83_FR_59027 83 FR 58802 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Make Permanent Exchange Rule 11.24, Which Sets Forth the Exchange's Pilot Retail Price Improvement Program

83 FR 58802 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Make Permanent Exchange Rule 11.24, Which Sets Forth the Exchange's Pilot Retail Price Improvement Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 225 (November 21, 2018)

Page Range58802-58804
FR Document2018-25341

Federal Register, Volume 83 Issue 225 (Wednesday, November 21, 2018) 
[Federal Register Volume 83, Number 225 (Wednesday, November 21, 2018)]
[Notices]
[Pages 58802-58804]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-25341]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84600; File No. SR-CboeBYX-2018-014]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Make Permanent Exchange Rule 11.24, Which Sets 
Forth the Exchange's Pilot Retail Price Improvement Program

November 15, 2018.

I. Introduction

    On July 30, 2018, Cboe BYX Exchange, Inc. (``BYX'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 make permanent Exchange Rule 11.24, which sets 
forth the Exchange's pilot Retail Price Improvement Program. The 
proposed rule change was published for comment in the Federal Register 
on August 17, 2018.\3\ On September 27, 2018, the Commission extended 
to November 15, 2018, the time period in which to approve, disapprove, 
or institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.\4\ The Commission received no comments on the 
proposed rule change. This order institutes proceedings under Section 
19(b)(2)(B) of the Act \5\ to determine whether to approve or 
disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83831 (August 13, 
2018), 83 FR 41128 (``Notice'').
    \4\ See Securities Exchange Act Release No. 84297, 83 FR 49959 
(October 3, 2018).
    \5\ 15 U.S.C. 78(s)(b)(2)(B).
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II. Summary of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 11.24 to make 
permanent the Retail Price Improvement Program (the ``Program''), which 
sets forth the rules and procedures governing the program and is 
currently offered on a pilot basis.\6\ The pilot is scheduled to expire 
upon the earlier of the approval of this proposed rule change or 
December 31, 2018.\7\ According to the Exchange, the Program is 
designed to attract retail order flow and allow such order flow to 
receive potential price improvement.\8\
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    \6\ In November 2012, the Commission approved the Program on a 
pilot basis. See Securities Exchange Act Release No. 68303 (November 
27, 2012), 77 FR 71652 (December 3, 2012) (``RPI Approval Order'') 
(SR-BYX-2012-019).
    \7\ The Exchange implemented the Program on January 11, 2013, 
and has extended the pilot period five times. See Securities 
Exchange Act Release Nos. 71249 (January 7, 2014), 79 FR 2229 
(January 13, 2014) (SR-BYX-2014-001); 74111 (January 22, 2015), 80 
FR 4598 (January 28, 2015) (SR-BYX-2015-05); 76965 (January 22, 
2016), 81 FR 4682 (January 27, 2016) (SR-BYX-2016-01); 78180 (June 
28, 2016), 81 FR 43306 (July 1, 2016) (SR-BYX-2016-15); and 81368 
(August 10, 2017), 82 FR 38960 (August 16, 2017) (SR-BYX-2017-18).
    \8\ See Notice, supra note 3 at 41128.
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    Under the Program, a class of market participant called a Retail 
Member Organization (``RMO'') is eligible to submit certain retail 
order flow (``Retail Orders'') to the Exchange. A User \9\ is permitted 
to provide potential price improvement for Retail Orders \10\ by 
submitting Retail Price Improvement (``RPI'') Orders, which are non-
displayed orders that are priced at least $0.001 better than the best 
protected bid (``PBB'') or best protected offer (``PBO'') (``PBBO''), 
as such terms are defined in Regulation NMS, and that is identified as 
such.\11\ After an RPI Order is submitted, the Exchange disseminates an 
indicator through its proprietary data feeds or through the 
Consolidated Tape Association/Consolidated Quotation Plan for Tape A 
and Tape B securities

