Notice2026-05660
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 3 and 4, To Modify EDGX Rule 11.21 To Adopt a Retail Price Improvement Program and Modify EDGX Rule 11.6(e)(2) and EDGX Rule 11.10(a)(4)(C)-(D) in Order To Describe the Behavior of Orders Containing a Non-Displayed Instruction; and Order Granting Limited Exemption Pursuant to Rule 612(d) of Regulation NMS
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
March 24, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 56 (Tuesday, March 24, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 56 (Tuesday, March 24, 2026)]
[Notices]
[Pages 14052-14056]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05660]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105052; File No. SR-CboeEDGX-2025-072]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment Nos. 3 and 4, To Modify EDGX Rule 11.21 To Adopt a Retail
Price Improvement Program and Modify EDGX Rule 11.6(e)(2) and EDGX Rule
11.10(a)(4)(C)-(D) in Order To Describe the Behavior of Orders
Containing a Non-Displayed Instruction; and Order Granting Limited
Exemption Pursuant to Rule 612(d) of Regulation NMS
March 19, 2026.
I. Introduction
On September 30, 2025, Cboe EDGX Exchange, Inc. (the ``Exchange''
or ``EDGX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``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'' or
``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\ On January 15, 2026,
the Commission published notice of Amendment No. 3.\9\ The Commission
has not received any comments on the proposed rule change. On January
29, 2026, the Exchange filed Amendment No. 4 to the proposed rule
change.\10\ In connection with the proposed rule change, the Exchange
requests exemptive relief from Rule 612 of Regulation NMS,\11\ which
establishes the minimum pricing increments for NMS stocks (``Sub-Penny
Rule'').\12\ This order approves the proposed rule change as modified
by Amendment Nos. 3 and 4, and grants the Exchange limited exemptive
relief pursuant to Rule 612(d) of Regulation NMS.\13\
---------------------------------------------------------------------------
\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).
\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). The Commission designated
January 1, 2026, as the date by which the Commission shall approve
or disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change.
\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). 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).
\8\ The full text of Amendment No. 3 is 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>.
\9\ See Securities Exchange Act Release No. 104620 (Jan.15,
2026), 91 FR 2568 (Jan. 21, 2026). (``Notice of Amendment No. 3'').
\10\ Amendment No. 4 is a partial amendment that updated the
proposal to reflect the Commission's approval of a proposed rule
change (SR-CboeEDGX-2025-035) that also amended the Exchange's Rule
11.21. See Securities Exchange Act Release No. 104705 (Jan. 28,
2026), 91 FR 4650 (Feb. 2, 2026) (``EDGX Retail Order Definition
Approval''). Because Amendment No. 4 is a technical amendment that
does not materially alter the substance of the proposal or raise
unique or novel regulatory issues, the amendment is not subject to
notice or comment. The full text of Amendment No. 4 is available on
the Commission's website at srcboeedgx2025072-699747-2194994.pdf
(``Amendment No. 4'').
\11\ See Letter from Courtney Smith, Senior Counsel, Cboe Global
Markets--North American Equities to Vanessa Countryman, Secretary,
Commission (Mar. 11, 2026) (``Exemption Request'').
\12\ 17 CFR 242.612 (``Rule 612''). Among other things, Rule 612
of Regulation NMS prohibits a national securities exchange from
accepting or ranking orders priced greater than $1.00 per share in
an increment smaller than either $0.01 or $0.005, depending on the
Time Weighted Average Quoted Spread the stock. Rule 612(b)(2).
``Time Weighted Average Quoted Spread'' is defined in Rule
612(a)(2).
\13\ 17 CFR 242.612(d).
