Notice2023-01743
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend Rule 7.44-E Relating to the Retail Liquidity Program
Primary source
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Published
January 30, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 19 (Monday, January 30, 2023)</title>
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[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Notices]
[Pages 5948-5952]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-01743]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96741; File No. SR-NYSEARCA-2023-06]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend Rule 7.44-E Relating to the Retail
Liquidity Program
January 24, 2023.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on January 10, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.44-E relating to the Retail
Liquidity Program. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.44-E, which sets forth the
Exchange's Retail Liquidity Program (the ``Program'').\4\ The purpose
of the Program is to attract retail order flow to the Exchange and
allow such order flow to receive potential price improvement. Rule
7.44-E currently provides for a class of market participant called
Retail Liquidity Providers (``RLPs'') who, along with non-RLP ETP
Holders, are able to provide potential price improvement to retail
investor orders in the form of a non-displayed order that is priced
better than the best protected bid or offer, called a Retail Price
Improvement Order (``RPI Order'').\5\ When there is an RPI Order in a
particular security, the Exchange disseminates an indicator, known as
the Retail Liquidity Identifier, that such interest exists.\6\ Retail
Member Organizations (``RMOs'') can submit a Retail Order to the
Exchange, which interacts, to the extent possible, with available
contra-side RPI Orders and then may interact with other liquidity on
the Exchange or elsewhere, depending on the Retail Order's
instructions.\7\ The segmentation in the Program allows retail order
flow to receive potential price improvement as a result of their order
flow being deemed more desirable by liquidity providers. The Exchange
recently modified the Program to be available for all securities traded
on the Exchange.\8\
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\4\ The Program was established on a pilot basis in 2013 and was
approved by the Commission to operate on a permanent basis in 2019.
See Securities Exchange Act Release No. 87350 (October 18, 2019), 84
FR 57106 (October 24, 2019) (SR-NYSEArca-2019-63). In connection
with the Commission's approval of the Program on a pilot basis, the
Commission granted the Exchange's request for exemptive relief from
Rule 612 of Regulation NMS, 17 CFR 242.612 (the ``Sub-Penny Rule''),
which, among other things, prohibits a national securities exchange
from accepting or ranking orders priced greater than $1.00 per share
in an increment smaller than $0.01. See Securities Exchange Act
Release No. 71176 (December 23, 2013), 78 FR 79524 (December 30,
2013) (SR-NYSEArca-2013-107).
\5\ See Rules 7.44-E(a)(1) (defining an RLP) and 7.44-E(a)(4)
(defining RPI Order).
\6\ See Rule 7.44-E(j).
\7\ See Rule 7.44-E(a)(2) (defining RMO); Rules 7.44-E(a)(3) and
7.44-E(k) (describing Retail Orders).
\8\ See Securities Exchange Act Release No. 96111 (October 20,
2022), 87 FR 64830 (October 26, 2022) (SR-NYSEARCA-2022-70) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change to
Modify Rule 7.44-E).
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As described in further detail below, the Exchange now proposes to
substantively amend the Program to (1) modify the Program to provide
Retail Orders with price improvement at the midpoint or better by
proposing that both RPI Orders and Retail Orders would function as Mid-
Point Liquidity Orders (``MPL Orders'') and (2) eliminate the role of
RLPs.\9\
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\9\ The Exchange notes that, with the proposed modification of
the Program to provide Retail Orders with price improvement at the
midpoint or better, the Exchange would no longer accept and rank RPI
Orders in increments smaller than $0.01, as ordinarily prohibited by
the Sub-Penny Rule. Accordingly, the operation of the Program, as
proposed, would no longer be dependent on the exemptive relief from
the Sub-Penny Rule previously granted by the Commission in
connection with its original approval of the Program.
