Notice2026-01016
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
January 21, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 13 (Wednesday, January 21, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 13 (Wednesday, January 21, 2026)]
[Notices]
[Pages 2568-2577]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01016]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104620; 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
January 15, 2026.
On September 30, 2025, Cboe EDGX Exchange, Inc. (``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to modify Rule 11.21 to adopt a Retail Price
Improvement program (``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 proposed rule change
was published for comment in the Federal Register on October 3,
2025.\3\ On November 3, 2025, pursuant to Section 19(b)(2) of the
Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On December 19, 2025, the Commission
instituted proceedings pursuant to Section 19(b)(2)(B) of the Act,\6\
to determine whether to approve or disapprove the proposed rule
change.\7\ On December 22, 2025, the Exchange filed Amendment No. 1 to
the proposed rule change. On January 8, 2026, the Exchange withdrew
Amendment No. 1 and filed Amendment No. 2 to the proposed rule change.
On January 12, 2026, the Exchange withdrew Amendment No. 2 and filed
Amendment No. 3 to the proposed rule change.\8\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended by Amendment No. 3, from interested persons. Items I and II
below have been prepared by the Exchange.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 104153 (Sept. 30,
2025), 90 FR 48098 (Oct. 3, 2025) (``Notice''). The Commission has
not received any comments on the proposed rule change.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104173 (Nov. 3,
2025), 90 FR 51424 (Nov. 17, 2025) (designating January 1, 2026, as
the date by which the Commission shall either approve, disapprove,
or institute proceedings to determine whether to disapprove the
proposed rule changes).
\6\ 15 U.S.C.78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 104470 (Dec. 19,
2025), 90 FR 60784 (Dec. 29, 2025).
\8\ Amendment No. 3 is publicly available on the Commission's
website at: <a href="https://www.sec.gov/comments/sr-cboeedgx-2025-072/srcboeedgx2025072-690827-2158314.pdf">https://www.sec.gov/comments/sr-cboeedgx-2025-072/srcboeedgx2025072-690827-2158314.pdf</a>.
---------------------------------------------------------------------------
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. This Amendment No. 3 to SR-
CboeEDGX-2025-072 supersedes and replaces in its entirety Amendment No.
2 to SR-CboeEDGX-2025-072, which was filed on January 8, 2026, and
withdrawn on January 12, 2026. 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
This Amendment No. 3 to SR-CboeEDGX-2025-072 supersedes and
replaces in its entirety Amendment No. 2 to SR-CboeEDGX-2025-072, which
was filed on January 8, 2026, and
[[Page 2569]]
withdrawn on January 12, 2026. The Exchange submits this Amendment No.
3 in order to clarify certain points regarding the behavior of orders
containing a Non-Displayed instruction and provide additional detail
regarding the proposed Retail Price Improvement program on the
Exchange.
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 \9\ to receive potential
price improvement at least $0.001 better than the Protected NBB \10\
(for buy orders) or Protected NBO \11\ (for sell orders) in securities
priced at or above $1.00.\12\ 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.\13\
---------------------------------------------------------------------------
\9\ 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'').
\10\ 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.
\11\ 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.
\12\ As discussed, infra, the proposed Program will not apply to
securities priced below $1.00.
\13\ See Exchange Rule 13.8 for a description of the available
EDGX Book Feeds.
---------------------------------------------------------------------------
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'').\14\ 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'').\15\ 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 \16\ or route to away trading centers according to User
instructions. In addition, the proposed Retail Price Improvement 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
Price Improvement Order as a MidPoint Peg Order as described in Rule
11.8(d).
---------------------------------------------------------------------------
\14\ See infra notes 41-44.
\15\ 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.
\16\ See Exchange Rule 1.5(d). The term ``EDGX Book'' shall mean
the System's electronic file of orders.
---------------------------------------------------------------------------
Background
The Commission has long recognized that U.S. capital markets should
be structured with the interests of retail investors in mind.\17\ 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,\18\ even with the
presence of RLPs offered by other national securities exchanges,\19\
including the Exchange's affiliate, BYX.\20\ 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.\21\ 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.\22\
---------------------------------------------------------------------------
\17\ 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>.
