). The terms 

Protected NBB and Protected NBO are defined in 

BYX Rule 1.5(s). The Protected NBB is the bestpriced protected bid and the Protected NBO is the 

best-priced protected offer. Generally, the Protected 

NBB and Protected NBO and the national best bid 

(‘‘NBB’’) and national best offer (‘‘NBO’’, together 

with the NBB, the ‘‘NBBO’’) will be the same. 

However, a market center is not required to route 

to the NBB or NBO if that market center is subject 

to an exception under Regulation NMS Rule 

611(b)(1) or if such NBB or NBO is otherwise not 

available for an automatic execution. In such case, 

the Protected NBB or Protected NBO would be the 

best-priced protected bid or offer to which a market 

center must route interest pursuant to Regulation 

NMS Rule 611. 

8See RPI Approval Order, supra note 3 at 71652. 

9 Id. 

10See Securities Exchange Act Release Nos. 

71249 (January 7, 2014), 79 FR 2229 (January 13, 

2014) (SR–BYX–2014–001); 74111 (January 22, 

2015), 80 FR 4598 (January 28, 2015) (SR–BYX– 

2015–05); 76965 (January 22, 2016), 81 FR 4682 

(January 27, 2016) (SR–BYX–2016–01); 78180 (June 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2018–15 and 

should be submitted on or before 

September 7, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–17740 Filed 8–16–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83831; File No. SR– 

CboeBYX–2018–014] 

Self-Regulatory Organizations; Cboe 

BYX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To Make 

Permanent Rule 11.24, Which Sets 

Forth the Exchange’s Pilot Retail Price 

Improvement Program 

August 13, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 30, 

2018, Cboe BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) 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 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 filed a proposal to 

make permanent Rule 11.24, which sets 

forth the Exchange’s pilot Retail Price 

Improvement Program. 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.markets.cboe.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 parts of such 

statements. 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Rule 11.24 to make 

permanent the Retail Price Improvement 

Program (the ‘‘Program’’), which is 

currently offered on a pilot basis. The 

Exchange has operated the pilot for a six 

year period and believes that it has been 

successful in its stated goal of providing 

price improvement opportunities to 

retail investors. The analysis conducted 

by the Exchange shows that retail 

investors have been provided a total of 

$4.5 million of price improvement 

during the 2.5 year period reviewed 

from January 2016 through June 2018. In 

addition, the Exchange’s analysis shows 

that the Program has provided these 

benefits to retail investors without 

having an adverse impact on the broader 

market. The proposal provides an 

analysis of the economic benefits to 

retail investors and the marketplace 

flowing from operation of the Program, 

which the Exchange believes supports 

making the Program permanent. 

Background 

In November 2012, the Commission 

approved the Program on a pilot basis.3

The Program is designed to attract retail 

order flow to the Exchange, and allow 

such order flow to receive potential 

price improvement. The Program is 

currently limited to trades occurring at 

prices equal to or greater than $1.00 per 

share.4 Under the Program, a class of 

market participant called a Retail 

Member Organization (‘‘RMO’’) is 

eligible to submit certain retail order 

flow (‘‘Retail Orders’’) to the Exchange. 

Users 5 are permitted to provide 

potential price improvement for Retail 

Orders 6 in the form of non-displayed 

interest that is better than the national 

best bid that is a Protected Quotation 

(‘‘Protected NBB’’) or the national best 

offer that is a Protected Quotation 

(‘‘Protected NBO’’, and together with the 

Protected NBB, the ‘‘Protected NBBO’’).7

The Program was approved by the 

Commission on a pilot basis running 

one-year from the date of 

implementation.8 The Commission 

approved the Program on November 27, 

2012.9 The Exchange implemented the 

Program on January 11, 2013, and has 

extended the pilot period five times.10


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28, 2016), 81 FR 43306 (July 1, 2016) (SR–BYX– 

2016–15); 81368 (August 10, 2017), 82 FR 38960 

(August 16, 2017) (SR–BYX–2017–18). 

11Concurrently with the filing of this proposed 

rule change, the Exchange is filing to extend the 

current pilot period until the earlier of approval of 

the filing to make this rule permanent (i.e., this 

proposed rule change) or December 31, 2018. 

12The Program will continue to only apply to 

trades occurring at prices equal to or greater than 

$1.00 per share. 

13See RPI Approval Order, supra note 3 at 71655. 

14 Id. 

15FINRA Rule 5320.03 clarifies that an RMO may 

enter Retail Orders on a riskless principal basis, 

provided that (i) the entry of such riskless principal 

orders meet the requirements of FINRA Rule 

5320.03, including that the RMO maintains 

supervisory systems to reconstruct, in a time-[sic] 

sequenced manner, all Retail Orders that are 

entered on a riskless principal basis; and (ii) the 

RMO submits a report, contemporaneously with the 

execution of the facilitated order, that identifies the 

trade as riskless principal. 16Exchange systems prevent Retail Orders from 

interacting with RPI Orders if the RPI Order is not 

priced at least $0.001 better than the Protected 

NBBO. The Exchange notes, however, that price 

improvement of $0.001 would be a minimum 

requirement and Users could enter RPI Orders that 

better the Protected NBBO by more than $0.001. 

Exchange systems will accept RPI Orders without 

a minimum price improvement value; however, 

such interest will execute at its floor or ceiling price 

only if such floor or ceiling price is better than the 

Protected NBBO by $0.001 or more. 

17The ‘‘System’’ is defined in BYX Rule 1.5(aa) 

as ‘‘the electronic communications and trading 

facility designated by the Board through which 

securities orders of Users are consolidated for 

ranking, execution and, when applicable, routing 

away.’’ 

The pilot period for the Program is 

scheduled to expire on July 31, 2018.11

The Exchange believes that the Program 

has been successful in its goal of 

providing price improvement to Retail 

Orders, and is therefore proposing to 

amend Rule 11.24 to make this pilot 

permanent so that retail investors can 

continue to reap the benefits of the 

Program.12

The SEC approved the Program on a 

pilot basis, in part, because it 

concluded, ‘‘the Program is reasonably 

designed to benefit retail investors by 

providing price improvement to retail 

order flow.’’ 13 The Commission also 

found that ‘‘while the Program would 

treat retail order flow differently from 

order flow submitted by other market 

participants, such segmentation would 

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

of the Act, which requires that the rules 

of an exchange are not designed to 

permit unfair discrimination.’’ 14 As the 

SEC acknowledged, the retail order 

segmentation was designed to create 

greater retail order flow competition and 

thereby increase the amount of this flow 

to transparent and well-regulated 

exchanges. This would help to ensure 

that retail investors benefit from 

competitive price improvement that 

exchange-based liquidity providers 

provide. As discussed below, the 

Exchange believes that the Program data 

supports the conclusion that it provides 

valuable price [sic] to retail investors 

that they may not otherwise have 

received, and that it is therefore 

appropriate to make the Program 

permanent. 