---------------------------------------------------------------------------
II. Description of the Proposal
Currently under EDGX Rule 11.21, an Exchange Member \14\ that
qualifies as a Retail Member Organization (``RMO'') \15\ is eligible to
submit certain agency, principal, or riskless principal orders that
reflect the trading interest of a natural person with a ``Retail
Order'' \16\ modifier, and designate that such orders be identified as
such on the EDGX Book Feed.\17\ The Exchange also offers order
[[Page 14053]]
allocation priority to Retail Orders that qualify as Retail Priority
Orders.\18\ The Exchange now proposes to amend EDGX Rule 11.21 to
establish a Retail Price Improvement Program that is structured
similarly to the programs currently in place at its affiliated
exchange, Cboe BYX, Inc. (``BYX''), as well as the retail liquidity
programs of other competitor exchanges (collectively, with the BYX
program, ``RLPs''),\19\ with certain differences that the Exchange
states will make its Program a unique offering for retail order
flow.\20\ Namely, under the proposed Program: (1) Retail Orders may be
entered with a time-in-force other than immediate-or-cancel
(``IOC''),\21\ and may post to the EDGX Book or route to away trading
centers pursuant to User instructions; (2) Retail Price Improvement
Orders \22\ will only be eligible to execute against incoming Retail
Orders and will not be eligible to remove resting Retail Orders from
the EDGX Book; and (3) Users may enter a Retail Price Improvement Order
as a MidPoint Peg Order.\23\ The Exchange also proposes to modify Rules
11.6(e)(2) and 11.10(a)(4)(C)-(D) in order to describe the operation of
orders entered with a ``Non-Displayed'' instruction.\24\
---------------------------------------------------------------------------
\14\ See EDGX Rule 1.5(n) (defining ``Member'' to mean any
registered broker or dealer that has been admitted to membership in
the Exchange).
\15\ See EDGX Rule 11.21(a)(1) (defining RMO to mean a Member
(or a division thereof) that has been approved by the Exchange under
EDGX Rule 11.21 to submit Retail Orders).
\16\ Pursuant to EDGX Rule 11.21(a)(2), a Retail Order is an
agency order, principal order (subject to the requirements of
current EDGX Rule 11.21(g)), or riskless principal order that meets
the criteria of Financial Industry Regulatory Authority, Inc.
(``FINRA'') Rule 5320.03 that originates from a natural person and
is submitted to the Exchange by an RMO, provided that no change is
made to the terms of the order with respect to price or side of
market and the order does not originate from a trading algorithm or
any other computerized methodology. A Retail Order entered
principally must also satisfy the requirements in current EDGX Rule
11.21(g). See EDGX Rule 11.21(a)(2); see also Amendment No. 4.
\17\ EDGX Rule 11.21; see also EDGX Rule 13.8 (describing the
``EDGX Book Feeds''); Notice of Amendment No. 3 at 2569-70
(describing the Exchange's current offerings for Retail Orders,
including pricing incentives and rebates).
\18\ EDGX Rule 11.9; Notice of Amendment No. 3 at 2569. Pursuant
to EDGX Rule 11.9, Interpretation .01, a Retail Priority Order is
defined as 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).
\19\ EDGX states that its Program is structured similarly to the
RLPs of BYX, New York Stock Exchange LLC (``NYSE''), NYSE National,
Inc. (``NYSE National''), Nasdaq BX, Inc. (``Nasdaq BX'') and
Investors Exchange LLC (``IEX''). See Notice of Amendment No. 3 at
2569, 2573.
\20\ See Notice of Amendment No. 3 at 2569-70.
\21\ Pursuant to EDGX Rule 11.6(q)(1) IOC means, 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 EDGX Rule
11.10(a)(4) on the System when reaching the Exchange will be
eligible for routing away pursuant to EDGX Rule 11.11. ``User'' is
defined in EDGX Rule 1.5(e)(e); ``System'' is defined in EDGX Rule
1.5(c)(c).
\22\ Proposed EDGX Rule 11.21(a) (defining ``Retail Price
Improvement Orders'' or ``RPI Orders''); infra Section II.A
(describing the proposed order type).
\23\ Notice of Amendment No. 3 at 2569. ``MidPoint Peg Order''
is defined in EDGX Rule 11.8(d). Additionally, the BYX RLP offers an
``Enhanced RPI Order'' type; is available in securities priced below
$1.00, in addition to securities priced at or above $1.00; does not
offer a MidPoint Peg RPI Order (discussed infra); requires Retail
Orders to be IOC, and permits RPI Orders to execute upon entry. See
Exemption Request at 2, n.5; Amendment No. 3 at 2570; BYX Rule
11.24. Similar to certain other RLPs (see, e.g., NYSE Rule 7.44;
NYSE National Rule 7.44) the Program will be limited to trades
occurring at prices equal to or greater than $1.00 per share.
Proposed EDGX Rule 11.21(i).
\24\ Notice of Amendment No. 3 at 2569; see also EDGX Rule
11.6(e)(2) (describing the Exchange's Non-Displayed instruction).