\18\ See Securities Exchange Act Release No. 96495 (December 14,
2022), 88 FR 128 (January 3, 2023) (``Order Competition Rule'') at
144.
\19\ 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>.
\20\ See Securities Exchange Act Release No. 87154 (September
30, 2019), 84 FR 53183 (October 4, 2019), SR-CboeBYX-2019-014 (``BYX
RPI Approval Order'').
\21\ See Securities Exchange Act Release No. 96494 (December 14,
2022), 87 FR 80266 (December 29, 2022) (``Tick Size Proposal'') at
80273.
\22\ Source: Cboe internal data.
---------------------------------------------------------------------------
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.\23\ 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.\24\
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.\25\ 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.\26\
---------------------------------------------------------------------------
\23\ 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//offerings/retail_priority/">https://www.cboe.com/us/equities//offerings/retail_priority/</a>.
\24\ Id.
\25\ 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>.
\26\ 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>.
---------------------------------------------------------------------------
The Exchange believes that its current product offerings aimed at
providing
[[Page 2570]]
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 \27\ 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,\28\ 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.
---------------------------------------------------------------------------
\27\ 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.
\28\ See BYX Rule 11.24. The proposed EDGX RPI Program also
differs from the current BYX RPI Program in that the EDGX RPI
Program is limited to securities priced at or above $1.00, does not
include an Enhanced RPI Order type, and allows for Retail Orders to
be entered with any time-in-force.
---------------------------------------------------------------------------
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.\29\
---------------------------------------------------------------------------
\29\ Under the proposed RPI Program, the Exchange would accept
and rank RPI Orders in $0.001 increments. As such, 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 Orders
in sub-penny increments.
---------------------------------------------------------------------------
<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 \30\ 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.
---------------------------------------------------------------------------
\30\ 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.
---------------------------------------------------------------------------
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.\31\ 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 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.
---------------------------------------------------------------------------
\31\ 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''). See also Securities Exchange Act Release
No. 34-104210 (November 18, 2025), 90 FR 52727 (November 21, 2025)
(``BYX Enhanced RPI Approval Order'').
---------------------------------------------------------------------------
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,\32\ the Exchange
is proposing to permit Retail Orders to be entered with
[[Page 2571]]
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 that not allowing RPI Orders to remove
liquidity upon arrival, but rather requiring RPI Orders to post to the
EDGX Book would deepen the Exchange's pool of available liquidity,
which 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 (while the definition of RPI Order in the revised BYX RPI
Program permits RPI Orders to be entered in all securities, regardless
of price.\33\ The Exchange has included examples below to describe how
RPI Orders will post to the EDGX Book and interact with Retail Orders.
---------------------------------------------------------------------------
\32\ See BYX Exchange Rule 11.24(a)(2). A Retail Order must be
entered with a time-in-force of IOC.
\33\ See BYX Exchange Rule 11.24(h).
---------------------------------------------------------------------------
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 the locking
price of $10.05 with an executable price of $10.045.\34\
---------------------------------------------------------------------------
\34\ See proposed Exchange Rule 11.6(e)(2)(B)(i). If the entered
limit price of a non-displayed order would lock the EDGX Book, the
non-displayed order will be posted on the EDGX Book at the locking
price and executed as set forth in proposed Rule 11.10(a)(4). An RPI
Order is a non-displayed order and therefore is subject to the
behavior described in proposed Exchange Rule 11.6(e)(2)(B)(i).
---------------------------------------------------------------------------
<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).\35\ 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.
---------------------------------------------------------------------------
\35\ The terms ``Locking Price'' and ``Resting Order'' are
discussed in the Non-Displayed Order Behavior section, discussed
infra.
---------------------------------------------------------------------------
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.\36\ Pursuant to Rule
11.21(d)(2), the proposed RPI Panel shall be made up of the Exchange's
Chief Regulatory Officer (``CRO''), or a designee of the CRO, and two
officers of the Exchange designated by the Chief Information Officer
(``CIO''). The Exchange now 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.\37\ 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 for selecting
members of the RPI Panel.