Definitions 

The Exchange adopted the following 

definitions under Rule 11.24(a): 

First, the term ‘‘Retail Member 

Organization’’ is defined as a Member 

(or a division thereof) that has been 

approved by the Exchange to submit 

Retail Orders. 

Second, the term ‘‘Retail Order’’ is 

defined as an agency order or riskless 

principal that meets the criteria of 

FINRA Rule 5320.03 15 that originates 

from a natural person and is submitted 

to the Exchange by a Retail Member 

Organization, provided that no change 

is made to the terms of the order with 

respect to price or side of market and 

the order does not originate from a 

trading algorithm or any other 

computerized methodology. A Retail 

Order is an Immediate or Cancel 

(‘‘IOC’’) Order and shall operate in 

accordance with Rule 11.24(f). A Retail 

Order may be an odd lot, round lot, or 

mixed lot. 

Finally, the term ‘‘Retail Price 

Improvement Order’’ or ‘‘RPI Order’’ 

consists of non-displayed interest on the 

Exchange that is priced better than the 

Protected NBB or Protected NBO by at 

least $0.001 and that is identified as 

such (‘‘RPI interest’’).16 The System 17

will monitor whether RPI buy or sell 

interest, adjusted by any offset and 

subject to the ceiling or floor price, is 

eligible to interact with incoming Retail 

Orders. An RPI Order remains nondisplayed in its entirety (the buy or sell 

interest, the offset, and the ceiling or 

floor). An RPI Order may also be entered 

in a sub-penny increment with an 

explicit limit price. Any User is 

permitted, but not required, to submit 

RPI Orders. An RPI Order may be an 

odd lot, round lot or mixed lot. 

The price of an RPI Order is 

determined by a User’s entry of the 

following into the Exchange: (1) RPI buy 

or sell interest; (2) an offset, if any; and 

(3) a ceiling or floor price. RPI Orders 

submitted with an offset are similar to 

other peg orders available to Users in 

that the order is tied or ‘‘pegged’’ to a 

certain price, and would have its price 

automatically set and adjusted upon 

changes in the Protected NBBO, both 

upon entry and any time thereafter. RPI 

buy or sell interest is typically entered 

to track the Protected NBBO, that is, RPI 

Orders are typically submitted with an 

offset. The offset is a predetermined 

amount by which the User is willing to 

improve the Protected NBBO, subject to 

a ceiling or floor price. The ceiling or 

floor price is the amount above or below 

which the User does not wish to trade. 

RPI Orders in their entirety (the buy or 

sell interest, the offset, and the ceiling 

or floor) will remain non-displayed. The 

Exchange also allows Users to enter RPI 

Orders that establish the exact limit 

price, which is similar to a nondisplayed limit order currently accepted 

by the Exchange except the Exchange 

accepts sub-penny limit prices on RPI 

Orders in increments of $0.001. The 

Exchange monitors whether RPI buy or 

sell interest, adjusted by any offset and 

subject to the ceiling or floor price, is 

eligible to interact with incoming Retail 

Orders. 

Users and RMOs may enter odd lots, 

round lots or mixed lots as RPI Orders 

and as Retail Orders respectively. As 

discussed below, RPI Orders are ranked 

and allocated according to price and 

time of entry into the System consistent 

with Rule 11.12 and therefore without 

regard to whether the size entered is an 

odd lot, round lot or mixed lot amount. 

Similarly, Retail Orders interact with 

RPI Orders according to the Priority and 

Allocation rules of the Program and 

without regard to whether they are odd 

lots, round lots or mixed lots. Finally, 

Retail Orders are designated as Type 1 

or Type 2 without regard to the size of 

the order. 

RPI Orders interact with Retail Orders 

as follows. Assume a User enters RPI 

sell interest with an offset of $0.001 and 

a floor of $10.10 while the Protected 

NBO is $10.11. The RPI Order could 

interact with an incoming buy Retail 

Order at $10.109. If, however, the 

Protected NBO was $10.10, the RPI 

Order could not interact with the Retail 

Order because the price required to 

deliver the minimum $0.001 price 

improvement ($10.099) would violate 

the User’s floor of $10.10. If a User 

otherwise enters an offset greater than 

the minimum required price 

improvement and the offset would 

produce a price that would violate the 

User’s floor, the offset would be applied 

only to the extent that it respects the 

User’s floor. By way of illustration, 

assume RPI buy interest is entered with 

an offset of $0.005 and a ceiling of 

$10.112 while the Protected NBB is at 

$10.11. The RPI Order could interact 

with an incoming sell Retail Order at 

$10.112, because it would produce the 

required price improvement without 

violating the User’s ceiling, but it could 

not interact above the $10.112 ceiling. 

Finally, if a User enters an RPI Order 


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18For example, a prospective RMO could be 

required to provide sample marketing literature, 

website screenshots, other publicly disclosed 

materials describing the retail nature of their order 

flow, and such other documentation and 

information as the Exchange may require to obtain 

reasonable assurance that the applicant’s order flow 

would meet the requirements of the Retail Order 

definition. 

19The Exchange or another self-regulatory 

organization on behalf of the Exchange will review 

an RMO’s compliance with these requirements 

through an exam-based review of the RMO’s 

internal controls. 

20The Exchange notes that the Retail Liquidity 

Identifier for Tape A and Tape B securities are 

disseminated pursuant to the CTA/CQ Plan. The 

identifier is also available through the consolidated 

public market data stream for Tape C securities. The 

processor for the Nasdaq UTP quotation stream 

disseminates the Retail Liquidity Identifier and 

analogous identifiers from other market centers that 

operate programs similar to the RPI Program. 

without an offset (i.e., an explicitly 

priced limit order), the RPI Order will 

interact with Retail Orders at the level 

of the User’s limit price as long as the 

minimum required price improvement 

is produced. Accordingly, if RPI sell 

interest is entered with a limit price of 

$10.098 and no offset while the 

Protected NBO is $10.11, the RPI Order 

could interact with the Retail Order at 

$10.098, producing $0.012 of price 

improvement. The System will not 

cancel RPI interest when it is not 

eligible to interact with incoming Retail 

Orders; such RPI interest will remain in 

the System and may become eligible 

again to interact with Retail Orders 

depending on the Protected NBBO. 