---------------------------------------------------------------------------
A. Retail Price Improvement Program
Types of Orders and Identifier
In connection with the Program, the Exchange proposes a new order
type, the RPI Order. An RPI Order will be non-displayed interest on the
Exchange that is identified as such in a manner prescribed by the
Exchange and is only eligible to interact with incoming Retail Orders.
An RPI Order may be entered as a limit order in a sub-penny increment
with an explicit price, as a MidPoint Peg Order (``RPI MidPoint Peg
Order''), or as a Primary Pegged Order (``RPI Primary Pegged
Order'').\25\ To be executable, an RPI Order must be priced at least
$0.001 better than the Protected NBB \26\ or Protected NBO.\27\ Any
User may enter an RPI Order.\28\
---------------------------------------------------------------------------
\25\ Proposed EDGX Rule 11.21(a)(3); Notice of Amendment No. 3
at 2570. An 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, and the
Offset Amount may be entered in pricing increments of $0.001.
Neither an RPI MidPoint Peg Order, nor an RPI Primary Pegged Order
will execute during a locked market. Id.
\26\ EDGX Rule 1.5(u) defines Protected NBB as the national best
bid that is a Protected Quotation. EDGX Rule 1.5(v) defines
Protected Bid and Protected Offer as a bid or 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 bid or best offer of a national
securities exchange or association; and Protected Quotation as a
quotation that is a Protected Bid or Protected Offer.
\27\ EDGX Rule 1.5(u) defines Protected NBO as the national best
offer that is a Protected Quotation.
\28\ Notice of Amendment No. 3 at 2570.
---------------------------------------------------------------------------
While the definition of Retail Order will generally remain the same
as the existing Retail Order definition, it will now specify that a
Retail Order will operate in accordance with new paragraph (f) of Rule
11.21, which provides that an RMO can designate a Retail Order as Type
1 or Type 2,\29\ which will dictate how it will interact with available
contra-side RPI Orders and other interest, as well as whether it is
eligible for routing. A Type 1-designated Retail Order must be marked
IOC and is eligible to interact only with available contra-side RPI
Orders and other price-improving liquidity. It will not interact with
non-price-improving, contra-side interest or route to other markets.
Portions of a Type 1-designated Retail Order that are not executed will
be immediately and automatically cancelled. A Type 2-designated Retail
Order 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 interact with an RPI Order that is not priced
better than the Protected NBB or Protected NBO, and may be submitted as
an EDGX only order or as eligible for routing pursuant to EDGX Rule
11.21. As is the case today on EDGX, and consistent with other exchange
RLPs,\30\ only RMOs may enter Retail Orders.\31\
---------------------------------------------------------------------------
\29\ Proposed EDGX Rule 11.21(f)(1) and (2); Notice of Amendment
No. 3 at 2572.
\30\ See, e.g., BYX Rule 11.24; NYSE Rule 7.44.
\31\ See EDGX Rule 11.21(a)(2); proposed EDGX Rule 11.21(a)(2).
The Exchange is not proposing any changes to its process for RMO
application, qualification, disapproval and disqualification, other
than to: update a cross reference in EDGX Rule 11.21(b)(6); to
change the name of the panel that reviews appeals of Exchange
decisions related to RMO status from ``Retail Attribution Panel'' to
``RPI Panel''; and to state that the two officers of the Exchange on
the Panel shall be designated by the Chief Operating Officer, rather
than the Chief Information Officer. See EDGX Rule 11.21(b); proposed
EDGX Rule 11.21(b)(6), (d)(2); Notice of Amendment No. 3 at 2571,
2576; Amendment No. 4.
---------------------------------------------------------------------------
Similar to BYX's RLP, the Exchange will disseminate an identifier
through the 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'').\32\ The Retail Liquidity Identifier would reflect the
symbol and the side (buy or sell) of the RPI Order, but it would not
include the price or size. Like BYX's RLP,\33\ 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 be
disseminated 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.
---------------------------------------------------------------------------
\32\ See Proposed EDGX Rule 11.21(e); Notice of Amendment No. 3
at 2571-72; see also BYX Rule 11.24; NYSE Rule 7.44.
\33\ See BYX Rule 11.24.
