Notice2025-19381
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Modify Rule 11.21 To Adopt a Retail Price Improvement Program and Modify Rule 11.6(e)(2) and Rule 11.10(a)(4)(C)-(D) in Order To Describe the Behavior of Orders Containing a Non-Displayed Instruction
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 3, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 190 (Friday, October 3, 2025)</title>
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[Federal Register Volume 90, Number 190 (Friday, October 3, 2025)]
[Notices]
[Pages 48098-48107]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19381]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104153; File No. SR-CboeEDGX-2025-072]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing of a Proposed Rule Change To Modify Rule 11.21 To Adopt a
Retail Price Improvement Program and Modify Rule 11.6(e)(2) and Rule
11.10(a)(4)(C)-(D) in Order To Describe the Behavior of Orders
Containing a Non-Displayed Instruction
September 30, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\
[[Page 48099]]
notice is hereby given that on September 30, 2025, Cboe EDGX Exchange,
Inc. (the ``Exchange'' or ``EDGX'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposal
to modify Rule 11.21 to adopt a Retail Price Improvement program. The
Exchange also proposes to modify Rule 11.6(e)(2) and Rule
11.10(a)(4)(C)-(D) in order to describe the behavior of orders
containing a Non-Displayed instruction. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/equities/regulation/rule_filings/bzx/">https://www.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 11.21 to adopt a Retail Price
Improvement Program on the Exchange (the ``EDGX RPI Program'') for the
benefit of retail investors. As described in greater detail below, the
purpose of the EDGX RPI Program would be to attract retail order flow
to the Exchange and allow such Retail Orders \3\ to receive potential
price improvement at least $0.001 better than the Protected NBB \4\
(for buy orders) or Protected NBO \5\ (for sell orders) in securities
priced at or above $1.00.\6\ Rule 11.21 is currently titled Retail
Orders and allows a certain class of Members known as Retail Member
Organizations (``RMOs'') to submit Retail Orders to the Exchange and
designate that Retail Orders be identified as Retail on the EDGX Book
Feed.\7\ The Exchange also proposes to modify Rule 11.6(e)(2) and Rule
11.10(a)(4)(C)-(D) in order to describe the behavior of orders
containing a Non-Displayed instruction.
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\3\ See Exchange Rule 11.21(a)(2). A ``Retail Order'' is an
agency or 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 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. The Exchange notes
that it has filed a separate proposal to amend the definition of
Retail Order that would permit an RMO to enter a Retail Order in a
principal capacity, but the proposed changes in the Retail Order
Definition Proposal do not affect the Exchange's proposed changes to
Rule 11.21(a)(2) for the introduction of the RPI Program. See
Securities Exchange Act Release No. 103182 (June 4, 2025), 90 FR
24476 (June 10, 2025), SR-CboeEDGX-2025-035 (``Retail Order
Definition Proposal'').
\4\ See Exchange Rule 1.5(u). The term ``Protected Bid'' shall
mean a bid in a stock that is (i) displayed by an automated trading
center; (ii) disseminated pursuant to an effective national market
system plan; and (iii) an automated quotation that is the best bid
of a national securities exchange or association.
\5\ See Exchange Rule 1.5(u). The term ``Protected Offer'' shall
mean an offer in a stock that is (i) displayed by an automated
trading center; (ii) disseminated pursuant to an effective national
market system plan; and (iii) an automated quotation that is the
best offer of a national securities exchange or association.
\6\ As discussed, infra, the proposed Program will not apply to
securities priced below $1.00.
\7\ See Exchange Rule 13.8 for a description of the available
EDGX Book Feeds.
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The proposed EDGX RPI Program is structured similarly to the retail
liquidity programs (``RLPs'') offered by the Exchange's affiliate, Cboe
BYX Exchange, Inc. (``BYX''), as well as retail liquidity programs
offered by competitor exchanges such as the New York Stock Exchange
(``NYSE''), NYSE National, Inc. (``NYSE National''), Nasdaq BX, Inc.
(``Nasdaq BX'') and Investors Exchange LLC (``IEX'').\8\ The proposed
EDGX RPI Program will be structured similarly to other retail liquidity
programs offered by the Exchange's various affiliated equities
exchanges and competitor exchanges. However, a substantive difference
between the Exchange's program and programs offered by the Exchange's
affiliate or competitor exchanges is that Retail Orders entered on the
Exchange may be entered with a time-in-force other than Immediate-or-
Cancel (``IOC'').\9\ As Retail Orders may be entered with a time-in-
force other than IOC, Retail Orders will be allowed to post to the EDGX
Book \10\ or route to away trading centers according to User
instructions. In addition, the proposed Retail Priority Order will only
be eligible to execute against incoming Retail Orders and will not be
eligible to remove resting Retail Orders from the EDGX Book. Further,
Users will have the ability to enter the proposed Retail Priority Order
as a MidPoint Peg Order as described in Rule 11.8(d).
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\8\ See infra notes 32-35.
\9\ See Exchange Rule 11.6(q)(1). Immediate-or-Cancel (``IOC'')
is an instruction the User may attach to an order stating the order
is to be executed in whole or in part as soon as such order is
received. The portion not executed immediately on the Exchange or
another trading center is treated as cancelled and is not posted to
the EDGX Book. An order with an IOC instruction that does not
include a Book Only instruction and that cannot be executed in
accordance with Rule 11.10(a)(4) on the System when reaching the
Exchange will be eligible for routing away pursuant to Rule 11.11.
\10\ See Exchange Rule 1.5(d). The term ``EDGX Book'' shall mean
the System's electronic file of orders.
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Background
The Commission has long recognized that U.S. capital markets should
be structured with the interests of retail investors in mind.\11\ In
response, exchanges have created various offerings to provide retail
investors with benefits not afforded to other market participants. As
noted by the Commission, the great majority of marketable orders of
retail investors continue to be sent to wholesalers,\12\ even with the
presence of RLPs offered by other national securities exchanges,\13\
including the Exchange's affiliate,
[[Page 48100]]
BYX.\14\ Indeed, as noted in the Commission's 2022 rule proposal
related to minimum pricing increments, RLPs have not yet attracted a
significant volume of retail order flow.\15\ In fact, since RLPs have
been adopted, the percentage of on-exchange share volume has continued
to decrease from approximately 71% to approximately 49% as of December
2024.\16\
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\11\ See U.S. Securities and Exchange Commission, Strategic
Plan, Fiscal Years 2018-2022, available at <a href="https://www.sec.gov/files/SEC_Strategic_Plan_FY18-FY22_FINAL_0.pdf">https://www.sec.gov/files/SEC_Strategic_Plan_FY18-FY22_FINAL_0.pdf</a>.
\12\ See Securities Exchange Act Release No. 96495 (December 14,
2022), 88 FR 128 (January 3, 2023) (``Order Competition Rule'') at
144.