RMO Qualifications and Application 

Process 

Under Rule 11.24(b), any Member 

may qualify as an RMO if it conducts a 

retail business or routes retail orders on 

behalf of another broker-dealer. For 

purposes of Rule 11.24(b), conducting a 

retail business shall include carrying 

retail customer accounts on a fully 

disclosed basis. Any Member that 

wishes to obtain RMO status is required 

to submit: (1) An application form; (2) 

supporting documentation sufficient to 

demonstrate the retail nature and 

characteristics of the applicant’s order 

flow; and (3) an attestation, in a form 

prescribed by the Exchange, that 

substantially all orders submitted as 

Retail Orders will qualify as such under 

Rule 11.24.18 The Exchange shall notify 

the applicant of its decision in writing. 

An RMO is required to have written 

policies and procedures reasonably 

designed to assure that it will only 

designate orders as Retail Orders if all 

requirements of a Retail Order are met. 

Such written policies and procedures 

must require the Member to (i) exercise 

due diligence before entering a Retail 

Order to assure that entry as a Retail 

Order is in compliance with the 

requirements of this rule, and (ii) 

monitor whether orders entered as 

Retail Orders meet the applicable 

requirements. If the RMO represents 

Retail Orders from another broker-dealer 

customer, the RMO’s supervisory 

procedures must be reasonably designed 

to assure that the orders it receives from 

such broker-dealer customer that it 

designates as Retail Orders meet the 

definition of a Retail Order. The RMO 

must (i) obtain an annual written 

representation, in a form acceptable to 

the Exchange, from each broker-dealer 

customer that sends it orders to be 

designated as Retail Orders that entry of 

such orders as Retail Orders will be in 

compliance with the requirements of 

this rule, and (ii) monitor whether its 

broker-dealer customers’ Retail Order 

flow continues to meet the applicable 

requirements.19

If the Exchange disapproves the 

application, the Exchange provides a 

written notice to the Member. The 

disapproved applicant could appeal the 

disapproval by the Exchange as 

provided in Rule 11.24(d), and/or 

reapply for RMO status 90 days after the 

disapproval notice is issued by the 

Exchange. An RMO also could 

voluntarily withdraw from such status 

at any time by giving written notice to 

the Exchange. 

Failure of RMO To Abide by Retail 

Order Requirements 

Rule 11.24(c) addresses an RMO’s 

failure to abide by Retail Order 

requirements. If an RMO designates 

orders submitted to the Exchange as 

Retail Orders and the Exchange 

determines, in its sole discretion, that 

those orders fail to meet any of the 

requirements of Retail Orders, the 

Exchange may disqualify a Member 

from its status as an RMO. When 

disqualification determinations are 

made, the Exchange provides a written 

disqualification notice to the Member. A 

disqualified RMO may appeal the 

disqualification as provided in Rule 

11.24(d) and/or reapply for RMO status 

90 days after the disqualification notice 

is issued by the Exchange. 

Appeal of Disapproval or 

Disqualification 

Rule 11.24(d) provides appeal rights 

to Members. If a Member disputes the 

Exchange’s decision to disapprove it as 

an RMO under Rule 11.24(b) or 

disqualify it under Rule 11.24(c), such 

Member (‘‘appellant’’) may request, 

within five business days after notice of 

the decision is issued by the Exchange, 

that the Retail Price Improvement 

Program Panel (‘‘RPI Panel’’) review the 

decision to determine if it was correct. 

The RPI Panel consists of the 

Exchange’s Chief Regulatory Officer 

(‘‘CRO’’), or a designee of the CRO, and 

two officers of the Exchange designated 

by the Chief Operating Officer (‘‘COO’’). 

The RPI Panel reviews the facts and 

render [sic] a decision within the time 

frame prescribed by the Exchange. The 

RPI Panel may overturn or modify an 

action taken by the Exchange and all 

determinations by the RPI Panel 

constitute final action by the Exchange 

on the matter at issue. 

Retail Liquidity Identifier 

Under Rule 11.24(e), the Exchange 

disseminates an identifier when RPI 

interest priced at least $0.001 better 

than the Exchange’s Protected Bid or 

Protected Offer for a particular security 

is available in the System (‘‘Retail 

Liquidity Identifier’’). The Retail 

Liquidity Identifier is disseminated 

through consolidated data streams (i.e., 

pursuant to the Consolidated Tape 

Association Plan/Consolidated 

Quotation Plan, or CTA/CQ, for Tape A 

and Tape B securities, and the Nasdaq 

UTP Plan for Tape C securities) as well 

as through proprietary Exchange data 

feeds.20 The Retail Liquidity Identifier 

reflects the symbol and the side (buy or 

sell) of the RPI interest, but does not 

include the price or size of the RPI 

interest. In particular, CQ and UTP 

quoting outputs include a field for codes 

related to the Retail Liquidity Identifier. 

The codes indicate RPI interest that is 

priced better than the Exchange’s 

Protected Bid or Protected Offer by at 

least the minimum level of price 

improvement as required by the 

Program. 

Retail Order Designations 

Under Rule 11.24(f), an RMO can 

designate how a Retail Order would 

interact with available contra-side 

interest as follows: 

A Type 1-designated Retail Order will 

interact with available contra-side RPI 

Orders and other price improving 

contra-side interest but will not interact 

with other available contra-side interest 

in the System that is not offering price 

improvement or route to other markets. 

The portion of a Type 1-designated 

Retail Order that does not execute 

against contra-side RPI Orders or other 

price improving liquidity will be 

immediately and automatically 

cancelled. 

A Type 2-designated Retail Order will 

interact first with available contra-side 

RPI Orders and other price improving 

liquidity and then any remaining 


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21A BYX Only Order is defined in BYX Rule 

11.9(c)(4) and includes orders that are not eligible 

for routing to other trading centers. 

22As discussed above, the price of an RPI is 

determined by a User’s entry of buy or sell interest, 

an offset (if any) and a ceiling or floor price. RPI 

sell or buy interest typically tracks the Protected 

NBBO. 

23Type 2 Retail Orders are treated as IOC orders 

that execute against displayed and non-displayed 

liquidity in the Exchange’s order book where there 

is no available liquidity in the Program. Type 2 

Retail Orders can either be designated as eligible for 

routing or as BYX Only Orders, and thus nonroutable, as described above. 

24 Given the limitation, the Program would have 

no impact on the minimum pricing increment for 

orders priced less than $1.00 and therefore no effect 

on the potential of markets executing those orders 

to lock or cross. In addition, the non-displayed 

nature of the liquidity in the Program simply has 

no potential to disrupt displayed, protected quotes. 

In any event, the Program would do nothing to 

change the obligation of exchanges to avoid and 

reconcile locked and crossed markets under NMS 

Rule 610(d). 

25RPI Approval Order, 77 FR at 71655. 

26 Id. 

portion of the Retail Order will be 

executed as an Immediate-or-Cancel 

(‘‘IOC’’) Order pursuant to Rule 

11.9(b)(1). A Type 2-designated Retail 

Order can either be submitted as a BYX 

Only Order 21 or as an order eligible for 

routing pursuant to Rule 11.13(a)(2). 