---------------------------------------------------------------------------
Priority
Proposed EDGX Rule 11.21(g) sets forth the rules governing priority
under the Program. Specifically, RPI Orders in the same security shall
be ranked according to price then time of entry into the System,
pursuant to EDGX Rule 11.9, and executions shall occur in price/time
priority, in accordance with EDGX Rule 11.9. Any remaining unexecuted
portion of an RPI Order will remain available to interact with other
[[Page 14054]]
incoming Retail Orders.\34\ The System will monitor whether RPI Orders,
adjusted by any Offset Amount and subject to the order's limit price,
are eligible to interact with incoming Retail Orders.\35\
---------------------------------------------------------------------------
\34\ See Notice of Amendment No. 3 at 2570-2574.
\35\ See Proposed EDGX Rule 11.21(a)(3).
---------------------------------------------------------------------------
Comparison to Other Retail Programs
In Notice of Amendment No. 3,\36\ the Exchange discusses how its
Program compares to, among others, the RLPs of BYX, NYSE, NYSE
National, IEX, and Nasdaq BX.\37\ The Exchange highlights the
substantive differences between several features of its proposed
Program and the programs of the other exchanges.\38\ Among other
things, the Exchange explains that its Program would provide that:
---------------------------------------------------------------------------
\36\ See Notice of Amendment No. 3 at 2569, 2573, 2575.
\37\ See, e.g., Securities Exchange Act Release Nos. 68303
(November 27, 2012), 77 FR 71652 (December 3, 2012), (``BYX RLP
Pilot Approval Order''); 87154 (September 30, 2019), 84 FR 53183
(October 4, 2019) (``BYX RLP Permanent Approval Order''); 85160
(February 15, 2019), 84 FR 5754 (February 22, 2019) (approving
NYSE's RLP on a permanent basis); 96169 (Aug. 18, 2023) 88 FR 57508
(Aug. 23, 2023) (notice of filing and immediate effectiveness of a
proposed rule change to establish NYSE National's RLP); 86619 (Aug.
9, 2019), 84 FR 41769 (Aug. 15, 2019) (approving IEX's midpoint
RLP); 86194 (June 25, 2019), 84 FR 31385 (July 1, 2019) (approving
Nasdaq BX's RLP on a permanent basis).
\38\ See Notice of Amendment No. 3 at 2569, 2573, 2575.
---------------------------------------------------------------------------
<bullet> Retail Orders may be entered with a time-in-force other
than IOC, and therefore may post to the EDGX Book or route to away
trading centers pursuant to User instructions; \39\
---------------------------------------------------------------------------
\39\ See Notice of Amendment No. 3 at 2570-71, 2572-73, 2576.
The Exchange states that 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. Id. at 2573.
---------------------------------------------------------------------------
<bullet> RPI Orders will only be eligible to execute against
incoming Retail Orders and will not be eligible to remove resting
Retail Orders from the EDGX Book; \40\ and
---------------------------------------------------------------------------
\40\ See Notice of Amendment No. 3 at 2570-71, 2573. The
Exchange states that since 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. Id. at 2571.
---------------------------------------------------------------------------
<bullet> Users may enter an RPI Order in pricing increments of
$0.001 or as a MidPoint Peg Order.\41\
---------------------------------------------------------------------------
\41\ See Notice of Amendment No. 3 at 2570, 2573.75. The
Exchange states 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. Id. at 2575. In Notice of Amendment No. 3, the Exchange
also provides examples of how each these proposed features would
operate.
---------------------------------------------------------------------------
B. Orders With a Non-Displayed Instruction
The Exchange currently permits orders to be entered with a Non-
Displayed instruction (``Non-Displayed Order'').\42\ In addition to
proposing to add a Retail Price Improvement Program, the Exchange also
proposes amendments to EDGX Rules 11.6 and 11.10 describing the
behavior of orders with a Non-Displayed instruction on the
Exchange.\43\ Specifically, the Exchange states that the proposed rule
change more accurately describes 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.\44\ Among other things, the proposed
rule change specifies the price at which a Non-Displayed Order is
posted and ranked on the EDGX Book in the event that it is not
immediately executed (because such execution would trade through a
Protected Quotation, or otherwise as a result of User instructions),
including how orders with Post Only \45\ and price slide instructions
will be handled. For example, the Exchange describes the circumstances
under which a later arriving Non-Displayed Order may gain execution
priority over a resting Non-Displayed Order as a result of the resting
order's User instructions. The proposed rule change is also designed to
better describe the execution of Non-Displayed Orders when the EDGX
Book is locked, including the execution price of orders on the EDGX
Book under certain related circumstances.