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Proposed Midpoint Program
The Exchange proposes to modify the Program to provide Retail
Orders with price improvement at the midpoint or better, which change
the Exchange believes would further the purpose of the Program to offer
price improvement opportunities to retail order flow. The Exchange
believes that the proposed change would provide more deterministic
price improvement opportunities for Retail Orders and could attract
additional retail order flow to the Exchange.
RPI Orders
Rule 7.44-E(a)(4) currently provides that an RPI Order consists of
non-displayed interest that would trade at prices better than the PBB
or PBO by at least $0.001 and that is identified as
[[Page 5949]]
such.\10\ RPI Orders are non-displayed and are ranked Priority 3--Non-
Display Orders.\11\ Currently, Exchange systems monitor whether RPI buy
or sell interest is eligible to trade with incoming Retail Orders, and
an RPI Order to buy (sell) with a limit price at or below (above) the
PBB (PBO) or at or above (below) the PBO (PBB) will not be eligible to
trade with incoming Retail Orders to sell (buy), and such an RPI will
cancel if a Retail Order to sell (buy) trades with all displayed
liquidity at the PBB (PBO) and then attempts to trade with the RPI. If
not cancelled, an RPI to buy (sell) with a limit price that is no
longer at or below (above) the PBB (PBO) or at or above (below) the PBO
(PBB) will again be eligible to trade with incoming Retail Orders.\12\
An RPI Order may be an odd lot, round lot, or mixed lot, may be
designated as either a Limit Non-Displayed Order or an MPL Order, and
will not interact with Type 2--Retail Orders resting on the NYSE Arca
Book.\13\
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\10\ Rule 7.44-E(a)(4)(C) currently provides that an RLP may
only enter an RPI in its RLP capacity for securities to which it is
assigned and is permitted, but not required, to submit RPIs for
securities to which it is not assigned (and would be treated as a
non-RLP ETP Holder with respect to those securities). As discussed
below, the Exchange proposes to delete current Rule 7.44-E(a)(4)(C)
in connection with the proposed elimination of the RLP function.
\11\ See Rule 7.44-E(a)(4)(A).
\12\ See Rule 7.44-E(a)(4)(B).
\13\ See Rule 7.44-E(a)(4)(D).
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To effect the proposed change that the Program would function to
provide Retail Orders with price improvement at the midpoint or better,
the Exchange proposes to modify RPI Orders to function only as MPL
Orders. An MPL Order is defined in Rule 7.31-E(d)(3) as a Limit Order
to buy (sell) that is not displayed and does not route, with a working
price at the lower (higher) of the midpoint of the PBBO or its limit
price.\14\ The Exchange believes that modifying RPI Orders to function
as MPL Orders would increase the potential pool of midpoint-eligible
liquidity with which a Retail Order could interact. In addition,
because all RPI Orders would be priced at the midpoint, the Retail
Liquidity Identifier would provide more deterministic information about
the potential liquidity available to interact with Retail Orders at the
midpoint.
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\14\ An MPL Order may be entered during any Exchange trading
session, is ranked Priority 3--Non-Display Orders, and does not
participate in auctions. See Rule 7.31-E(d)(3). An MPL Order to buy
(sell) must be designated with a limit price in the minimum price
variation for the security and will be eligible to trade at its
working price. See Rule 7.31-E(d)(3)(A). If there is no PBB or PBO,
or if the PBBO is locked or crossed, an arriving or resting MPL
Order will not be eligible to trade until the PBBO is not locked or
crossed. See Rule 7.31-E(d)(3)(B). An Aggressing MPL Order to buy
(sell) will trade at the working price of resting orders to sell
(buy) when such resting orders have a working price at or below
(above) the working price of the MPL Order. Resting MPL Orders to
buy (sell) will trade against all Aggressing Orders to sell (buy)
priced at or below (above) the working price of the MPL Order. See
Rule 7.31-E(d)(3)(C).