---------------------------------------------------------------------------
\36\ See BYX Rule 11.24(d)(1).
\37\ See BYX Rule 11.24(d)(2).
---------------------------------------------------------------------------
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) (Attribution), and introducing rule text that describes
when the Retail Liquidity Identifier for RPI Orders will be
displayed.\38\ The proposed rule text is as follows:
---------------------------------------------------------------------------
\38\ 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 Orders under the EDGX RPI Program.
---------------------------------------------------------------------------
<bullet> 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 price or
size of the RPI Order. The Retail Liquidity Identifier will only be
disseminated when an RPI Order has a ranked price 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 ranked price of
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 the BYX Enhanced RPI Proposal,
except that the Exchange is not seeking to introduce an
[[Page 2572]]
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 are RPI Orders 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 Order 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. The Exchange does
not believe that RMOs are harmed by the Exchange accepting an RPI Order
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 \39\ while also introducing a new
Type 2 Retail Order.
---------------------------------------------------------------------------
\39\ See BYX Rule 11.24(f)(1).
---------------------------------------------------------------------------
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 portion
of an RPI Order will remain available to interact with other incoming
Retail Orders. Any remaining unexecuted portion of a Type 2 Retail
Order will cancel, execute, or post to the EDGX Book in accordance User
instruction. 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 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
[[Page 2573]]
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 Retail 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.\40\
---------------------------------------------------------------------------
\40\ 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.
---------------------------------------------------------------------------
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''),\41\ NYSE
National, Inc. (``NYSE National''),\42\ Investors' Exchange LLC
(``IEX''),\43\ and Nasdaq BX, Inc. (``Nasdaq BX''),\44\ with important
distinctions highlighted below.
---------------------------------------------------------------------------
\41\ See NYSE Rule 7.44 (Retail Liquidity Program).
\42\ See NYSE National Rule 7.44 (Retail Liquidity Program).
\43\ See IEX Rule 11.232 (Retail Price Improvement Program).
\44\ See Nasdaq BX Equity 4, Rule 4780 (Retail Price Improvement
Program).
---------------------------------------------------------------------------
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 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(e)(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(e)(2)(A), which
provides that when a Non-Displayed Order is entered,
[[Page 2574]]
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.\45\ 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.
---------------------------------------------------------------------------
\45\ See Rule 1.5(u). The term ``Protected Quotation'' shall
mean a quotation that is a Protected Bid or Protected Offer.
---------------------------------------------------------------------------
The Exchange next proposes to introduce Rule 11.6(e)(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(e)(2)(A). Proposed Rule 11.6(e)(2)(B)(i) provides if
the limit price of a Non-Displayed Order would lock 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 (e.g., Post Only \46\ or minimum quantity) 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(e)(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(e)(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 (e.g., Post Only or minimum quantity) 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. The Exchange believes that it is more
appropriate to permit later-arriving orders to execute ahead of a
resting order posted to the EDGX Book that is in a locked state due to
the presence of a contra-side order with specific User instructions
(e.g., Post Only or minimum quantity) rather than cancel or slide the
later-arriving order due to the information leakage that would occur as
a result of the cancellation. The Exchange has included an example to
demonstrate the operation of proposed Rule 11.6(e)(2)(B)(iii).
---------------------------------------------------------------------------
\46\ See Rule 11.6(n)(4). A Post Only instruction is an
instruction that may be attached to an order that is to be ranked
and executed on the Exchange pursuant to Rule 11.9 and Rule
11.10(a)(4) or cancelled, as appropriate, without routing away to
another trading center except that the order will not remove
liquidity from the EDGX Book, except as described below. An order
with a Post Only instruction will remove contra-side liquidity from
the EDGX Book if the order is an order to buy or sell a security
priced below $1.00 or if the value of such execution when removing
liquidity equals or exceeds the value of such execution if the order
instead posted to the EDGX Book and subsequently provided liquidity,
include the applicable fees charged or rebates provided.
---------------------------------------------------------------------------
Example 7
<bullet> NBBO for security ABC is $10.00 x $10.05.