---------------------------------------------------------------------------
\42\ EDGX Rule 11.6.
\43\ Proposed EDGX Rules 11.6 and 11.10. The proposed changes to
these rules are discussed in more detail, including examples, in
Notice of Amendment No. 3. See Notice of Amendment No. 3 at 2571,
2573-2574.
\44\ See Notice of Amendment No. 3 at 2573.
\45\ EDGX Rule 11.6(n)(4) describes EDGX's Post Only
instruction.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 3 and 4, is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\46\ In particular, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\47\ which requires that an exchange have
rules designed to, among other things, 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, in general,
protect investors and the public interest, and that are not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\46\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange currently operates a process by which Members can
qualify to become RMOs, thereby permissioning them to submit Retail
Orders to the Exchange.\48\ Under EDGX's proposed Program, RMOs will
continue to be eligible to submit Retail Orders. Any User could submit
liquidity-providing RPI Orders, which will be orders that are only
eligible to execute against Retail Orders, and only at a price that is
at least $0.001 better than the Protected NBB or Protected NBO. Retail
Orders would be able to execute against the proposed RPI Orders, as
well as certain other orders on the Exchange's order book as specified
in proposed EDGX Rule 11.21(f).
---------------------------------------------------------------------------
\48\ Supra notes 16-18 and accompany text (discussing the
Exchange's current offerings for Retail Orders).
---------------------------------------------------------------------------
The Exchange's proposed Program differs in several respects from
the RLPs operated by certain other national securities exchanges and,
thus, does not present all of the same issues raised by those programs.
EDGX provided a fulsome discussion of the distinctions between its
proposed Program and the programs operated by other exchanges.\49\ In
particular, the Exchange discussed how it will: (1) permit Retail
Orders to be entered with any time-in-force and not be limited to a
time-in-force of IOC; (2) not permit an RPI Order to execute
immediately against resting Retail Orders upon entry; and (3) permit an
RPI Order to be entered in pricing increments of $0.001 or as an RPI
MidPoint Peg Order.
---------------------------------------------------------------------------
\49\ See supra notes 36-41 and accompanying text (discussing
differences between the EDGX proposal and the RLPs of other
exchanges).
---------------------------------------------------------------------------
The Exchange states that, while the proposed Program will function
similarly to the RLPs of other exchanges, these differences ``will make
[the Program] a unique offering for retail order flow.'' \50\ First,
the Exchange explains the proposal to permit Retail Orders to be
entered with any time-in-
[[Page 14055]]
force 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.\51\ Further, according to the
Exchange, the proposed RPI Order behavior that does not permit an RPI
Order to execute immediately against resting Retail Orders upon entry
will provide an additional, optional order type that provides liquidity
providers greater control over its contra-side execution.\52\ Any
liquidity provider may utilize the proposed RPI Order as part of its
investment strategy.\53\ According to the Exchange, liquidity providers
who choose this order type may forego immediate executions in exchange
for the ``strong likelihood'' of executing against an incoming, contra-
side Retail Order.\54\ Finally, according to the Exchange, its proposal
to permit an RPI Order to be entered in pricing increments of $0.001 or
as an RPI MidPoint Peg Order provides a User 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.\55\
---------------------------------------------------------------------------
\50\ Notice of Amendment No. 3 at 2570.
\51\ See Notice of Amendment No. 3 at 2576. The Exchange states
that it 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. See id.
\52\ See Notice of Amendment No. 3 at 2575.
\53\ See id. The Exchange states that 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. According to the
Exchange, 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 may choose
another order type on the Exchange. See id.
\54\ See Notice of Amendment No. 3 at 2575.
\55\ See Notice of Amendment No. 3 at 2575-76. The Exchange
states that 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.
See id.
---------------------------------------------------------------------------
The Exchange states that these distinctions will 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.\56\ The Exchange further states that the
introduction of the program would ``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 [over-
the-counter] markets.''
---------------------------------------------------------------------------
\56\ See Notice of Amendment No. 3 at 2573.
---------------------------------------------------------------------------
The Exchange also asserts that while the Program would
differentiate among its Members, it believes that such differentiation
is not unfairly discriminatory because the Program is 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 cost.'' \57\
---------------------------------------------------------------------------
\57\ Notice of Amendment No. 3 at 2575.