\13\ See, e.g., NYSE Retail Liquidity program, which promotes
cost savings through price improvement for individual investors
provided by retail liquidity providers that submit non-displayed
interest priced better than the best protected best bid or protected
best offer. See also NYSE National Retail Liquidity program, which
seeks to attract retail order flow to the Exchange through the
potential of price improvement at the midpoint or better. Available
at <a href="https://www.nyse.com/markets/liquidity-programs">https://www.nyse.com/markets/liquidity-programs</a>. See also IEX
Retail Program, which incentivizes midpoint liquidity for retail
orders through the use of retail liquidity provider orders.
Available at <a href="https://www.iexexchange.io/products/retail-program">https://www.iexexchange.io/products/retail-program</a>. See
also Nasdaq BX Retail Price Improvement, which allows retail orders
to interact with price-improving liquidity. Available at <a href="https://www.nasdaqtrader.com/content/BXRPIfs.pdf">https://www.nasdaqtrader.com/content/BXRPIfs.pdf</a>.
\14\ See Securities Exchange Act Release No. 87154 (September
30, 2019), 84 FR 53183 (October 4, 2019), SR-CboeBYX-2019-014 (``BYX
RPI Approval Order'').
\15\ See Securities Exchange Act Release No. 96494 (December 14,
2022), 87 FR 80266 (December 29, 2022) (``Tick Size Proposal'') at
80273.
\16\ Source: Cboe internal data.
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The Exchange has established itself as a venue that seeks to
provide a positive experience for orders submitted on behalf of retail
investors. Currently, EDGX offers Retail Priority, which changes the
order allocation priority model from price-time priority to a price-
retail priority-time priority model.\17\ Retail Priority was designed
to improve execution quality and trading outcomes for Retail Orders and
RMOs by reducing their time to execution. Under the Retail Priority
program, a displayed limit order designated with Retail Priority will
be given queue priority over same-priced orders submitted on EDGX.\18\
In addition to its Retail Priority offering, the Exchange also provides
pricing incentives including low cost remove by Retail Orders and
premium rebates for retail order flow on the Exchange.\19\ Further, the
Exchange provides a Retail Membership Program, which offers up to 18
months of discounted market data fees and connectivity as well as
premium rebates for RMOs.\20\
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\17\ See Exchange Rule 11.9(a)(2)(A) and Exchange Rule 11.9,
Interpretations and Policies. See also ``Cboe Retail Priority''
available at: <a href="https://www.cboe.com/us/equities/trading/offerings/retail_priority/">https://www.cboe.com/us/equities/trading/offerings/retail_priority/</a>.
\18\ Id.
\19\ See EDGX Equities Fee Schedule, Fee Codes, available at:
<a href="https://www.cboe.com/us/equities/membership/fee_schedule/edgx/">https://www.cboe.com/us/equities/membership/fee_schedule/edgx/</a>.
\20\ See Cboe Retail Membership Program, available at: <a href="https://www.cboe.com/us/equities/trading/offerings/retail_membership_program/">https://www.cboe.com/us/equities/trading/offerings/retail_membership_program/</a>.
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The Exchange believes that its current product offerings aimed at
providing higher execution quality for retail investors can be further
augmented. Accordingly, the Exchange now seeks to introduce an RPI
Program on EDGX in order to provide an additional, lit market on which
retail investors can submit order flow with the potential for price
improvement. As proposed, the EDGX RPI Program will offer RMOs the
ability to submit Retail Orders to the Exchange. Users \21\ will be
permitted to provide potential price improvement for Retail Orders in
the form of non-displayed interest that is priced higher than the
Protected NBB (for buy orders) or lower than the Protected NBO (for
sell orders). While the proposed EDGX RPI Program will function
similarly to the RPI Program on the Exchange's affiliate, BYX, and the
retail liquidity programs of other exchanges, certain differences,
including the ability for Retail Orders to post to the EDGX Book and
route away from the Exchange as well as the inability of a resting RPI
Order to remove a resting Retail Order, will make the EDGX RPI Program
a unique offering for retail order flow.
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\21\ See Rule 1.5(ee). A ``User'' is defined as any member or
sponsored participant of the Exchange who is authorized to obtain
access to the System pursuant to Rule 11.3.
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Proposal
Proposed Rule 11.21 (Retail Price Improvement Program); Proposed Rule
11.21(a) (Definitions)
Rule 11.21 is currently titled ``Retail Orders'' and sets forth in
the following subparagraphs: (a) the definitions of RMO and Retail
Order, (b) the qualification and application process for becoming an
RMO, (c) the failure of an RMO to abide by Retail Order requirements,
(d) appeals of disapproval or disqualification, (e) order designation,
and (f) attribution. The Exchange proposes to amend the title of Rule
11.21 from ``Retail Orders'' to ``Retail Price Improvement Program.''
Next, the Exchange proposes to amend Rule 11.21(a)(2) to add a sentence
at the end of the current rule text that provides that a Retail Order
shall operate in accordance with proposed Rule 11.21(f).
The Exchange next proposes to introduce proposed Rule 11.21(a)(3)
to define a Retail Price Improvement Order, as described below.\22\
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\22\ The Exchange plans to submit a request for an exemption
under Regulation NMS Rule 612 that would permit it to accept and
rank non-displayed RPI interest.
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<bullet> A ``Retail Price Improvement Order'' or ``RPI Order''
consists of non-displayed interest on the Exchange that is eligible to
interact with incoming Retail Orders and that is identified by the
Retail Liquidity Identifier described in paragraph (e) below. To be
executable, an RPI Order for a security priced at or above $1.00 must
be priced at least $0.001 better than the Protected NBB or Protected
NBO and may be priced in $0.001 increments (e.g., $10.001). An RPI
Order may not be entered in securities priced below $1.00. An RPI Order
is ineligible to execute at prices equal to or inferior to the
Protected NBB (for buy orders) or Protected NBO (for sell orders). An
RPI Order that is ineligible to execute because it is priced equal to
or inferior to the Protected NBB or Protected NBO will not be canceled
and will become eligible to execute against incoming Retail Orders
should the RPI Order become priced better than the Protected NBB (for
buy orders) or Protected NBO (for sell orders) at a later time. An
incoming RPI Order will not be eligible to interact with a resting
Retail Order on the EDGX Book and upon entry will post to the EDGX Book
to execute against later-arriving Retail Orders.