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To effect this change, the Exchange first proposes to modify
current Rule 7.44-E(a)(4) (which, as discussed below, would be
renumbered as 7.44-E(a)(3)) and to combine current Rule 7.44-E(a)(4)(A)
into new Rule 7.44-E(a)(3), with non-substantive changes to improve the
clarity of the rule text. Rule 7.44-E(a)(3), as proposed, would thus
define an RPI Order as an MPL Order that is eligible to trade only with
incoming Retail Orders submitted by an RMO. The Exchange also proposes
to add text to new Rule 7.44-E(a)(3) to clarify that an RPI Order may
not be designated IOC, ALO, or with a Minimum Trade Size (``MTS'')
Modifier.\15\ In addition, the Exchange proposes to delete current
Rules 7.44-E(a)(4)(B) and 7.44-E(a)(4)(D) because the text of those
rules would no longer be necessary.\16\ Specifically, the provisions of
Rule 7.44-E(a)(4)(B) would no longer apply in light of the Exchange's
proposal to modify RPI Orders to function as MPL Orders and the
provisions of Rule 7.44-E(a)(4)(D) are either duplicative of proposed
Rule 7.44-E(a)(3) (as renumbered) or no longer applicable based on the
proposed elimination Type 2 Retail Orders (as further discussed
below).\17\
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\15\ See Rules 7.31-E(b)(2) (providing that an order with an IOC
Modifier will be traded in whole or in part on the NYSE Arca
Marketplace as soon as such order is received, with any untraded
quantity cancelled); 7.31-E(e)(2) (providing that an ALO Order is a
Non-Routable Limit Order that, unless it receives price improvement,
will not remove liquidity from the NYSE Arca Book); 7.31-E(i)(3)
(providing that the MTS Modifier designates an order with a minimum
trade size and an order with an MTS Modifier will be rejected if the
MTS is less than a round lot or if the MTS is larger than the size
of the order).
\16\ The proposed deletion of Rule 7.44-E(a)(4)(C) is discussed
below in connection with the proposed elimination of RLPs.
\17\ The Exchange also proposes to delete text in Rule 7.44-
E(a)(4)(D) providing that an RPI Order may be an odd lot, round lot,
or mixed lot as extraneous, because Exchange rules provide that
orders are accepted in any size unless otherwise provided. See Rule
7.38-E(a). The Exchange further proposes a conforming change to Rule
7.38-E(a) to delete its reference to Rule 7.44-E, as Rule 7.44-E
does not specify that an order may not be entered as an odd lot or
mixed lot.
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The Exchange also proposes to modify current Rule 7.44-E(j) (to be
renumbered as Rule 7.44-E(e), as discussed below), which describes the
Retail Liquidity Identifier that is currently disseminated via the
Consolidated Quotation System or the UTP Quote Data Feed, as
applicable, when RPI interest priced at least $0.001 better than the
PBB or PBO for a particular security is available in Exchange systems.
Consistent with the proposed change to modify RPI Orders to operate as
MPL Orders only, the Exchange proposes that new Rule 7.44-E(e) would
provide that the Retail Liquidity Identifier would be disseminated when
RPI interest is eligible to trade at the midpoint of the PBBO. The
dissemination of the Retail Liquidity Identifier would thus alert RMOs
to the availability of trading opportunities at the midpoint of the
PBBO.
Retail Orders
Current Rule 7.44-E(a)(3), which as described below would be
renumbered as Rule 7.44-E(a)(2), defines a Retail Order as an agency
order or a riskless principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person and is submitted to
the Exchange by an RMO, provided that no change is made to the terms of
the order with respect to price or side of market and the order does
not originate from a trading algorithm or any other computerized
methodology. Current Rule 7.44-E(a)(3) also provides that a Retail
Order will operate in accordance with Rule 7.44-E(k) and may be an odd
lot, round lot, or mixed lot.\18\
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\18\ Consistent with the proposed change to Rule 7.44-E(a)(4)(D)
regarding odd lots, round lots, or mixed lots, see id., the Exchange
also proposes to delete the similar provision in current Rule 7.44-
E(a)(3) for the same reasons.