---------------------------------------------------------------------------
Proposals involving segmentation of order flow on a national
securities exchange--even if such order flow is retail or offers price
improvement to retail orders--must be carefully evaluated. In this
instance, the Program is reasonably designed to attract retail order
flow to a registered national securities exchange while offering the
opportunity for retail investors to potentially benefit from the
ability to obtain price improvement.\58\
---------------------------------------------------------------------------
\58\ The Commission has previously recognized that market
participants and some exchanges distinguish between individual and
retail investors, whose orders are considered desirable by liquidity
providers because such retail investors are presumed on average to
be less informed about short-term price movements. The Commission
has also recognized that, because of this distinction, some
liquidity providers may be more inclined to offer price improvement.
See Securities Exchange Act Release No. 73702 (November 28, 2014),
79 FR 72049 (December 4, 2014) (approving Nasdaq BX's RLP on a pilot
basis).
---------------------------------------------------------------------------
The Commission finds that the Program is consistent with the Act
because it is reasonably designed to benefit retail investors by
providing price improvement to retail order flow.\59\ The Commission
also finds that the Program is reasonably designed to enhance
competition amongst market participants and encourage competition
amongst exchange venues. To the extent the Program is successful, the
proposal could facilitate and promote competition among exchanges and
between exchanges and the over-the-counter (``OTC'') markets and
potentially bring more retail order flow to a public exchange. As such,
the proposal is designed to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
further the investor protection and public interest objectives of
6(b)(5) of the Act.
---------------------------------------------------------------------------
\59\ The Commission has previously approved similar RLPs for
other national securities exchanges. See supra note 36 and
accompanying text. Among other things, the Commission has previously
found the dissemination of information regarding liquidity-providing
orders available to execute against Retail Orders, similar to the
proposed Retail Liquidity Identifier, to be consistent with the Act;
and that such programs are sufficiently tailored to provide the
benefits of potential price improvement only to bona fide retail
order flow originating from natural persons, highlighting the
qualification and oversight of RMOs and the limitations on the
definition of Retail Order. See BYX RLP Pilot Approval Order at
71656; Securities Exchange Act Release No. 67347 (July 3, 2012) 77
FR 40673 (July 10, 2012) (order approving NYSE's RLP on a pilot
basis) at 40680; see also EDGX Retail Order Definition Approval at
4650 (finding that EDGX's proposal to expand the definition of
Retail Order to include orders entered on a principal basis, subject
to the specified compliance requirements and monitoring, is
reasonably designed to ensure that RMOs submit only bona fide retail
order flow as Retail Orders and thereby should promote just and
equitable principals of trade and protect investors and the public
interest).
---------------------------------------------------------------------------
The Commission also find the Exchange's proposed amendments to EDGX
Rule 11.6 and 11.10 to be consistent with the Act. The Exchange states
that 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.\60\
---------------------------------------------------------------------------
\60\ See Notice of Amendment No. 3 at 2576. The Exchange states
that 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.
---------------------------------------------------------------------------
For the reasons set forth above, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 3 and 4, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, the requirements of Sections 6(b)(5).\61\
---------------------------------------------------------------------------
\61\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Limited Exemption From the Sub-Penny Rule
Pursuant to its authority under Rule 612(d) of Regulation NMS,\62\
the Commission hereby grants the Exchange a limited exemption from the
Sub-Penny Rule to operate the RPI Program. For the reasons discussed
below, the Commission determines that such action is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
---------------------------------------------------------------------------
\62\ 17 CFR 242.612(d).
---------------------------------------------------------------------------
When the Commission adopted the Sub-Penny Rule, the Commission
identified a variety of problems caused by sub-penny quoting that the
Sub-Penny Rule was designed to address:
[[Page 14056]]
<bullet> If investors' limit orders lose execution priority for a
nominal amount, investors may, over time, decline to use them, thus
depriving the markets of liquidity.
<bullet> When market participants can gain execution priority for a
nominal amount, important customer protection rules such as exchange
priority rules and the Manning Rule \63\ could be undermined.
---------------------------------------------------------------------------
\63\ See FINRA Rule 5320 (Prohibition Against Trading Ahead of
Customer Orders).
---------------------------------------------------------------------------
<bullet> Flickering quotations that can result from widespread sub-
penny pricing could make it more difficult for broker-dealers to
satisfy their best execution obligations and other regulatory
responsibilities.
<bullet> Widespread sub-penny quoting could decrease market depth
and lead to higher transaction costs.