Priority and Order Allocation 

Under Rule 11.24(g), competing RPI 

Orders in the same security are ranked 

and allocated according to price then 

time of entry into the System. 

Executions occur in price/time priority 

in accordance with Rule 11.12. Any 

remaining unexecuted RPI interest 

remains available to interact with other 

incoming Retail Orders if such interest 

is at an eligible price. Any remaining 

unexecuted portion of the Retail Order 

will cancel or execute in accordance 

with Rule 11.24(f). The following 

example illustrates this method: 

• Protected NBBO for security ABC is 

$10.00–$10.05 

• User 1 enters an RPI Order to buy 

ABC at $10.015 for 500 

• User 2 then enters an RPI Order to 

buy ABC at $10.02 for 500 

• User 3 then enters an RPI Order to 

buy ABC at $10.035 for 500 

An incoming Retail Order to sell ABC 

for 1,000 executes first against User 3’s 

bid for 500 at $10.035, because it is the 

best priced bid, then against User 2’s bid 

for 500 at $10.02, because it is the next 

best priced bid. User 1 is not filled 

because the entire size of the Retail 

Order to sell 1,000 is depleted. The 

Retail Order executes against RPI Orders 

in price/time priority. 

However, assume the same facts 

above, except that User 2’s RPI Order to 

buy ABC at $10.02 is for 100. The 

incoming Retail Order to sell 1,000 

executes first against User 3’s bid for 

500 at $10.035, because it is the best 

priced bid, then against User 2’s bid for 

100 at $10.02, because it is the next best 

priced bid. User 1 then receives an 

execution for 400 of its bid for 500 at 

$10.015, at which point the entire size 

of the Retail Order to sell 1,000 is 

depleted. 

As a final example, assume the same 

facts as above, except that User 3’s order 

was not an RPI Order to buy ABC at 

$10.035, but rather, a non-displayed 

order to buy ABC at $10.03. The result 

would be similar to the result 

immediately above, in that the incoming 

Retail Order to sell 1,000 executes first 

against User 3’s bid for 500 at $10.03, 

because it is the best priced bid, then 

against User 2’s bid for 100 at $10.02, 

because it is the next best priced bid. 

User 1 then receives an execution for 

400 of its bid for 500 at $10.015, at 

which point the entire size of the Retail 

Order to sell 1,000 is depleted. 

Eligible Securities 

All Regulation NMS securities traded 

on the Exchange are eligible for 

inclusion in the RPI Program. The 

Exchange limits the Program to trades 

occurring at prices equal to or greater 

than $1.00 per share. Toward that end, 

Exchange trade validation systems 

prevent the interaction of RPI buy or sell 

interest (adjusted by any offset) and 

Retail Orders at a price below $1.00 per 

share.22 For example, if there is RPI buy 

interest tracking the Protected NBB at 

$0.99 with an offset of $0.001 and a 

ceiling of $1.02, Exchange trade 

validation systems would prevent the 

execution of the RPI Order at $0.991 

with a sell Retail Order with a limit of 

$0.99. However, if the Retail Order was 

Type 2 as defined the Program,23 it 

would be able to interact at $0.99 with 

liquidity outside the Program in the 

Exchange’s order book. In addition to 

facilitating an orderly 24 and 

operationally intuitive program, the 

Exchange believes that limiting the 

Program to trades equal to or greater 

than $1.00 per share enabled it better to 

focus its efforts to monitor price 

competition and to assess any 

indications that data disseminated 

under the Program is potentially 

disadvantaging retail orders. As part of 

that review, the Exchange produced 

data throughout the pilot, which 

included statistics about participation, 

the frequency and level of price 

improvement provided by the Program, 

and any effects on the broader market 

structure. 

Rationale for Making the Program Pilot 

Permanent 

The Exchange established the 

Program in an attempt to attract retail 

order flow to the Exchange by providing 

an opportunity for price improvement to 

such order flow. The Exchange believes 

that the Program promotes transparent 

competition for retail order flow by 

allowing Exchange members to submit 

RPI Orders to interact with Retail 

Orders. Such competition promotes 

efficiency by facilitating the price 

discovery process and generating 

additional investor interest in trading 

securities, thereby promoting capital 

formation and retail investment 

opportunities. The Program will 

continue to be limited to trades 

occurring at prices equal to or greater 

than $1.00 per share. 

In accordance with its filing 

establishing the pilot, the Exchange did 

‘‘produce data throughout the pilot, 

which will include statistics about 

participation, the frequency and level of 

price improvement provided by the 

Program, and any effects on the broader 

market structure.’’ 25 The Exchange has 

fulfilled this obligation through the 

reports and assessments it has 

submitted to the Commission since the 

implementation of the pilot Program. 

The Exchange believes that the data 

provided to the Commission to date, as 

well as the data being provided in this 

proposed rule change, support the 

continued operation of the Program on 

a permanent basis. 

The SEC stated in the RPI Approval 

Order that the Program could promote 

competition for retail order flow among 

execution venues, and that this could 

benefit retail investors by creating 

additional well-regulated and 

transparent price improvement 

opportunities for marketable retail order 

flow, most of which is currently 

executed in the Over-the-Counter 

(‘‘OTC’’) markets without ever reaching 

a public exchange.26 The Exchange 

believes that it has achieved its goal of 

attracting retail order flow to the 

Exchange. As the Exchange’s analysis of 

the Program data below demonstrates, 

there has been consistent retail investor 

interest in the Program, which has 

provided tangible price improvement to 

those retail investors through a 

competitive pricing process over the 

course of the pilot. The data also 

demonstrates that the Program had an 

overall negligible impact on broader 

market quality outside of the Program. 

The Exchange has not received any 


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27The Exchange has also performed an analysis 

of the impact of the Program on other market 

quality indicators, which found that the Program 

did not have a significant impact on market quality 

in the broader market. See Section III below. 

complaints or negative feedback 

concerning the Program. 

I. Overall Analysis of the Program 

Brokers route retail orders to a wide 

range of different trading systems. The 

Program offers a transparent and wellregulated option, providing meaningful 

competition and price improvement. As 

explained above, the purpose of the 

Program is to attract retail order flow to 

the Exchange by providing an 

opportunity for retail investors to 

receive price improvement. The 

Exchange believes that the Program has 

satisfied this goal, having provided a 

total of $4.5 million of price 

improvement, or approximately 

$153,000 per month, in the last 2.5 

years. Furthermore, while the amount of 

price improvement provided in the 

Program varies month to month, the 

amount of price improvement provided 

in recent months has generally 

increased relative to prior months due 

to additional participation in the 

Program by market participants with 

retail order flow. The Exchange believes 

that this supports permanent approval 

of the pilot as retail investors continue 

to reap the benefits afforded by the 

Program. The amount of monthly and 

cumulative price improvement provided 

in the Program is illustrated in Chart 1 

below. 