<bullet> An RPI Order may be entered as a limit order, in a sub-
penny increment with an explicit limit price, as a MidPoint Peg Order
(as defined in Rule 11.8(d)) (an ``RPI MidPoint Peg Order''), or as a
Primary Peg Order (as defined in Rule 11.6(j)(2)). An RPI Order that is
also a Primary Pegged Order (``RPI Primary Pegged Order'') must be
entered with a positive (for buy orders) or negative (for sell orders)
offset (``Offset Amount''). The ranked price of an RPI Primary Pegged
Order is the price that results after application of the Offset Amount,
as described in Rule 11.6(j)(2). An RPI Primary Pegged Order may have
its Offset Amount entered in pricing increments of $0.001. An RPI
MidPoint Peg Order and an RPI Primary Pegged Order will not execute
during a locked market.
<bullet> The System \23\ will monitor whether RPI Orders, adjusted
by any Offset Amount and subject to the limit price, are eligible to
interact with incoming Retail Orders. An RPI Order remains non-
displayed in its entirety, including any applicable Offset Amount and
the limit price. Any User is permitted, but not required, to submit an
RPI Order. An RPI Order may be an odd lot, round lot, or mixed lot. An
RPI Order may be entered as a Post Only or Book Only order and is not
eligible for routing.
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\23\ See Rule 1.5(cc). The term ``System'' shall mean 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.
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Proposed Rule 11.21(a)(3) is largely identical to the proposed
definition of RPI Order in the Exchange's recent filing to introduce an
Enhanced RPI Order to the BYX RPI Program.\24\ Notably, proposed Rule
11.21(a)(3) differs from the proposed definition of RPI Order in the
BYX Enhanced RPI Proposal as it permits an RPI Order to
[[Page 48101]]
be entered with a MidPoint Peg Order instruction, which is not
contemplated on BYX. The MidPoint Peg Order instruction will be
optional, and not required for Users of RPI Orders. The Exchange has
included examples below to describe how RPI MidPoint Peg Orders will
function.
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\24\ See Securities Exchange Act Release No. 34-102681 (March
14, 2025), 90 FR 13240 (March 20, 2025), SR-CboeBYX-2025-007 (``BYX
Enhanced RPI Proposal'').
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Example 1
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters displayed limit order to buy ABC at $10.00
for 100 shares.
<bullet> User 2 enters an RPI MidPoint Peg Order to buy ABC at
$10.03 for 100 shares. User 2's RPI MidPoint Peg Order is posted to the
EDGX Book and ranked at a price of $10.025, non-displayed.
<bullet> The RPI Indicator is displayed for User 2's RPI MidPoint
Peg Order.
<bullet> User 3 enters a Retail Order to sell ABC at $10.00 for
100.
<bullet> Result: User 3's Retail Order executes against User 2's
RPI MidPoint Peg Order at a price of $10.025. User 2's RPI MidPoint Peg
Order has price priority over User 1's displayed limit order pursuant
to Exchange Rule 11.9 because it is ranked at $10.025 while User 1's
order has a ranked price of $10.00. User 3's Retail Order receives
$0.025 of price improvement by executing with User 2's RPI MidPoint Peg
Order.
Additionally, the Exchange's proposed definition of RPI Order
provides that an RPI Order will not remove a resting Retail Order upon
entry, but rather an RPI Order will be posted to the EDGX Book and may
only execute against an incoming Retail Order. The Exchange notes that
unlike Retail Orders in the current BYX RPI Program,\25\ the Exchange
is proposing to permit Retail Orders to be entered with a time-in-force
other than Immediate-or-Cancel (``IOC''). As Retail Orders under the
EDGX RPI Program would be permitted to have a time-in-force that
permits them to post to the EDGX Book or route to away markets, the
Exchange believes it would be most beneficial to all Users to not allow
RPI Orders to remove liquidity upon arrival, but rather to post to the
EDGX Book and deepen the Exchange's pool of available liquidity, which
benefits all market participants and provides greater execution
opportunities on the Exchange, particularly for Retail Orders. Finally,
the Exchange's proposed definition of RPI Order is limited to use in
securities priced at or above $1.00 (which is identical to the current
BYX RPI Program),\26\ while the proposed definition of RPI Order in the
BYX Enhanced RPI Proposal would permit RPI Orders to be entered in all
securities, regardless of price. The Exchange has included examples
below to describe how RPI Orders will post to the EDGX Book and
interact with Retail Orders.
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\25\ See BYX Exchange Rule 11.24(a)(2). A Retail Order must be
entered with a time-in-force of IOC.
\26\ See BYX Exchange Rule 11.24(h).
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Example 2
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters displayed limit order to buy ABC at $10.00
for 100 shares.
<bullet> User 2 enters an RPI Order to buy ABC at $10.001 for 100
shares. User 2's RPI Order is posted to the EDGX Book and ranked at a
price of $10.001, non-displayed.
<bullet> The RPI Indicator is displayed for User 2's RPI Order.
<bullet> User 3 enters a Retail Order to sell ABC at $10.00 for
100.
<bullet> Result: User 3's Retail Order executes against User 2's
RPI Order at a price of $10.001. User 2's RPI Order has price priority
over User 1's displayed limit order because User 2's RPI Order is
ranked at $10.001 while User 1's order is ranked at $10.00. User 3
received $0.001 of price improvement by executing with User 2's RPI
Order.
Example 3
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters a Retail Order to sell ABC at $10.05 for
100.
<bullet> User 2 enters an RPI Order to buy ABC at $10.05 for 100.
User 2's RPI Order is posted to the EDGX Book and ranked at a price of
$10.045.\27\
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\27\ See Exchange Rule 11.6(l)(3). Orders with a Non-Displayed
instruction that are subject to the Display-Price Sliding or Price
Adjust instruction are ranked at the Locking Price on entry. An RPI
Order is a non-displayed order and therefore is subject to the re-
pricing behavior described in Exchange Rule 11.6(l)(3).
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<bullet> The RPI Indicator is displayed for User 2's RPI Order.
<bullet> User 3 enters a Retail Order to sell ABC at $10.00 for
100.
<bullet> Result: User 3's Retail Order executes against User 2's
RPI Order at a price of $10.045. User 2's RPI Order is ineligible to
execute against User 1's Retail Order because under proposed Rule
11.21(a)(3) an incoming RPI Order is not eligible to interact with a
resting Retail Order on the EDGX Book and upon entry the incoming RPI
Order will post to the EDGX Book to execute against later-arriving
Retail Orders. As such, User 2's RPI Order posted to the EDGX Book at
the locking price of $10.05 upon entry pursuant to proposed Rule
11.6(e)(2)(B)(i), discussed infra. Pursuant to proposed Rule
11.10(a)(4)(D), discussed infra, User 3's incoming Retail Order was
priced more aggressively ($10.00) than the Locking Price ($10.05) of a
Resting Order (User 2's RPI Order).\28\ As such, the Exchange will
execute User 2's RPI Order at one-half minimum price variation less
than the Locking Price of $10.05, which results in an execution against
User 3's later-arriving Retail Order at a price of $10.045. User 3
received $0.045 of price improvement by executing with User 2's RPI
Order.