<bullet> User 1 enters a MidPoint Peg order to buy 100 shares of
ABC at $10.03. User 1's order is posted to the EDGX Book and ranked at
$10.025.
<bullet> User 2 enters a MidPoint Peg Post Only order to sell 100
shares of ABC at $10.02. User 2's order is posted to the EDGX Book and
ranked at $10.025.
<bullet> User 3 enters an IOC order to buy 100 shares of ABC at
$10.05.
<bullet> Result: Pursuant to proposed Rule 11.6(e)(2)(B)(iii), User
3's order trades with User 2's MidPoint Peg Post Only order at a price
of $10.025. In this instance, User 3's order trades with User 2's order
ahead of User 1's order because when User 2's order was originally
entered, it was unable to execute due to the Post Only instruction. As
both User 2's order and User 1's order are non-displayed orders
(MidPoint Peg orders by nature are non-displayed), the Exchange allows
User 2's order to post to the EDGX Book and be ranked at the locking
price as the non-displayed nature of these orders would not cause a
violation of Regulation NMS. The Exchange believes that if it were
instead to slide User 2's order in accordance with Rule 11.6(l)(3) or
cancel User 2's order so that it would not create an internal locked
book, the act of sliding or cancelling User 2's order would result in
information leakage. As such, the Exchange believes that it is
appropriate to permit User 3's order to trade ahead of User 1's resting
order at a price of $10.025.
In conjunction with the proposed changes to Rule 11.6(e)(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(l)(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'').\47\ 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.
---------------------------------------------------------------------------
\47\ 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.
---------------------------------------------------------------------------
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
[[Page 2575]]
and, in particular, the requirements of Section 6(b) of the Act.\48\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \49\ 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 proposed rule change is
consistent with the Section 6(b)(5) \50\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78f(b).
\49\ 15 U.S.C. 78f(b)(5).
\50\ Id.
---------------------------------------------------------------------------
The Commission has repeatedly emphasized that the U.S. capital
markets should be structured with the interests of retail investors in
mind \51\ 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.\52\ 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.
---------------------------------------------------------------------------
\51\ Supra note 17.
\52\ Supra notes 18 and 21. 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.\53\ 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.\54\ 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.
---------------------------------------------------------------------------
\53\ Id.
\54\ Id.
---------------------------------------------------------------------------
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.\55\ 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.
---------------------------------------------------------------------------
\55\ 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.
---------------------------------------------------------------------------
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
[[Page 2576]]
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,, 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.
Additionally, proposed Rule 11.21 will retain the processes for RMO
application, qualification, disapproval and disqualification that were
previously approved under Rule 11.21 for the proposed RPI Program with
non-substantive changes. Accordingly, the Exchange also believes the
proposed change would promote just and equitable principles of trade,
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system, and protect investors and the
public interest by promoting consistency among exchange rules setting
forth retail price improvement programs, which could encourage retail
investors to direct order flow to the 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.\56\ 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.\57\ 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 \58\ 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.
---------------------------------------------------------------------------
\56\ See proposed Rule 11.21(f)(1).
\57\ See proposed Rule 11.21(f)(2).
\58\ 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).
---------------------------------------------------------------------------
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 \59\ 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.
---------------------------------------------------------------------------
\59\ 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.
---------------------------------------------------------------------------
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
[[Page 2577]]
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, ranked, and executed 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
additional retail order flow with the aforementioned exchanges.\60\
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.
---------------------------------------------------------------------------
\60\ Supra notes 41-44.
---------------------------------------------------------------------------
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.\61\
---------------------------------------------------------------------------
\61\ See supra note 7 (citing to the Commission's order
instituting proceedings to determine whether to disapprove the
proposed rule change). April 1, 2026, is the date by which the
Commission shall issue an order approving, disapproving, or
extending the period for not more than 60 days. See 15 U.S.C.
78s(b)(2)(B)(ii).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 3, 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#057770696028666a6868606b7176457660662b626a73"><span class="__cf_email__" data-cfemail="255750494008464a4848404b5156655640460b424a53">[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 February 11, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\62\
---------------------------------------------------------------------------
\62\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-01016 Filed 1-20-26; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on January 21, 2026.
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.