Furthermore, Retail Order volume 

executed in the Program accounted for 

between 0.86% and 2.32% of total BYX 

volume from January 2017 to June 2018, 

as shown in Chart 2 below, and between 

0.05% and 0.11% of total consolidated 

volume, as shown in Chart 3 below. 

Despite its size relative to total volume 

executed on the Exchange or the broader 

market, the Program has continued to 

provide considerable price 

improvement each month to retail 

investors that participated in the 

Program. In addition, the Exchange 

believes that the relatively modest 

volume executed in the Program relative 

to total BYX volume and total 

consolidated volume limits the potential 

impact of the Program on broader 

market quality on the Exchange.27 The 

Exchange therefore believes that the 

Program has demonstrated the 

effectiveness of a transparent, onexchange retail order price 

improvement functionality, 

notwithstanding that the majority of 

retail volume is still traded offexchange. 


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Chart 2: RPI Volume as a Percentage of Total BYX Volume 
41134 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices 

Retail Orders are routed by 

sophisticated brokers using systems that 

seek the highest fill rates and amounts 

of price improvement. These brokers 

have many choices of execution venues 

for this order flow. When they choose to 

route to the Program, they have 

determined that it is the best 

opportunity for fill rate and price 

improvement at that time. As shown in 

Table 1 below, Retail Order average 

daily volume (‘‘ADV’’) executed in the 

Program averaged between 2 and 7 

million shares from January 2016 to 

June 2018. Increased volatility in 

February 2018 likely contributed to the 

increased Retail Order shares executed 

in the Program that month. Fill rates for 

the majority of the period studied 

ranged from 11%–19% with fill rates 

declining below 10% starting in 

December 2017, likely due to additional 

participation in the Program that 

resulted in a significant increase in the 

Retail Order volume entered on the 

Exchange. Retail Orders also continue to 

receive more than the minimum $0.001 

price improvement required of a 

liquidity providing RPI Order, with the 

monthly average price improvement 

provided to Retail Orders ranging from 

$0.0011–$0.0014 per share, and the 

monthly effective/quoted spread ratio 

ranging from 0.77–0.90. The Exchange 

believes that this data supports 

permanent approval of the Program as 

this would allow retail investors to 

continue to execute their orders with 

price improvement in the Program. 

TABLE 1—SUMMARY STATISTICS ON THE PROGRAM

Date Retail shares 

executed ADV 

Retail orders 

placed ADV 

Effective 

spread BPS 

Quoted 

spread BPS 

Effective/ 

quoted 

spread ratio 

Price 

improvement 

Fill rate 

(%) 

Jan-16 .......................... 4,666,052 20,560 19 22 0.89 $0.0011 16.09 

Feb-16 .......................... 4,083,670 18,025 19 22 0.87 0.0011 16.10 

Mar-16 .......................... 3,474,997 15,103 21 24 0.90 0.0011 17.50 

Apr-16 .......................... 3,216,923 14,126 18 21 0.88 0.0011 19.23 

May-16 ......................... 2,912,160 12,980 18 21 0.87 0.0011 19.73 


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TABLE 1—SUMMARY STATISTICS ON THE PROGRAM—Continued 

Date Retail shares 

executed ADV 

Retail orders 

placed ADV 

Effective 

spread BPS 

Quoted 

spread BPS 

Effective/ 

quoted 

spread ratio 

Price 

improvement 

Fill rate 

(%) 

Jun-16 .......................... 3,144,024 13,924 16 18 0.89 0.0011 19.65 

Jul-16 ........................... 4,009,916 17,257 18 20 0.90 0.0011 19.97 

Aug-16 .......................... 3,906,624 17,135 19 21 0.90 0.0011 17.66 

Sep-16 .......................... 4,887,221 20,708 17 19 0.88 0.0011 17.28 

Oct-16 .......................... 3,595,900 15,922 24 27 0.90 0.0012 17.19 

Nov-16 .......................... 2,273,885 8,972 29 33 0.88 0.0013 12.71 

Dec-16 .......................... 3,192,065 12,768 36 41 0.88 0.0013 14.82 

Jan-17 .......................... 3,122,721 16,951 31 36 0.88 0.0013 16.09 

Feb-17 .......................... 3,262,046 21,151 31 35 0.88 0.0013 14.71 

Mar-17 .......................... 3,068,930 20,921 33 38 0.88 0.0014 13.85 

Apr-17 .......................... 2,680,646 18,518 34 38 0.88 0.0013 13.97 

May-17 ......................... 3,407,603 23,437 29 33 0.87 0.0013 16.88 

Jun-17 .......................... 7,896,833 46,398 28 32 0.88 0.0013 17.07 

Jul-17 ........................... 5,966,961 36,717 27 31 0.88 0.0012 16.43 

Aug-17 .......................... 6,467,615 38,608 23 26 0.88 0.0013 16.24 

Sep-17 .......................... 5,237,243 33,314 27 31 0.87 0.0013 15.76 

Oct-17 .......................... 5,702,759 33,578 34 40 0.84 0.0012 16.77 

Nov-17 .......................... 4,427,779 62,352 33 40 0.83 0.0012 11.61 

Dec-17 .......................... 5,131,502 142,810 34 41 0.84 0.0012 8.30 

Jan-18 .......................... 6,359,122 167,730 29 36 0.82 0.0013 7.98 

Feb-18 .......................... 7,230,230 227,980 21 27 0.79 0.0012 8.29 

Mar-18 .......................... 5,967,844 202,050 23 31 0.73 0.0011 7.69 

Apr-18 .......................... 4,976,642 178,009 20 27 0.75 0.0011 7.90 

May-18 ......................... 4,367,743 169,085 23 28 0.83 0.0011 7.02 

Jun-18 .......................... 5,211,044 202,601 23 31 0.77 0.0011 7.19 

II. Analysis of Retail Orders by Order 

Size 

Tables 2, 3, and 4 show the 

distribution of Retail Orders entered and 

executed in the Program for the period 

from January 2017 to June 2018. As 

shown in Table 2, a majority of all Retail 

Orders entered to participate in the 

Program from January 2016 to June 2018 

were for a round lot or fewer shares. 

Specifically, Retail Orders of one round 

lot or fewer shares accounted for an 

average of approximately 56% of the 

total number of Retail Orders entered. 