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\28\ The terms ``Locking Price'' and ``Resting Order'' are
discussed in the Non-Displayed Order Behavior section, discussed
infra.
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Proposed Rule 11.21(d) (Appeal of Disapproval or Disqualification)
The Exchange next proposes to make two amendments to Rule 11.21(d)
(Appeal of Disapproval or Disqualification). First, the Exchange
proposes to rename the Retail Attribution Panel described in Rule
11.21(d)(1) as the RPI Panel, to align with the name change of Rule
11.21 from Retail Orders to the Retail Price Improvement Program. The
proposed change will ensure that the name of the review panel on the
Exchange matches the name of the review panel on the Exchange's
affiliate, BYX, thus causing less confusion for RMOs or RMO applicants
seeking to avail themselves of the panel.\29\ Next, the Exchange
proposes to amend Rule 11.21(d)(2) to change to the Chief Information
Officer referenced in the Rule to the Chief Operating Officer. The
Exchange notes that it currently does not have a Chief Information
Officer and the corresponding rule of the Exchange's affiliate, BYX,
also references the Chief Operating Officer.\30\ The Exchange believes
this change is necessary in order to maintain continuity between the
Exchange and its affiliate as well as reference the appropriate
corporate officer responsible to selecting members of the RPI Panel.
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\29\ See BYX Rule 11.24(d)(1).
\30\ See BYX Rule 11.24(d)(2).
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Proposed Rule 11.21(e) (Retail Liquidity Identifier)
The Exchange proposes to amend Rule 11.21(e) (currently titled
Order Designation) by changing the title to ``Retail Liquidity
Identifier,'' deleting the rule text that describes how an RMO may
designate an order as a Retail Order from current Rule 11.21(e), moving
the rule text of current Rule 11.21(e) that describes the designation
of a Retail Order when routed to an away Trading Center to proposed
Rule 11.24(h)
[[Page 48102]]
(Attribution), and introducing rule text that describes when the Retail
Liquidity Identifier for RPI Orders will be displayed.\31\ The proposed
rule text is as follows:
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\31\ The Exchange plans on submitting a letter requesting
assurance from staff of the Division of Trading and Markets that it
will not recommend enforcement action to the Commission pursuant to
Rule 602 of Regulation NMS (the ``Quote Rule'') with respect to: (1)
the Exchange with respect to collecting, processing, and making
available to vendors the best bid, best offer, and quotation sizes
communicated by members of the Exchange, or (2) liquidity providers
entering RPI interest under the EDGX RPI Program.
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<bullet> For securities priced at or above $1.00, an identifier
shall be disseminated through proprietary data feeds or as appropriate
through the Consolidated Quotation System, when an RPI Order with a
ranked price at least $0.001 better than the Protected NBB or Protected
NBO for a particular security, is available in the System (``Retail
Liquidity Identifier''). The Retail Liquidity Identifier shall reflect
the symbol for the particular security and the side (buy or sell) of
the RPI Order, but shall not include the ranked price or size of the
RPI Order. The Retail Liquidity Identifier will only be disseminated
when an RPI Order is priced better than the Protected NBB or Protected
NBO and will not disseminate if the price of the Protected NBB or
Protected NBO moves such that the RPI Order is no longer priced higher
than the Protected NBB or lower than the Protected NBO.
The Exchange notes that its proposed rule text for Rule 11.21(e) is
nearly identical to the rule text in its BYX Enhanced RPI Proposal,
except that the Exchange is not seeking to introduce an Enhanced RPI
Order and will only seek to display the Retail Liquidity Identifier
(``RLI'') when an RPI Order, rather than RPI Interest as described in
the BYX Enhanced RPI Proposal, is priced better than the Protected NBB
or Protected NBO in securities priced at or above $1.00 by at least
$0.001. The proposed rule text describes that the RLI will be
disseminated over the Exchange's proprietary data feeds and the
Consolidated Quotation System when there is an RPI Order priced at
least $0.001 above the Protected NBB or below the Protected NBO in
securities priced at or above $1.00. The RLI will not be disseminated
if an RPI Order is priced equal to, below (for buy orders), or above
(for sell orders) the Protected NBB or Protected NBO, even if the
ranked price of the RPI Order does not change. In the event that the
Protected NBB or Protected NBO moves such that a resting RPI Order is
again priced above the Protected NBB or below the Protected NBO, the
RLI will then be disseminated.
The purpose of the Identifier is to provide relevant market
information to RMOs that there is available RPI Interest available on
the Exchange, thereby incentivizing RMOs to send Retail Orders to the
Exchange. The Exchange believes that even in instances where the
Identifier is not being disseminated due to RPI Interest not having a
ranked price at least $0.001 above (for buy orders) or below (for sell
orders) the Protected NBB or Protected NBO, RMOs continue to be
incentivized to submit Retail Orders to the Exchange. While RMOs may
not be aware of potential RPI Interest on the Exchange during periods
when the Identifier is not being disseminated, the Exchange does not
believe that RMOs are harmed by the Exchange accepting RPI Interest
that is not executable at the time of receipt by the Exchange and
therefore not disseminating an Identifier because there may be
additional hidden liquidity on the EDGX Book with which a Retail Order
submitted by an RMO may interact. First, not all RMOs rely on the
Identifier when submitting Retail Orders to the Exchange. In addition,
Retail Orders may continue to be submitted even when the Identifier is
not being disseminated and will continue to be eligible to execute
against contra-side hidden liquidity that may be priced equal to or
above (for buy orders) or below (for sell order) the Protected NBB or
Protected NBO.
Proposed Rule 11.21(f) (Retail Order Designation)
The Exchange proposes to amend Rule 11.21(f) (currently titled
Attribution) by changing the title to ``Retail Order Designation,''
moving the text of current Rule 11.21(f) to proposed Rule 11.24(h)
(Attribution), and introducing rule text that describes how RMOs may
designate Retail Orders submitted to the Exchange to interact with
contra-side interest. Proposed Rule 11.21(f) is based off BYX Rule
11.24(f) (Retail Order Designation) and will contain a nearly identical
definition of a Type 1 Retail Order \32\ while also introducing a new
Type 2 Retail Order.
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\32\ See BYX Rule 11.24(f)(1).
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The Exchange proposes to introduce Rule 11.21(f)(1), which
describes a Type 1 Retail Order. Type 1-designated Retail Orders must
be designated as IOC and 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.
The Exchange also proposes to introduce Rule 11.21(f)(2), which
describes a Type 2 Retail Order. Type 2-designated Retail Orders will
be executed, posted to the EDGX Book, or cancelled according to the
User's instructions. A Type 2-designated Retail Order will be
ineligible to execute with a resting RPI Order that is not priced
better than the Protected NBB or Protected NBO. A Type 2-designated
Retail Order can either be submitted as an EDGX Only Order or as an
order eligible for routing pursuant to Rule 11.11.