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Rule 7.44-E(k) currently describes how RMOs can designate how a
Retail Order would interact with available contra-side interest and
provides for Type 1--Retail Orders and Type 2--Retail Orders. Type 1--
Retail Orders are Limit IOC Orders to buy (sell) that will trade only
with available RPI Orders to sell (buy) and all other orders to sell
(buy) with a working price below (above) the PBO (PBB) on the NYSE Arca
Book and will not route. The quantity of a Type 1--Retail Order to buy
(sell) that does not trade with eligible orders to sell (buy) will be
immediately and automatically cancelled. Type 2--Retail Orders may be
Limit Orders designated IOC or Day or Market Orders. A Type 2--Retail
Order IOC is a Limit IOC Order to buy (sell) that will trade first with
available RPI Orders to sell (buy) and all other orders to sell (buy)
with a working price below (above) the PBO (PBB) on the NYSE Arca Book.
Any remaining quantity of the Retail Order will trade with orders to
sell (buy) on the NYSE Arca Book at prices equal to or above
[[Page 5950]]
(below) the PBO (PBB) and will be traded as a Limit IOC Order and will
not route. A Type 2--Retail Order Day is a Limit Order to buy (sell)
that will trade first with available RPI Orders to sell (buy) and all
other orders to sell (buy) with a working price below (above) the PBO
(PBB) on the NYSE Arca Book. Any remaining quantity of the Retail
Order, if marketable, will trade with orders to sell (buy) on the NYSE
Arca Book or route, and if non-marketable, will be ranked in the NYSE
Arca Book as a Limit Order. Finally, a Type 2--Retail Order Market is a
Market Order that will trade first with available RPI Orders to sell
(buy) and all other orders to sell (buy) with a working price below
(above) the NBO (NBB). Any remaining quantity of the Retail Order will
function as a Market Order.
To effect the change that Retail Orders in the Program would be
eligible to trade at the midpoint or better, the Exchange proposes to
amend Rule 7.44-E(k) (which is proposed to be renumbered as Rule 7.44-
E(f)). In new Rule 7.44-E(f), the Exchange proposes to both rename the
section ``Retail Order Operation'' rather than ``Retail Order
Designation'' and reflect the Exchange's proposal to offer only one
type of Retail Order, which, as noted above, would function as an MPL
Order.\19\ The Exchange proposes to delete text in current Rule 7.44-
E(k) providing that an RMO may designate how a Retail Order would trade
with contra-side interest, as such text would no longer apply with only
one type of Retail Order. The Exchange also proposes to move text in
current Rule 7.44-E(k)(1) into new Rule 7.44-E(f) and to modify the
description of a Type 1 Retail Order in current Rule 7.44-E(k)(1) to
describe the only Retail Order that would be available, as proposed.
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\19\ See note 14, supra and accompanying text.
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New Rule 7.44-E(f) would thus provide that a Retail Order to buy
(sell) would be an MPL IOC Order with a working price at the lower
(higher) of the midpoint of the PBBO or its limit price and that will
trade only with available RPI Orders to sell (buy) and all other orders
to sell (buy) with a working price below (above) or equal to the
midpoint of the PBBO on the NYSE Arca Book and will not route. New Rule
7.44-E(f) would also continue to provide that the quantity of a Retail
Order to buy (sell) that does not trade with eligible orders to sell
(buy) will be immediately and automatically cancelled. The Exchange
proposes to delete references to Type 1 Retail Orders in current Rule
7.44-E(k)(1), as the proposed change would result in only one type of
Retail Order. The Exchange also proposes to update the remainder of
current Rule 7.44-E(k)(1) such that new Rule 7.44-E(f) would provide
that the quantity of a Retail Order to buy (sell) that does not trade
with eligible orders to sell (buy) will be rejected on arrival if there
is no PBBO or the PBBO is locked or crossed. The Exchange believes this
proposed change would simplify the Program by offering only one type of
Retail Order and, similar to the proposed change to RPI Orders, would
modify the Program to provide price improvement opportunities for
Retail Orders priced at the midpoint or better.