More than 73% of Retail Orders entered 

were for 300 shares or less. Very large 

orders of more than 7,500 shares 

accounted for only 1.9% of Retail 

Orders submitted to the Program but 

accounted for a significant portion 

(approximately 40%) of the shares 

entered, as shown in Table 3. In 

addition, despite lower fill rates, large 

orders account for a reasonable portion 

(approximately 9%) of the shares 

executed in the Program, as shown in 

Table 4. The Program also receives a 

significantly large number of odd lot 

and single lot sized shares, which could 

be representative of retail marketable 

orders from retail customers. By 

providing price improvement to these 

orders, retail customers would continue 

to benefit from the Program. 

TABLE 2—DISTRIBUTION OF RETAIL ORDERS ENTERED BY ORDER SIZE

Date ≤100 

(%) 

101–300 

(%) 

301–500 

(%) 

501–1,000 

(%) 

1,001–2,000 

(%) 

2,001–4,000 

(%) 

4,001–7,500 

(%) 

7,500–15,000 

(%) 

>15,000 

(%) 

Jan-17 ..................................... 44.90 18.45 8.60 10.12 6.84 4.90 3.10 1.93 1.16 

Feb-17 ..................................... 47.80 18.04 8.21 9.61 6.27 4.41 2.82 1.75 1.09 

Mar-17 ..................................... 47.60 17.76 8.16 9.67 6.36 4.60 3.01 1.78 1.05 

Apr-17 ...................................... 48.82 17.30 7.88 9.48 6.19 4.61 2.88 1.82 1.02 

May-17 .................................... 52.39 18.69 7.13 8.13 5.21 3.81 2.40 1.41 0.83 

Jun-17 ..................................... 55.32 13.89 6.67 8.08 5.35 4.47 3.24 2.03 0.95 

Jul-17 ....................................... 53.18 15.12 7.32 8.85 5.86 4.12 2.71 1.79 1.05 

Aug-17 ..................................... 49.41 16.53 8.00 9.65 6.33 4.49 2.75 1.76 1.08 

Sep-17 ..................................... 49.88 16.51 7.94 9.50 6.27 4.49 2.71 1.71 1.00 

Oct-17 ...................................... 49.92 16.17 7.73 9.45 6.49 4.67 2.76 1.79 1.02 

Nov-17 ..................................... 61.01 17.66 5.65 6.33 3.86 2.54 1.39 0.98 0.59 

Dec-17 ..................................... 61.48 18.49 6.31 6.65 3.40 1.97 0.93 0.49 0.28 

Jan-18 ..................................... 61.20 17.06 6.54 7.14 3.84 2.25 1.06 0.58 0.33 

Feb-18 ..................................... 66.63 15.79 5.61 5.80 2.98 1.70 0.80 0.43 0.25 

Mar-18 ..................................... 66.11 15.39 5.82 6.22 3.25 1.76 0.78 0.41 0.24 

Apr-18 ...................................... 67.41 15.45 5.40 6.06 3.10 1.43 0.59 0.34 0.22 

May-18 .................................... 66.09 16.12 5.43 6.30 3.41 1.47 0.59 0.35 0.24 

Jun-18 ..................................... 66.29 16.17 5.59 6.14 3.20 1.46 0.59 0.35 0.22 

TABLE 3—DISTRIBUTION OF SHARES ENTERED BY ORDER SIZE

Date ≤100 

(%) 

101–300 

(%) 

301–500 

(%) 

501–1,000 

(%) 

1,001–2,000 

(%) 

2,001–4,000 

(%) 

4,001–7,500 

(%) 

7,500–15,000 

(%) 

>15,000 

(%) 

Jan-17 ..................................... 2.15 3.45 3.27 7.03 9.15 12.48 14.61 17.00 30.87 

Feb-17 ..................................... 2.36 3.64 3.40 7.30 9.16 12.29 14.52 16.80 30.53 


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TABLE 3—DISTRIBUTION OF SHARES ENTERED BY ORDER SIZE—Continued 

Date ≤100 

(%) 

101–300 

(%) 

301–500 

(%) 

501–1,000 

(%) 

1,001–2,000 

(%) 

2,001–4,000 

(%) 

4,001–7,500 

(%) 

7,500–15,000 

(%) 

>15,000 

(%) 

Mar-17 ..................................... 2.25 3.55 3.36 7.32 9.21 12.68 15.38 16.92 29.33 

Apr-17 ...................................... 2.36 3.54 3.32 7.32 9.17 13.00 14.92 17.45 28.91 

May-17 .................................... 3.44 4.59 3.60 7.51 9.25 12.92 15.02 16.32 27.35 

Jun-17 ..................................... 1.89 2.89 2.92 6.64 8.44 13.27 17.56 20.05 26.34 

Jul-17 ....................................... 1.98 3.18 3.22 7.24 9.17 12.23 14.73 18.29 29.96 

Aug-17 ..................................... 1.92 3.36 3.39 7.59 9.57 12.76 14.33 17.21 29.87 

Sep-17 ..................................... 2.15 3.49 3.43 7.55 9.70 13.15 14.55 17.27 28.70 

Oct-17 ...................................... 1.97 3.34 3.30 7.41 9.91 13.48 14.54 17.90 28.16 

Nov-17 ..................................... 6.28 5.19 3.86 7.92 9.53 12.10 12.18 16.22 26.72 

Dec-17 ..................................... 9.96 7.34 5.96 11.51 11.24 12.70 11.15 11.31 18.83 

Jan-18 ..................................... 8.56 6.29 5.64 11.27 11.49 13.17 11.61 12.18 19.79 

Feb-18 ..................................... 11.33 7.16 6.01 11.31 11.12 12.42 10.99 11.30 18.37 

Mar-18 ..................................... 11.06 6.96 6.10 12.00 11.88 12.69 10.62 10.82 17.88 

Apr-18 ...................................... 12.30 7.46 5.95 12.51 12.19 11.17 8.89 9.73 19.80 

May-18 .................................... 12.14 7.50 5.74 12.40 12.76 11.08 8.53 9.67 20.17 

Jun-18 ..................................... 12.39 7.77 6.12 12.60 12.60 11.42 8.76 9.89 18.45 

TABLE 4—DISTRIBUTION OF SHARES EXECUTED BY ORDER SIZE

Date ≤100 

(%) 

101–300 

(%) 

301–500 

(%) 

501–1,000 

(%) 

1,001–2,000 

(%) 

2,001–4,000 

(%) 

4,001–7,500 

(%) 

7,500–15,000 

(%) 

>15,000 

(%) 

Jan-17 ..................................... 11.39 14.06 10.40 18.41 15.88 12.34 8.41 5.26 3.86 

Feb-17 ..................................... 13.96 15.27 10.48 17.77 14.54 11.44 7.82 5.15 3.60 

Mar-17 ..................................... 14.14 14.99 10.15 17.53 14.74 11.80 8.15 5.02 3.48 

Apr-17 ...................................... 14.69 14.83 10.01 17.80 14.84 11.55 7.85 5.00 3.42 