Proposed Rule 11.21(g) (Order Priority)
The Exchange proposes to introduce Rule 11.21(g) titled Order
Priority which will describe how RPI Orders will be ranked and executed
upon receipt by the Exchange. RPI Orders in the same security shall be
ranked according to price then time of entry into the System, as
provided for in Rule 11.9 and executions shall occur in price/time
priority in accordance with Rule 11.9. Any remaining unexecuted RPI
interest will remain available to interact with other incoming Retail
Orders. Any remaining unexecuted portion of the Retail Order will
cancel or execute in accordance with paragraph (f) above. RPI Orders
are ineligible to execute at prices that are equal to or inferior to
the Protected NBB or Protected NBO. An RPI Order that is priced equal
to or inferior to the Protected NBB or Protected NBO will not be
cancelled and will become eligible to execute against Retail Orders
should the RPI Order become priced better to the Protected NBB or
Protected NBO at a later time. The Exchange has provided the following
examples to demonstrate how RPI Order priority will function.
Example 4
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters an RPI Order to buy ABC at $10.015 for 500
shares.
<bullet> User 2 enters an RPI Order to buy ABC at $10.02 for 500
shares.
<bullet> User 3 enters an RPI Order to buy ABC at $10.035 for 500
shares.
<bullet> User 4 enters a Retail Order to sell ABC at $10.00 for
1,000 shares.
<bullet> Result: User 4's Retail Order to sell ABC for 1,000
executes first against User 3's bid for 500 shares at $10.035 because
it is the best priced bid, then against User 2's bid for 500 shares at
$10.02
[[Page 48103]]
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 shares is depleted.
The Retail Order executes against RPI Orders in price/time priority.
Example 5
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters an RPI Order to buy ABC at $10.015 for 500
shares.
<bullet> User 2 enters an RPI Order to buy ABC at $10.02 for 100
shares.
<bullet> User 3 enters an RPI Order to buy ABC at $10.035 for 500
shares.
<bullet> User 4 enters a Retail Order to sell ABC at $10.00 for
1,000 shares.
<bullet> Result: User 4's Retail Order to sell ABC for 1,000
executes first against User 3's bid for 500 shares 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.
Example 6
<bullet> Protected NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters an RPI Order to buy ABC at $10.015 for 500
shares.
<bullet> User 2 enters an RPI Order to buy ABC at $10.02 for 100
shares.
<bullet> User 3 enters a Non-Displayed Order to buy ABC at $10.03
for 500 shares.
<bullet> User 4 enters a Retail Order to sell ABC at $10.00 for
1,000 shares.
<bullet> Result: User 4's Retail Order to sell ABC for 1,000
executes first against User 3's bid for 500 shares 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.
Proposed Rule 11.21(h) (Attribution)
The Exchange proposes to introduce Rule 11.21(h) titled
Attribution, which will contain details about how RMOs may designate
Retail Orders to be identified as such. The Exchange notes that the
text from current Rule 11.21(f) (Attribution) will be relocated to
proposed Rule 11.21(h) with minor changes in order to incorporate rule
text from current Rule 11.21(e). Pursuant to proposed Rule 11.21(h),
and as is currently described in Rule 11.21(f), an RMO may designate a
Retail Order to be identified as a Retail Order on the EDGX Book Feed
on an order-by-order basis. An RMO may also instruct the Exchange to
identify all its Retail Orders as Retail Orders on a port-by-port basis
where that port is also designated as a Retail Order Port. An RMO that
instructs the Exchange to identify all its Retail Orders as Retail
Orders on a Retail Order Port will be able to override such setting and
designate any individual Retail Order from that port as Attributable or
Non-Attributable, as set forth in Rule 11.6(a). The Exchange proposes
to relocate the language from current Rule 11.21(e) (Order Designation)
to proposed Rule 11.21(h) stating that a Retail Order will be
identified as a Retail Order when routed to an away Trading Center
unless otherwise instructed by an RMO as this language more
appropriately describes order attribution rather than how an order will
interact with contra-side interest as is proposed in proposed Rule
11.21(f). The Exchange proposes to keep the existing language from
current attribution Rule 11.21(f) stating all Retail Priority Orders,
as defined in Interpretations and Policies .01 to Rule 11.9, will be
identified as such on the EDGX Book Feed in order to avoid investor
confusion. The Exchange notes that it is proposing non-substantive
changes to the existing rule text being relocated from current Rules
11.21(e) and 11.21(f) to proposed Rule 11.21(h) to clarify that the
term ``Retail'' refers to a Retail Order.
Proposed Rule 11.21(i)
As discussed in proposed Rule 11.21(a)(3), the EDGX RPI Program
will be limited to trades occurring at prices equal to or greater than
$1.00 per share. The Exchange notes that it will periodically notify
the membership regarding the securities included in the EDGX RPI
Program through an information circular, which is the same practice
utilized by its affiliate, BYX, in its current RPI Program.\33\
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\33\ See BYX Rule 11.24(h). The Exchange notes that BYX has
proposed to remove BYX Rule 11.24(h) as part of the BYX Enhanced RPI
Proposal, but currently the Program is limited to securities priced
at or above $1.00.
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Comparison to Existing Retail Liquidity Programs
The Exchange notes that in addition to being substantially similar
to the proposed RPI Program on its affiliate equity exchange, BYX, the
proposed EDGX RPI Program is similar to other retail liquidity programs
offered by the New York Stock Exchange LLC (``NYSE''),\34\ NYSE
National, Inc. (``NYSE National''),\35\ Investors' Exchange LLC
(``IEX''),\36\ and Nasdaq BX, Inc. (``Nasdaq BX''),\37\ with important
distinctions highlighted below.
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\34\ See NYSE Rule 7.44 (Retail Liquidity Program).
\35\ See NYSE National Rule 7.44 (Retail Liquidity Program).
\36\ See IEX Rule 11.232 (Retail Price Improvement Program).
\37\ See Nasdaq BX Equity 4, Rule 4780 (Retail Price Improvement
Program).
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First, the Exchange notes that its proposal differs from all other
retail liquidity programs as it is proposing to allow Retail Orders to
be entered with any time-in-force and is not limiting Retail Orders to
only be entered with a time-in-force of IOC. The Exchange believes
allowing Retail Orders to be entered with any time-in-force instruction
rather than limiting the time-in-force to IOC will provide for
additional execution opportunities for Retail Orders and will create a
deeper pool of liquidity on the Exchange, which provides for greater
execution opportunities for all Users and provides for overall enhanced
price discovery and price improvement opportunities on the Exchange.