<bullet> Decreasing depth at the inside could cause institutions to
rely more on execution alternatives away from the exchanges,
potentially increasing fragmentation in the securities markets.\64\
---------------------------------------------------------------------------
\64\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (Adopting Release for Regulation
NMS). See also BYX RLP Permanent Approval Order at 53186; BYX RLP
Pilot Approval Order at 71657.
---------------------------------------------------------------------------
In connection with approvals of RLPs of other national securities
exchanges, the Commission has granted a limited exemption from Rule
612(a).\65\ The Commission recognized that the vast majority of
marketable retail orders are internalized by OTC market makers, and to
the extent that OTC market makers offer price improvement over the
NBBO, it is typically offered in sub-penny amounts. The Commission
stated that OTC market makers typically select a sub-penny price for a
trade without quoting at that exact amount or accepting orders from
retail customers seeking that exact price. The Commission further
recognized that exchanges, and exchange member firms, cannot compete
for marketable retail order flow on the same basis because it would be
impractical for exchange electronic systems to generate sub-penny
executions without exchange liquidity providers or retail brokerage
firms having first submitted sub-penny orders or quotations, which the
Sub-Penny Rule expressly prohibits.\66\
---------------------------------------------------------------------------
\65\ See, e.g., RPI Approval Order at 53186; RPI Pilot Approval
Order at 71657-58; Securities Exchange Act Release No. 104625
(January 16, 2026), 91 FR 2813 Jan. 22, 2026 (``ERPI Exemption
Order'').
\66\ See, e.g., RPI Pilot Approval Order at 71658; see also RPI
Approval Order at 53186; ERPI Exemption Order at 2814.
---------------------------------------------------------------------------
Similarly, EDGX's proposed Program does not raise any new concerns
regarding the problems the Sub-Penny Rule was designed to address, and
the limited exemption granted in this order should continue to promote
competition between exchanges and OTC market makers in a manner that is
reasonably designed to minimize the problems that the Commission
identified when adopting the Sub-Penny Rule. Under the Program, sub-
penny prices will not be disseminated through the consolidated
quotation data stream,\67\ which should avoid quote flickering and
reduced depth at the inside quotation.\68\
---------------------------------------------------------------------------
\67\ See supra Section II.A (discussing dissemination of the
Retail Liquidity Identifier).
\68\ See BYX RLP Pilot Approval Order at 71658; ERPI Exemption
Order at 2815.
---------------------------------------------------------------------------
Furthermore, granting this limited exemption would not reduce
incentives for market participants to display limit orders. Enabling
the Exchange to compete for retail order flow through the proposed
Program should not materially detract from the current incentives to
display limit orders, while potentially resulting in greater order
interaction and price improvement for marketable retail orders on a
public national securities exchange. To the extent that the Program may
raise Manning Rule and best execution issues for broker-dealers, these
issues are already presented by the existing practices of OTC market
makers.\69\
---------------------------------------------------------------------------
\69\ Id.
---------------------------------------------------------------------------
This exemption from the Sub-Penny Rule is limited solely to the
operation of the RPI Program by the Exchange. This exemption does not
extend beyond the scope of EDGX Rule 11.21. In addition, this exemption
is conditioned on the Exchange continuing to conduct the Program, in
accordance with Exchange Rule 11.21 and substantially as described in
the Exchange's request for exemptive relief and the proposed rule
change.\70\ Any further changes in Exchange Rule 11.21 may cause the
Commission to reconsider this exemption.
---------------------------------------------------------------------------
\70\ See supra note 11.
---------------------------------------------------------------------------
VII. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 3 and 4, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, the requirements of Sections 6(b)(5).\71\
---------------------------------------------------------------------------
\71\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\72\ that the proposed rule change (SR-CboeEDGX-2025-072), as
modified by Amendment Nos. 3 and 4, be, and hereby is, approved.
---------------------------------------------------------------------------
\72\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
It is further ordered, pursuant to Rule 612(d) under Regulation
NMS, that the Exchange is granted a limited exemption from Rule 612 of
Regulation NMS with respect to the operation of the Program as set
forth in Exchange Rule 11.21 to allow the Exchange to accept and rank
RPI Interest priced equal to or greater than $1.00 per share in
increments of $0.001.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\73\
---------------------------------------------------------------------------
\73\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30-3(a)(83).
---------------------------------------------------------------------------
Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05660 Filed 3-23-26; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on March 24, 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.