May-17 .................................... 17.86 18.10 9.98 16.46 13.17 10.48 6.94 4.23 2.78 

Jun-17 ..................................... 9.74 11.25 8.91 16.71 14.58 14.86 12.03 7.97 3.95 

Jul-17 ....................................... 10.37 12.33 9.91 18.84 16.17 12.75 8.96 6.56 4.11 

Aug-17 ..................................... 9.39 12.34 10.01 18.97 16.70 13.36 8.77 6.15 4.31 

Sep-17 ..................................... 10.60 12.93 10.22 18.87 16.28 13.00 8.56 5.74 3.79 

Oct-17 ...................................... 9.40 12.40 10.16 19.36 17.12 13.45 8.58 5.86 3.66 

Nov-17 ..................................... 12.42 13.48 9.27 16.56 15.84 13.24 7.98 6.63 4.56 

Dec-17 ..................................... 14.98 15.80 10.29 16.77 14.92 11.67 6.98 5.04 3.55 

Jan-18 ..................................... 14.27 14.96 10.28 17.53 15.27 11.90 7.12 5.16 3.50 

Feb-18 ..................................... 16.74 15.75 10.78 17.05 14.27 11.08 6.48 4.57 3.30 

Mar-18 ..................................... 17.27 15.97 10.58 16.87 13.81 10.51 6.66 4.63 3.70 

Apr-18 ...................................... 17.12 15.58 10.24 16.30 13.60 10.04 6.71 5.37 5.03 

May-18 .................................... 18.24 16.29 10.18 15.89 12.80 9.80 6.25 5.25 5.31 

Jun-18 ..................................... 18.93 17.28 10.59 16.16 12.96 9.64 5.66 4.95 3.84 

The Exchange also analyzed fill rates 

across the different order size buckets 

and found that while fill rates are higher 

for smaller orders as expected, large size 

orders are still able to access liquidity 

and therefore receive price 

improvement in the Program. Moreover, 

overall fill rates indicate that market 

participants that provide liquidity are 

responding with quote depth when the 

contra side order is looking for a fill. 

While fill rates decreased starting in 

November 2017, the Exchange believes 

that this is due to new Retail Order flow 

being routed to the Program, rather than 

a decrease in the available liquidity. 

Monthly volume executed in the 

Program, as shown in Table 1, has 

therefore remained constant or 

increased since November 2017 despite 

the lower overall fill rates for those 

months. The Exchange therefore 

believes that the Program is an attractive 

option for market participants looking to 

fill Retail Orders with price 

improvement. 

TABLE 5—FILL RATES

Date ≤100 

(%) 

101–300 

(%) 

301–500 

(%) 

501–1,000 

(%) 

1,001–2,000 

(%) 

2,001–4,000 

(%) 

4,001–7,500 

(%) 

7,500–15,000 

(%) 

>15,000 

(%) 

Jan-17 ..................................... 85.19 65.62 51.13 42.16 27.93 15.91 9.26 4.98 2.01 

Feb-17 ..................................... 87.21 61.69 45.31 35.83 23.36 13.69 7.92 4.51 1.73 

Mar-17 ..................................... 87.04 58.53 41.87 33.20 22.18 12.89 7.34 4.11 1.65 

Apr-17 ...................................... 86.90 58.46 42.12 33.97 22.59 12.40 7.35 4.00 1.65 

May-17 .................................... 87.53 66.54 46.75 36.99 24.03 13.69 7.80 4.38 1.71 

Jun-17 ..................................... 87.78 66.50 52.07 42.98 29.48 19.12 11.70 6.78 2.56 

Jul-17 ....................................... 85.99 63.63 50.52 42.77 28.96 17.12 9.99 5.89 2.25 

Aug-17 ..................................... 79.61 59.74 48.02 40.59 28.33 17.00 9.94 5.81 2.34 

Sep-17 ..................................... 77.55 58.32 46.98 39.39 26.44 15.58 9.27 5.24 2.08 

Oct-17 ...................................... 80.19 62.29 51.71 43.82 28.97 16.73 9.90 5.49 2.18 

Nov-17 ..................................... 22.78 29.93 27.66 24.11 19.16 12.61 7.55 4.71 1.97 

Dec-17 ..................................... 12.14 17.37 13.96 11.77 10.72 7.42 5.05 3.60 1.52 

Jan-18 ..................................... 12.84 18.31 14.06 11.98 10.24 6.96 4.72 3.26 1.36 

Feb-18 ..................................... 11.79 17.56 14.32 12.03 10.24 7.12 4.70 3.23 1.43 

Mar-18 ..................................... 11.56 17.00 12.85 10.42 8.60 6.13 4.64 3.17 1.53 

Apr-18 ...................................... 10.61 15.91 13.11 9.93 8.50 6.85 5.76 4.21 1.94 

May-18 .................................... 10.11 14.61 11.93 8.62 6.75 5.95 4.93 3.65 1.77 

Jun-18 ..................................... 10.57 15.39 11.98 8.88 7.12 5.84 4.47 3.46 1.44 


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28 Inside size is the average bid or ask size when 

the venue is at the NBB or NBO. 

29 15 U.S.C. 78f(b). 

30 15 U.S.C. 78f(b)(5). 

III. Impact of the Program on Broader 

Market Quality 

As shown in Charts 2 and 3 above, 

Retail Order volume executed in the 

Program is a small percentage of both 

total volume executed on the Exchange 

and total consolidated volume. While 

the Program has better depth available 

for Retail Orders, it does not 

significantly affect the market volume of 

BYX. The average volume within the 

95th percentile is between 1.3% and 

1.7%. With the Program volume mostly 

below 2.5% of BYX volume, the 

Exchange does not believe that it is able 

to significantly impact BYX market 

quality. Nevertheless, to test the impact 

of the Program on broader market 

quality, the Exchange reviewed the 

correlation between metrics that are tied 

to overall market quality with relevant 

Program metrics over both 2017 and 

2018. Based on this analysis, which is 

provided in Table 6 below, the 

Exchange does not believe that the 

Program has had any significant impact 

on broader market quality. 

Specifically, the Exchange’s analysis 

shows that: (1) Inside size in the broader 

market is not correlated with either RPI 

effective spreads or the percentage of 

volume executed in the Program, which 

suggests that market participants are not 

moving volume from the regular market 

to the Program as effective spreads 

narrow or volume executed in the 

Program increases; (2) effective spreads 

in the broader market are not correlated 

with the percentage of volume executed 

in the Program, which suggests that 

spreads are not widening as a result of 

more Retail Order flow being executed 

in the Program, (3) midpoint volume 

executed is not correlated with effective 

spreads in the Program, which suggests 

that market participants are not moving 

midpoint liquidity from the regular 

market to instead receive price 

improvement in the Program, and (4) 

displayed volume executed is not 

correlated with quoted spreads in the 

Program, which suggest that market 

participants are not entering nondisplayed retail price improving interest 

in the Program as an alternative to 

displaying interest on an order book. 