While a resting Retail Order will not be eligible to interact with a
resting RPI Order that was not originally executable upon receipt of
the Retail Order due to the RPI Order's requirement to execute only
against incoming Retail Orders, the ability of the Retail Order to
execute against other liquidity on the Exchange, including hidden
liquidity that may offer price improvement, stands to provide
additional execution opportunities to the Retail Order that it
otherwise would not have received if required to be entered with a
time-in-force of IOC.
Next, the Exchange notes that its proposed RPI Order may be entered
in price increments of $0.001, which is identical to the corresponding
RPI Orders on BYX, NYSE, and Nasdaq BX but differs from the price
increments of RPI Orders on IEX and NYSE National, whose equivalent RPI
Orders may only be entered in $0.005 increments. The Exchange believes
that providing Users the ability to enter RPI Orders in $0.001
increments while simultaneously proposing to allow RPI Orders to be
entered as MidPoint Peg Orders provides Users the appropriate balance
in having the ability to control how much price improvement is offered
to contra-side Retail Orders using $0.001 increments while also having
more certainty and control over its order flow by choosing to utilize
the MidPoint Peg Order type. If a User chooses to submit an RPI Order
with a limit price in a $0.001 increment, the User risks being priced
lower than other hidden liquidity on the EDGX Book and not earning an
execution against an incoming Retail
[[Page 48104]]
Order. Additionally, the User's RPI Order entered in $0.001 increments
may be subject to movement in the NBBO and become unexecutable if the
order is no longer priced at least $0.001 better than the Protected NBB
or Protected NBO. Alternatively, if a User enters an RPI MidPoint Peg
Order, the User knows that any execution will occur at the NBBO
midpoint and that its order will remain executable, as it will always
be priced at least $0.001 better than the Protected NBB or Protected
NBO as it is a pegged order with a limit price that updates as the NBBO
updates.
The Exchange believes that the distinctions highlighted above will
make the EDGX RPI Program an attractive alternative to other retail
liquidity programs and provide RMOs with the ability to submit Retail
Orders to the Exchange with a chance at receiving additional price
improvement compared to what is already available on the Exchange.
Non-Displayed Order Behavior
The Exchange currently permits orders to be entered with a Non-
Displayed instruction (a ``Non-Displayed Order'') pursuant to Rule
11.6(e)(2). The Exchange now proposes to amend Rule 11.6(e)(2) and Rule
11.10(a)(4)(C)-(D) in order to more accurately describe the price at
which a Non-Displayed Order posts to the EDGX Book and at what price a
Non-Displayed Order may execute in certain situations. The Exchange
believes the below changes to Rule 11.6(a)(2) and Rule 11.10(a)(4)(C)-
(D) are necessary in order to provide market participants with greater
certainty and clarity regarding the entry and execution of orders with
Non-Displayed instructions on the Exchange.
The Exchange proposes to introduce Rule 11.6(a)(2)(A), which
provides that when a Non-Displayed Order is entered, the Non-Displayed
Order will be executed against previously posted orders on the EDGX
Book that are priced equal to or better than the price of the Non-
Displayed Order, up to the full amount of such previously posted
orders, unless such executions would trade through a Protected
Quotation.\38\ Any portion of a Non-Displayed Order that cannot be
executed in this manner will be posted to the EDGX Book (unless the
Non-Displayed Order has a time-in-force of IOC) and/or routed if it has
been designated as a routable order.
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\38\ See Rule 1.5(u). The term ``Protected Quotation'' shall
mean a quotation that is a Protected Bid or Protected Offer.
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The Exchange next proposes to introduce Rule 11.6(a)(2)(B), which
describes the price at which a Non-Displayed Order is posted and ranked
on the EDGX Book in the event that it is not executed pursuant to
proposed Rule 11.6(a)(2)(A). Proposed Rule 11.6(a)(2)(B)(i) provides if
the limit price of a Non-Displayed Order would lock either a Protected
Quotation or the EDGX Book, the Non-Displayed Order will be posted on
the EDGX Book at the locking price and will be executed as set forth in
Rule 11.10(a)(4)(C). If, however, an inbound Non-Displayed Order cannot
execute due to User instruction and does not contain a price slide
instruction, the Non-Displayed Order will be cancelled. An inbound Non-
Displayed Order that cannot execute upon entry and contains a price
slide instruction will be ranked at the locking price upon entry.
Proposed Rule 11.6(a)(2)(B)(ii) provides if the limit price of the Non-
Displayed Order would cross a Protected Quotation and the Non-Displayed
Order contains a price slide instruction, the Non-Displayed Order will
be executed as set forth in Rule 11.6(l)(1)(B) or cancel, based on User
instruction. If the entered limit price of the Non-Displayed Order
would cross a Protected Quotation and the Non-Displayed Order does not
contain a price slide instruction, the Non-Displayed Order will cancel
or route, based on User instruction. Proposed Rule 11.6(a)(2)(B)(iii)
provides in situations where there is a resting Non-Displayed Order on
the buy (sell) side of the market and an incoming Non-Displayed Order
on the sell (buy) side of the market is unable to execute due to User
instruction and posts to the EDGX Book at a price that locks the
resting Non-Displayed Order, an incoming Non-Displayed Order on the buy
(sell) side of the market may execute with the resting Non-Displayed
Order on the sell (buy) side of the market at the locking price ahead
of the Non-Displayed Order on the buy (sell) side of the market.
In conjunction with the proposed changes to Rule 11.6(a)(2), the
Exchange also proposes to amend Rule 11.10(a)(4)(C)-(D) to better
describe the execution of Non-Displayed Orders in situations where a
locked market exists on the EDGX Book. Rule 11.10(a)(4)(C) currently
states that certain orders are permitted to post and rest on the EDGX
Book at prices that lock contra-side liquidity, provided, however, that
the System will never display a locked market. The Exchange proposes to
add language to Rule 11.10(a)(4)(C) to provide that consistent with
Rule 11.9, which sets forth the Exchange's rule regarding priority of
orders, Non-Displayed Orders and orders subject to display-price
sliding as set forth in Rule 11.6(k)(1) (defined as the ``Resting
Orders'') cannot be executed pursuant to Rule 11.10 when such Resting
Orders would be executed at prices equal to displayed orders on the
opposite side of the market (the ``Locking Price'').\39\ The Exchange
also proposes to amend Rule 11.10(a)(4)(D) to conform with the proposed
changes in Rule 11.10(a)(4)(C) with regard to the use of the terms
Resting Order and Locking Price. Proposed Rule 11.10(a)(4)(D) will be
revised from its current text to provide that in the event that an
incoming order described in sub-paragraphs (A) and (B) is a Market
Order or is a Limit Order priced more aggressively than the Locking
Price of a Resting Order as described in sub-paragraph (C), the
Exchange will execute the Resting Order at, in the case of a Resting
Order bid, one-half minimum price variation less than the Locking
Price, and, in the case of a Resting Order offer, one-half minimum
price variation more than the Locking Price.