The Exchange further proposes to add new text to new Rule 7.44-E(f)
to provide additional options to ETP Holders with respect to Retail
Orders. First, the Exchange proposes to add text to new Rule 7.44-E(f)
providing that a Retail Order may be designated with an MTS Modifier,
at the ETP Holder's option.\20\ The Exchange also proposes to add text
to new Rule 7.44-E(f) to introduce a new ``No Retail Modifier'' for use
at an ETP Holder's discretion. Proposed Rule 7.44-E(f) would provide
that the No Retail Modifier is available for use with MPL Orders and
MPL-ALO Orders only, and orders designated with the No Retail Modifier
would not trade with Retail Orders.\21\ Specifically, as proposed, an
incoming Retail Order would not interact with an MPL Order or MPL-ALO
Order designated with the No Retail Modifier and may trade through such
MPL Order or MPL-ALO Order.
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\20\ Consistent with this proposed change, the Exchange proposes
to delete text in Rule 7.44-E(k) currently providing that a Retail
Order may not be designated with a minimum trade size.
\21\ The Exchange also proposes to modify Rule 7.31-E(d)(3),
which defines MPL Orders, to add new subparagraph (G) regarding the
No Retail Modifier. Subparagraph (G) would, consistent with the
proposed addition to new Rule 7.44-E(f), provide that MPL Orders and
MPL-ALO Orders may be designated with a No Retail Modifier and that
orders so designated would not trade with Retail Orders. The
Exchange proposes to offer the No Retail Modifier to provide ETP
Holders with the ability to designate their MPL Orders and MPL-ALO
Orders to not interact with Retail Orders, which some ETP Holders
may choose to do based on their desired trading strategy.
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The Exchange also proposes to delete current Rule 7.44-E(k)(2),
which currently describes Type 2 Retail Orders, as such order types
would no longer be offered, as proposed.\22\
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\22\ The Exchange also proposes a conforming change in the final
paragraph of new Rule 7.44-E(g) to reflect the proposed elimination
of Type 2 Retail Orders. The Exchange proposes to delete the second
sentence in the final paragraph of current Rule 7.44-E(l), which
relates to Type 2 Market Retail Orders, as such rule text would no
longer have application following the elimination of Type 2 Retail
Orders.
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Finally, the Exchange proposes to modify Rule 7.44-E(l) (proposed
to be renumbered as Rule 7.44-E(g)), which currently describes priority
and order allocation of RPI Orders and Retail Orders, to reflect the
changes described above. Under current Rule 7.44-E(l), RPI Orders in
the same security will be ranked together with all other interest
ranked as Priority 3--Non-Display Orders. Odd-lot orders ranked as
Priority 2--Display Orders will have priority over orders ranked
Priority 3--Non-Display Orders at each price. Any remaining unexecuted
RPI interest will remain available to trade with other incoming Retail
Orders. Currently, any remaining unfilled quantity of the Retail Order
will cancel, execute, or post to the NYSE Arca Book in accordance with
Rule 7.44-E(k).
The Exchange proposes to delete text from the last sentence of the
first paragraph under current Rule 7.44-E(l) referring to an unfilled
quantity of a Retail Order executing or posting to the NYSE Arca Book.