The Exchange therefore believes that the 

Program can continue on a permanent 

basis—and thereby provide increased 

price improvement opportunities to 

retail investors on a transparent wellregulated exchange—without degrading 

market quality outside of the Program. 

TABLE 6—BYX MARKET QUALITY CORRELATION ANALYSIS

Date 

2017 2018 

Correlation of RPI Effective Spread to Average Inside Size across all Equities Exchanges 28 ............................. ¥0.0145 ¥0.0096 

Correlation of RPI Volume as a Percent of Total Volume to Average Inside Size across all Equities Exchanges ¥0.0217 ¥0.0056 

Correlation of RPI Volume as a Percent of Total Volume to Average Effective Spread across all Venues ......... 0.1175 0.0134 

Correlation of RPI Effective Spread to Total Midpoint Volume across all Venues ................................................. ¥0.1438 ¥0.1366 

Correlation of RPI Quoted Spread to Total Protected Lit Volume across all Equities Exchanges ........................ ¥0.1221 ¥0.0999 

IV. Conclusion 

Based on the Exchange’s experience 

in operating the Program, and the data 

provided here and during the duration 

of the pilot, the Exchange believes that 

the Program has been a positive 

experiment in attracting retail order 

flow to a public exchange. The data 

provided by the Exchange describes a 

valuable service that delivers 

considerable price improvement in a 

transparent and well-regulated 

environment. The Program represents 

just a fraction of retail orders, most of 

which are executed off-exchange by a 

wide range of order handling services 

that have considerably more market 

share, and which operate pursuant to 

different rules and regulatory 

requirements. The order flow the 

Program attracted to the Exchange 

provided tangible price improvement to 

retail investors through a competitive 

and transparent pricing process 

unavailable in non-exchange venues. As 

such, despite relatively modest 

volumes, the Exchange believes that the 

Program satisfied the twin goals of 

attracting retail order flow to the 

Exchange and allowing such order flow 

to receive potential price improvement. 

Moreover, the Exchange believes that 

the data collected supports the 

conclusion that the Program did not 

have a negative impact on broader 

market quality. Although the results of 

the Program highlight the substantial 

advantages that broker-dealers retain 

when managing the benefits of retail 

order flow, the Exchange believes that 

the level of price improvement provided 

by the Program and the scant evidence 

that the Program negatively impacted 

the marketplace justifies making the 

Program permanent. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

requirements of Section 6(b) of the 

Act,29 in general, and Section 6(b)(5) of 

the Act,30 in particular, in that it is 

designed to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest 

and not to permit unfair discrimination 

between customers, issuers, brokers, or 

dealers. 

The Exchange believes that making 

the pilot permanent is consistent with 

these principles because the Program is 

reasonably designed to attract retail 

order flow to the exchange environment, 

while helping to ensure that retail 

investors benefit from the better price 

that liquidity providers are willing to 

give their orders. During the pilot 

period, the Exchange has provided data 

and analysis to the Commission. The 

Exchange believes that this data and 

analysis, as well as the further analysis 

provided in this filing, show that the 

Program has provided the intended 

benefits to the market, and retail 

investors in particular, and is therefore 

consistent with the Act. 

Additionally, the Exchange believes 

the proposed rule change is designed to 

facilitate transactions in securities and 

to remove impediments to, and perfect 

the mechanisms of, a free and open 

market and a national market system 

because making the Program permanent 

would allow the Exchange to continue 

to attract retail order flow to a public 

exchange and allow such order flow to 

receive potential price improvement. 

The data provided by the Exchange to 

the Commission staff demonstrates that 

the Program provided tangible price 

improvement to retail investors through 

a competitive pricing process 


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41138 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices 

31 17 CFR 200.30–3(a)(12). 

unavailable in non-exchange venues, 

and otherwise had an insignificant 

impact on the broader market. The 

Exchange believes that making the 

Program permanent would encourage 

the additional utilization of, and 

interaction with, the Exchange and 

provide retail customers with an 

additional venue for price discovery, 

liquidity, competitive quotes, and price 

improvement. For the same reasons, the 

Exchange believes that making the 

Program permanent would promote just 

and equitable principles of trade and 

remove impediments to and perfect the 

mechanism of a free and open market. 

Finally, the Exchange also believes 

that it is subject to significant 

competitive forces, as described below 

in the Exchange’s statement regarding 

the burden on competition. For all of 

these reasons, the Exchange believes 

that the proposed rule change is 

consistent with the Act. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes that making the 

Program permanent would continue to 

promote competition for retail order 

flow among execution venues and 

contribute to the public price discovery 

process. The Exchange believes that the 

data supplied to the Commission, and 

experience gained over the life of the 

pilot, have demonstrated that the 

Program creates price improvement 

opportunities for retail orders that are 

equal to what would be provided under 

OTC internalization arrangements, 

thereby benefiting retail investors and 

increasing competition between 

execution venues. The Exchange also 

believes that making the Program 

permanent will promote competition 

between execution venues operating 

their own retail liquidity programs. 

Such competition will lead to 

innovation within the market, thereby 

increasing the quality of the national 

market system. Finally, the Exchange 

notes that it operates in a highly 

competitive market in which market 

participants can easily direct their 

orders to competing venues, including 

off-exchange venues. In such an 

environment, the Exchange must 

continually review, and consider 

adjusting the services it offers and the 

requirements it imposes to remain 

competitive with other U.S. equity 

exchanges. For the reasons described 

above, the Exchange believes that the 

proposed rule change reflects this 

competitive environment. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Exchange consents, 

the Commission 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 proposal 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 No. SR– 

CboeBYX–2018–014 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File No. 

SR–CboeBYX–2018–014. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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 

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 such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File No. SRCboeBYX–2018–014 and should be 

submitted on or before September 7, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–17736 Filed 8–16–18; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #15567 and #15568; 

HAWAII Disaster Number HI–00049] 

Presidential Declaration Amendment of 

a Major Disaster for the State of Hawaii 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Amendment 1. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for the State of Hawaii (FEMA– 

4366–DR), dated 06/14/2018. 

Incident: Kilauea Volcanic Eruption 

and Earthquakes. 

Incident Period: 05/03/2018 and 

continuing. 

DATES: Issued on 06/14/2018. 

Physical Loan Application Deadline 

Date: 09/12/2018. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 03/14/2019. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW, Suite 6050, 

Washington, DC 20416, (202) 205–6734. 


amozie on DSK3GDR082PROD with NOTICES1