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\39\ Any incoming order that would execute against the Resting
Order at the Locking Price would receive a priority advantage over
the displayed order at the Locking Price. As such, the Exchange does
not execute a Resting Order against an incoming order at the Locking
Price if there is also a displayed order resting on the EDGX Book at
the Locking Price.
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Implementation
The Exchange proposes to implement the RPI Program on EDGX during
the first half of 2026 and will announce the date via Trade Desk
Notice.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\40\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \41\ requirements that the rules of an exchange be
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 regulating, clearing,
settling, processing information with respect to, and 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. Additionally,
the Exchange believes the
[[Page 48105]]
proposed rule change is consistent with the Section 6(b)(5) \42\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78f(b).
\41\ 15 U.S.C. 78f(b)(5).
\42\ Id.
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The Commission has repeatedly emphasized that the U.S. capital
markets should be structured with the interests of retail investors in
mind \43\ and has recently proposed a series of rules designed, in
part, to attempt to bring order flow back to the exchanges from off-
exchange trading venues.\44\ The Exchange believes its proposal to
introduce an RPI Program on EDGX is consistent with the Commission's
goal of ensuring that the equities markets continue to serve the needs
of the investing public. Specifically, introducing the Program on EDGX
would protect investors and the public interest by providing retail
investors the ability to obtain price improvement on EDGX, a national
securities exchange. The Exchange is committed to innovation that
improves the quality of the equities markets and believes that the
proposed EDGX RPI Program may increase the attractiveness of the
Exchange for the execution of Retail Orders submitted on behalf of the
millions of ordinary investors that rely on these markets for their
investment needs.
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\43\ Supra note 11.
\44\ Supra notes 12 and 15. See also, Securities Exchange Act
Release No. 96496 (December 14, 2022), 88 FR 5440 (January 27, 2023)
(``Regulation Best Execution''); Securities Exchange Act Release No.
96493 (December 14, 2022), 88 FR 3786 (January 20, 2023)
(``Disclosure of Order Execution Information'').
---------------------------------------------------------------------------
The Exchange believes the proposed EDGX RPI Program promotes just
and equitable principles of trade and is not unfairly discriminatory.
While the proposed EDGX RPI Program would differentiate among its
Members, the Exchange does not believe that such segmentation is
inconsistent with section 6(b)(5) of the Act, as it does not permit
unfair discrimination. The Commission has previously stated that the
markets generally distinguish between retail investors, whose orders
are considered desirable by liquidity providers because such retail
investors are presumed to be less informed about short-term price
movements, and professional traders, whose orders are presumed to be
more informed.\45\ The Commission has further stated that without
opportunities for price improvement, retail investors may encounter
wider spreads that are a consequence of liquidity providers interacting
with more informed order flow.\46\ The Exchange believes that its
proposed EDGX RPI Program is reasonably designed to attract marketable
retail order flow to the exchange as it will help to ensure that retail
investors benefit from the better price that liquidity providers are
willing to provide to retail orders in exchange for minimizing their
adverse selection costs.
---------------------------------------------------------------------------
\45\ Id.
\46\ Id.
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The Exchange believes that the proposed RPI Order behavior that
does not permit an RPI Order to execute immediately against resting
Retail Orders upon entry is not unfairly discriminatory because the
proposed RPI Order is an optional order type that any liquidity
provider may utilize as part of its investment strategy. As an example,
a liquidity provider may choose to submit a limit order with a time-in-
force of Day, and that order may execute immediately upon entry with
hidden liquidity on the EDGX Book. Conversely, another liquidity
provider may choose to submit an RPI Order knowing that the order will
not execute immediately upon entry, but rather will be posted to the
EDGX Book, foregoing potentially receiving an immediate executions in
exchange for the strong likelihood of executing against an incoming,
contra-side Retail Order, which is generally a more desirable outcome
for more sophisticated market participants.\47\ The Exchange is not
proposing to amend the functionality of any existing order types on the
Exchange, but rather seeks to provide an additional order type that
provides liquidity providers with greater control over its contra-side
execution. The proposed RPI Order is completely optional, can be
utilized by any liquidity provider, and will be an additional order
type from which liquidity providers may choose when determining how
best to submit order flow to the Exchange. While the proposed RPI Order
is limited to executing only with incoming contra-side Retail Orders
and not resting Retail Orders on the EDGX Book, the Exchange believes
that liquidity providers are in the best position to determine whether
the proposed RPI Order is appropriate for the liquidity provider's
current investment strategy. If a liquidity provider wishes to
prioritize speed of execution or wishes to have the ability to execute
immediately upon entry without regard to the contra-side order type, it
is free to utilize another order type on the Exchange.
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\47\ Marketable retail order flow is generally seen as more
desirable by institutional liquidity providers as executions against
retail orders are less prone to adverse selection. Adverse selection
is the phenomenon where the price of a stock drops right after a
liquidity provider purchases the stock. The Commission has
previously opined that retail liquidity programs may be beneficial
to institutional investors as they may be able to reduce their
possible adverse selection costs by interacting with retail order
flow. See Securities Exchange Act Release No. 68303 (November 27,
2012), 77 FR 71652 (December 3, 2012), SR-BYX-2012-019 (``BYX RPI
Pilot Approval Order'') at 71656.
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The Exchange further believes the proposed change would promote
just and equitable principles of trade, remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system, and protect investors and the public interest because proposed
Rule 11.21 is based on BYX Exchange Rule 11.24, providing for the BYX
RPI Program, and is also similar to rules providing for the NYSE, NYSE
National, IEX, and Nasdaq BX retail liquidity programs. The Exchange
believes that its proposal to permit an RPI Order to be entered in
pricing increments of $0.001 or as an RPI MidPoint Peg Order provides
Users the appropriate balance in having the ability to control how much
price improvement is offered to contra-side Retail Orders while also
having more certainty and control over its order flow. For example, if
a User chooses to submit an RPI Order with a limit price in a $0.001
increment, the User risks being priced lower than other hidden
liquidity on the EDGX Book and not earning an execution against a
Retail Order. Additionally, the User's RPI Order may be subject to
movement in the NBBO and become unexecutable if the order is no longer
priced at least $0.001 better than the Protected NBB or Protected NBO.
Alternatively, a User who elects to enter an RPI MidPoint Peg Order
knows that any execution will occur at the NBBO midpoint and that its
order will remain executable, as it will always be priced at least
$0.001 better than the Protected NBB or Protected NBO as it is a pegged
order with a limit price that updates as the NBBO updates.