The Exchange proposes to eliminate this text because Retail Orders
would, as proposed, function as IOC orders only, and any remaining
unfilled quantity of a Retail Order would thus be cancelled. The
Exchange also proposes to delete the examples currently provided in
Rule 7.44-E(l) to illustrate priority and order allocation of RPI
Orders and Retail Orders. With the changes proposed in this filing to
modify RPI Orders and Retail Orders to function only as MPL Orders and
to offer only one type of Retail Order, RPI Orders and Retail Orders
would simply trade according to price/time priority as described in
Rule 7.36-E. The Exchange thus believes that new Rule 7.44-E(g) clearly
describes the ranking and priority of RPI Orders and Retail Orders and
that no examples are needed to further illustrate how such orders would
trade. The Exchange believes that removing unnecessary examples from
current Rule 7.44-E(l) would improve the clarity of the rule.
Proposed Elimination of Retail Liquidity Providers
NYSE Arca Rules 7.44-E(a)(1), 7.44-E(a)(4)(C), and 7.44-E(c)
through (i) currently set forth rules pertaining to RLPs:
<bullet> Rule 7.44-E(a)(1) provides that RLPs are ETP Holders that
are approved by the Exchange and required to submit RPIs.
<bullet> Rule 7.44-E(a)(4)(C) describes how RLPs may enter RPIs for
their assigned and non-assigned securities.
<bullet> Rule 7.44-E(c) describes how an ETP Holder may qualify to
become an RLP.
[[Page 5951]]
<bullet> Rule 7.44-E(d) sets forth the process by which an ETP
Holder may apply to become an RLP, subject to the Exchange's approval
of such application.
<bullet> Rule 7.44-E(e) provides for an RLP's voluntary withdrawal
from RLP status.
<bullet> Rule 7.44-E(f) sets forth an RLP's obligations with
respect to entering RPIs.
<bullet> Rule 7.44-E(g) describes action the Exchange may take with
respect to an RLP that fails to meet the requirements of Rule 7.44-E.
<bullet> Rule 7.44-E(i) describes the process through which an ETP
Holder may appeal the Exchange's decision to disapprove or disqualify
it as an RLP.
The Exchange proposes to modify the Program to eliminate the role
of RLPs, as there are no ETP Holders currently registered as RLPs.
Accordingly, the Exchange does not believe that modifying Rule 7.44-E
to remove text providing for the RLP function would impact the
effectiveness of the Program and notes that other exchanges currently
operate retail price improvement programs that do not include an RLP
function.\23\ To effect this change, the Exchange proposes to delete
Rules 7.44-E(a)(1), 7.44-E(a)(4)(C), and 7.44-E(c) through (g) in their
entirety and to modify Rule 7.44-E(i) to remove text relating to the
disapproval or disqualification of an RLP.\24\ The Exchange also
proposes to renumber current Rules 7.44-E(a)(2) through (4) as Rules
7.44-E(a)(1) through (3) to reflect the deletion of current Rule 7.44-
E(a)(1) and to renumber Rules 7.44-E(h) through (l) as Rules 7.44-E(c)
through (g) to reflect the proposed deletion of current Rules 7.44-E(c)
through (g).\25\ The Exchange believes that the proposed change would
simplify and add clarity to its Rules by removing the description of an
unutilized aspect of the Program.
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\23\ See, e.g., Investors Exchange LLC (``IEX'') Rule 11.232
(describing IEX Retail Price Improvement Program); Nasdaq BX, Inc.
(``Nasdaq BX'') Rule 4780 (describing Nasdaq BX Retail Price
Improvement Program).
\24\ In Rule 7.44-E(i) (which is proposed to be renumbered as
Rule 7.44-E(d)), the Exchange proposes to delete references to Rules
7.44-E(d) and 7.44-E(g), which currently provide for the process by
which an ETP Holder may apply to become an RLP and actions the
Exchange may take with respect to an RLP that fails to meet the
requirements of Rule 7.44-E, respectively. The Exchange also
proposes a conforming change to replace the reference to Rule 7.44-
E(h) with a reference to Rule 7.44-E(c) to reflect the proposed
renumbering of Rules 7.44-E(h) through (l). The Exchange also
proposes to delete current Rule 7.44-E(i)(1)(A) (which describes the
reassignment of securities from an RLP that has been disqualified)
because the rule would no longer have application. The Exchange
further proposes to delete the defined term ``appellant'' in current
Rule 7.44-E(i)(1), as such term would no longer be used following
the elimination of Rule 7.44-E(i)(1)(A).