Proposed Rule 11.21 sets forth definitions, order types, processes
for RMO application, qualification, disapproval and disqualification
for the Program, and the operation, priority, and attribution of orders
in the Program that are based on rules previously approved by the
Commission for retail price improvement programs currently offered by
equity exchanges. Accordingly, the Exchange also believes the proposed
change would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and protect investors and the public
interest by promoting consistency among
[[Page 48106]]
exchange rules setting forth retail price improvement programs, which
could encourage retail investors to direct order flow to the proposed
Program to seek out price improvement opportunities.
The Exchange believes that the introduction of the EDGX RPI Program
promotes just and equitable principles of trade and is consistent with
Section 6(b)(5) of the Act as it encourages Users to submit RPI Orders
with limit prices that are priced at least $0.001 better than the
Protected NBB or Protected NBO in exchange for the ability to guarantee
the opportunity to execute against a contra-side Retail Order. As
previously stated, all Users are eligible to submit RPI Orders. While
the Exchange believes that most RPI Orders will be submitted by or on
behalf of professional traders, retail investors will have the
opportunity to receive better-priced executions should their executing
broker choose to submit a marketable Retail Order to the Exchange. The
Exchange believes the introduction of the EDGX RPI Program will deepen
the Exchange's pool of available liquidity, increase marketable retail
order flow to the Exchange and provide additional competition for
marketable retail order flow, most of which is currently executed off-
exchange in the OTC markets. Promoting competition for retail order
flow among execution venues stands to benefit retail investors, who may
be eligible to receive greater price improvement on the Exchange by
interacting with an RPI Order than they would if their order was
internalized by a broker-dealer on the OTC market.
The Exchange believes that its proposal to permit Retail Orders to
be entered with any time-in-force and not be limited to a time-in-force
of IOC as is the case with existing retail liquidity programs promotes
just and equitable principles of trade and is consistent with Section
6(b)(5) of the Act because it provides an RMO submitting orders on
behalf of retail customers additional control over how its Retail
Orders will interact with liquidity resting on the EDGX Book. For
instance, an RMO may choose to submit a Retail Order with a time-in-
force of IOC, which would behave identical to a Retail Order submitted
to the Exchange's affiliate RPI Program on BYX, and would immediately
cancel if it does not receive an execution against an RPI Order or
other price improving liquidity on the EDGX Book.\48\ However, an RMO
may also choose to utilize a time-in-force that permits the Retail
Order to post to the EDGX Book or route to an away market center if it
is not immediately executed.\49\ By permitting a Retail Order to post
to the EDGX Book, the Retail Order will be eligible not only to execute
against a resting RPI Order immediately upon entry, but may also be
designated as a Retail Priority Order \50\ if the order does not
execute against a resting RPI Order and instead posts to the EDGX Book.
If an RMO chooses to designate its Retail Order as a Retail Priority
Order, the displayed portion of the Retail Priority Order is given
allocation priority ahead of all other available interest on the EDGX
Book.
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\48\ See proposed Rule 11.21(f)(1).
\49\ See proposed Rule 11.21(f)(2).
\50\ See Rule 11.9, Interpretations and Policies .01. A Retail
Priority Order is a Retail Order that is entered on behalf of a
person that does not place more than 390 equity orders per day on
average during a calendar month for its own beneficial account(s).
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The Exchange views the ability to enter Retail Orders with any
time-in-force an important feature that benefits retail investors by
increasing both the likelihood and speed with which their non-
marketable Retail Orders are executed. If speed is a priority, then an
RMO is free to select a time-in-force of IOC and will only receive an
execution if there is a resting RPI Order priced at least $0.001 better
than the NBBO or a hidden order providing price improvement. If,
however, speed is not a concern and an RMO would like to increase its
odds that its Retail Order will be filled on the Exchange after posting
to the EDGX Book, the RMO may elect to submit its order as a Retail
Priority Order. RMOs are also free to simply choose to designate a
Retail Order with a time-in-force other than IOC and not as a Retail
Priority Order, which would permit the Retail Order to post to the EDGX
Book or route to an away market and receive an execution under standard
price/display/time priority. The Exchange has already proven that it
can attract Retail Orders through its retail priority offering \51\ and
now believes that it can provide price improvement to those Retail
Orders through the introduction of the RPI Program on the Exchange and
building a greater depth of book against which Retail Orders may be
eligible to execute.
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\51\ A review of internal Exchange data found that approximately
44% of all Retail Orders submitted to EDGX between January 2025-July
2025 were designated as Retail Priority Orders. Retail Orders
(including Retail Priority Orders) accounted for approximately 18.6%
of all orders executed on EDGX during the period January 2025-July
2025.
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The Exchange believes its proposal to introduce additional rule
text describing the entry and execution of Non-Displayed Orders on the
Exchange promotes just and equitable principles of trade by providing
additional clarity and transparency to market participants on how the
System processes Non-Displayed Orders. Specifically, the Exchange is
providing additional information regarding the price at which a Non-
Displayed Order is posted and ranked on the EDGX Book when a Non-
Displayed Order either locks or crosses a Protected Quotation or when a
Non-Displayed Order locks the EDGX Book. By introducing the proposed
rule text, Users will have a better understanding of how a Non-
Displayed Order is posted and ranked during certain scenarios involving
locked and crossed markets, which benefits all Users and the
marketplace as a whole. In addition, the Exchange believes its proposal
to introduce additional rule text describing the entry and execution of
Non-Displayed Orders on the Exchange is not unfairly discriminatory as
all Users and market participants will be subject to the same
application of the Exchange's rules and will have equal access to the
Exchange rulebook.
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 proposal does not impose any burden on intramarket competition that
is not necessary or appropriate in furtherance of the purposes of the
Act. Rather, the proposed rule change is designed to increase
intramarket competition for retail order flow by introducing a retail
liquidity program on a regulated market. The proposed change could
encourage additional competition by promoting additional trading
opportunities for retail investors at both the NBBO midpoint as well as
at sub-penny increments priced better than the Protected NBB or
Protected NBO. The proposed change regarding Non-Displayed Order entry
and execution is not being made for competitive reasons, but rather to
provide Users with additional clarity and transparency about what price
a Non-Displayed Order is posted and ranked during certain scenarios
involving locked and crossed markets.
The Exchange also believes the proposed rule change does not impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act. As discussed above, IEX, NYSE,
NYSE National, and Nasdaq BX each operate RLPs and the Exchange
believes that its proposed rule change will allow it to compete for
[[Page 48107]]
additional retail order flow with the aforementioned exchanges.\52\
Furthermore, the Exchange's proposal will promote competition between
the Exchange and off-exchange trading venues where the majority of
retail order flow trades today.
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\52\ Supra notes 34-37.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received 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 up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the 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 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="3f4d4a535a125c5052525a514b4c7f4c5a5c11585049">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2025-072 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-CboeEDGX-2025-072. 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CboeEDGX-2025-072 and should be
submitted on or before October 24, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
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\53\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-19381 Filed 10-2-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on October 3, 2025.
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