\25\ The Exchange also proposes conforming changes to renumbered
Rules 7.44-E(a)(2) (Retail Order) and 7.44-E(g) (Priority and Order
Allocation) to update references to Rule 7.44-E(k) to refer instead
to Rule 7.44-E(f), to account for the proposed renumbering described
above in connection with the elimination of RLPs.
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Subject to approval of this proposed rule change, the Exchange will
implement this change no later than in the second quarter of 2023 and
announce the implementation date by Trader Update.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) of the
Act,\26\ in general, and furthers the objectives of section
6(b)(5),\27\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system and, in general, to protect
investors and the public interest.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes to both Retail
Orders and RPI Orders in the Program would promote just and equitable
principles of trade and remove impediments to, and perfect the
mechanism of, a free and open market and a national market system
because modifying RPI Orders and Retail Orders to function as MPL
Orders would further the purpose of the Program by providing Retail
Orders with price improvement opportunities at the midpoint or better.
The Exchange believes that providing more deterministic price
improvement opportunities for Retail Orders would attract additional
retail order flow to the Exchange. The Exchange also believes that the
proposed change to the Program would allow it to compete with other
exchanges that operate retail price improvement programs that are
priced at the midpoint.\28\ The Exchange believes that the proposed
change to streamline how Retail Orders function would also promote just
and equitable principles of trade and remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system by simplifying the operation of the Program.
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\28\ See, e.g., IEX Rule 11.232 (providing for Retail Price
Improvement Program with Retail Order defined as a Discretionary Peg
order or Midpoint Peg order with a Time-in-Force of IOC or FOK, that
is only eligible to trade at a price between the NBB and the
Midpoint Price (for bids) or between the NBO and the Midpoint Price
(for offers)).
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The Exchange also believes that the proposed change to eliminate
RLPs as a class under the Program would promote just and equitable
principles of trade, remove impediments to, and perfect the mechanism
of, a free and open market and a national market system, and protect
investors and the public interest because there are no ETP Holders
currently registered as RLPs and, accordingly, deleting rule text
providing for RLPs would not have any impact on any existing ETP
Holders. Moreover, because any ETP Holder may enter RPI Orders,
eliminating RLPs as a class would not impact the ability of ETP Holders
to enter RPI Orders on the Exchange. The Exchange further notes that
other exchanges currently operate retail price improvement programs
that do not include RLPs.\29\
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\29\ See note 23, supra.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed change could promote competition by modifying RPI Orders
and Retail Orders to function as MPL Orders, thereby encouraging
additional trading opportunities at the midpoint and supporting price
improvement opportunities at the midpoint of the PBBO or better for
retail investors. The Exchange also believes that the proposed change
to eliminate the RLP function would not impose any burden on
competition, as no ETP Holders are currently registered as RLPs. The
Exchange further believes that the proposed change could promote
competition between the Exchange and other exchanges that offer retail
price improvement programs, including an exchange that operates a
retail price improvement program intended to provide additional trading
opportunities at the midpoint.\30\
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\30\ See note 28, supra; see also, e.g., Nasdaq BX Rule 4780
(describing BX's Retail Price Improvement Program); Cboe BYX
Exchange, Inc. (``BYX'') Rule 11.24 (describing BYX's Retail Price
Improvement Program).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 5952]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#255750494008464a4848404b5156655640460b424a53"><span class="__cf_email__" data-cfemail="354740595018565a5858505b4146754650561b525a43">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2023-06 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2023-06. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2023-06 and should be submitted
on or before February 21, 2023.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01743 Filed 1-27-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on January 30, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.