[[Page 58803]]

and the Nasdaq UTP Plan for Tape C securities, known as the Retail 
Liquidity Identifier, indicating that such interest exists.\12\ The 
Retail Liquidity Identifier reflects the symbol for the particular 
security and the side (buy or sell) of the RPI interest, but does not 
include the price or size of the RPI interest.\13\
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    \9\ A ``User'' is defined in Exchange Rule 1.5(cc) as any member 
or sponsored participant of the Exchange who is authorized to obtain 
access to the System.
    \10\ A ``Retail Order'' is defined in Exchange Rule 11.24(a)(2) 
as an agency order or riskless principal that meets the criteria of 
FINRA Rule 53250.03 that originates from a natural person and is 
submitted to the Exchange by a RMO, provided that no change is made 
to the terms of the order with respect to price or side of market 
and the order does not originate from a trading algorithm or any 
computerized methodology. See Exchange Rule 11.24(a)(2).
    \11\ See Notice, supra note 3 at 41128. As more fully set forth 
in the Notice, RPI Orders may be submitted with an explicit limit 
price, or an offset. RPI Orders submitted with an offset are similar 
to other peg orders in that the order is tied or ``pegged'' to a 
certain price, and would have its price automatically set and 
adjusted upon changes to the Protected NBBO. The offset is a 
predetermined amount by which the User is willing to improve the 
Protected NBBO, subject to a ceiling or floor price. The ceiling or 
floor price is the amount above or below which the User does not 
wish to trade. RPI Orders in their entirety (the buy or sell 
interest, the offset, and the ceiling or floor) will remain non-
displayed.
    \12\ See Notice, supra note 3 at 41130.
    \13\ See id.
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    To qualify as an RMO, a member organization must conduct a retail 
business or route retail orders on behalf of another broker-dealer.\14\ 
A member organization must submit the following to the Exchange for 
approval: (i) An application form, (ii) supporting documentation, and 
(iii) an attestation that substantially all orders submitted as retail 
orders will qualify as such. The Program provides for an appeal process 
for a disapproved applicant, and a withdraw process for RMOs. RMOs must 
have written policies and procedures reasonably designed to assure that 
they will only designate orders as Retail Orders if all requirements of 
a Retail Order are met. RMOs could be disqualified if they submit 
Retail Orders that do not meet the requirements of Retail Orders. If 
disqualified, RMOs may appeal and reapply.
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    \14\ See id.
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    Under the Program, there are two types of Retail Orders. A Type 1 
Retail Order will interact with only available contra-side RPI Orders 
and other price improving contra-side interest.\15\ A Type 1 Retail 
Order will not interact with other available contra-side interest or 
route to away markets. The unexecuted portion of a Type 1 Retail Order 
will be immediately cancelled. A Type 2 Retail Order will interact 
first with available contra-side RPI Orders and price-improving 
liquidity, and then any remaining portion will be executed as an 
immediate-or-cancel order.\16\ A Type 2-desiganted Retail Order can 
either be submitted as a BYX Only Order or an order eligible for 
routing.\17\
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    \15\ See id.
    \16\ See id. at 41130-31.
    \17\ See id. at 41131.
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    The Program provides that RPI Orders will be ranked and allocated 
according to price-time priority. Executions occur in price time 
priority. Any remaining unexecuted RPI interest remains available to 
interact with other incoming Retail Orders if such interest is at an 
eligible price.
    A more detailed description of how the program operates, including 
but not limited to how a member organization may qualify an apply to 
become a RMO; the different types of Retail Orders; and priority and 
order allocation of RPI Orders is more fully set forth in the 
Notice.\18\
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    \18\ See Notice, supra note 3.
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    As part of the RPI Approval Order, the Exchange agreed to provide 
the Commission with a significant amount of data to assist the 
Commission's evaluation of the Program.\19\ Specifically, the Exchange 
represented that it would ``produce data throughout the pilot, which 
will include statistics about participation, the frequency and level of 
price improvement provided by the Program, and any effects on the 
broader market structure.'' \20\ The Commission expected the Exchange 
to monitor the scope and operation of the Program and study the data 
produced during that time with respect to such issues.\21\
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    \19\ See RPI Order, supra note 7, at 71657.
    \20\ Id.
    \21\ Id.
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    In the Notice, the Exchange states that it believes that it has 
achieved its goal of attracting retail order flow to the Exchange.\22\ 
The Exchange further states that its analysis of the data collected 
demonstrates that ``there has been consistent retail investor interest 
in the Program, which has provided tangible price improvement to those 
retail investors through a competitive pricing process over the course 
of the pilot.'' \23\ The Exchange also concluded that the data shows 
that the Program ``had an overall negligible impact on broader market 
quality outside of the Program.'' \24\
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    \22\ See Notice, supra note 3, at 41131.
    \23\ Id.
    \24\ Id.
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III. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \25\ to determine whether the proposal should be 
approved or disapproved. Institution of proceedings is appropriate at 
this time in view of the legal and policy issues raised by the 
proposal. Institution of disapproval proceedings does not indicate that 
the Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described in greater detail below, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposal.
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    \25\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\26\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Section 6(b)(5) 
of the Act,\27\ which requires that the rules of an exchange be 
designed, among other things, to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
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, and which prohibits the rules of an 
exchange from being designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers, and with Section 6(b)(8) of 
the Act, which requires that the rules of an exchange not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\28\
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    \26\ Id.
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78f(b)(8).
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    The Program was intended to create additional price improvement 
opportunities for retail investors by segmenting retail order flow on 
the Exchange.\29\ When the Commission initially approved the Program on 
a pilot basis, it explained that it would monitor the Program 
throughout the pilot period for its potential effects on public price 
discovery and on the broader market structure.\30\ The Commission 
expressed its view that the Program should not cause a major shift in 
market structure, but instead, it would closely replicate the trading 
dynamics that exist in the over-the-counter markets to present another 
competitive venue for retail order flow execution.\31\ As explained 
above, the Exchange provides an analysis of what it considers to be the 
economic benefits for retail investors and the marketplace flowing from 
operation of the Program.\32\ The Exchange also concludes, among other 
things, that the relatively modest volume in the Program limits the 
potential impact of the Program on the broader market quality on the 
Exchange, and that Program has not had any significant impact on 
broader market quality.\33\
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    \29\ See RPI Approval Order, supra note 13, at 71655
    \30\ See id.
    \31\ See id. at 71656.
    \32\ See supra notes 20--22, and Notice, supra note 3, at 41131-
38.
    \33\ See id. at 413332; 41337.
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . .

[[Page 58804]]

 is on the [SRO] that proposed the rule change.'' \34\ The description 
of a proposed rule change, its purpose and operation, its effect, and a 
legal analysis of its consistency with applicable requirements must all 
be sufficiently detailed and specific to support an affirmative 
Commission finding,\35\ and any failure of an SRO to provide this 
information may result in the Commission not having a sufficient basis 
to make an affirmative finding that a proposed rule change is 
consistent with the Act and the applicable rules and regulations.\36\ 
Moreover, ``unquestioning reliance'' on an SRO's representations in a 
proposed rule change would not be sufficient to justify Commission 
approval of a proposed rule change.\37\
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    \34\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \35\ See id.
    \36\ See id.
    \37\ See Susquehanna Int'l Group, LLP v. Securities and Exchange 
Commission, 866 F.3d 442, 446-47 (D.C. Cir. 2017) (rejecting the 
Commission's reliance on an SRO's own determinations without 
sufficient evidence of the basis for such determinations).
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    The Commission questions whether the information and analysis 
provided by the Exchange support the Exchange's conclusions that the 
Program has achieved its goals, including whether the Program has not 
had a significant impact on broader market quality. The Commission 
seeks additional information and analysis concerning the Program's 
impact on the broader market; for example, additional information to 
support the view that the Program has not had a material adverse impact 
on market quality. The Commission believes it is appropriate to 
institute proceedings to allow for additional consideration and comment 
on the issues raised herein, any potential response to comments or 
supplemental information provided by the Exchange, and any additional 
independent analysis by the Commission. The Commission believes that 
these issues raise questions as to whether the Exchange has met its 
burden to demonstrate, based on the data and analysis provided, that 
permanent approval of the Program is consistent with the Act, and 
specifically, with its requirements that the Program be designed to 
perfect the mechanism of a free and open market and the national market 
system, protect investors and the public interest, and not be unfairly 
discriminatory; or not impose an unnecessary or inappropriate burden on 
competition.\38\
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    \38\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Sections 6(b)(5) and 6(b)(8), or any other provision of 
the Exchange Act, or the rules and regulations thereunder. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\39\
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    \39\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), 
grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Act Amendments of 
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 
75, 94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by December 12, 2018. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
December 26, 2018.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBYX-2018-014 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBYX-2018-014. The 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make publicly available. All submissions 
should refer to File Number SR-CboeBYX-2018-014 and should be submitted 
on or before December 12, 2018. Rebuttal comments should be submitted 
by December 26, 2018.
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    \40\ 17 CFR 200.30-3(a)(57) and (58).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25341 Filed 11-20-18; 8:45 am]
BILLING CODE 8011-01-P

58802 Federal Register / Vol. 83, No. 225 / Wednesday, November 21, 2018 / Notices change and require that the proposed be submitted on or before December 12, rules and procedures governing the rule change be refiled in accordance 2018. program and is currently offered on a with the provisions of Section 19(b)(1) For the Commission, by the Division of pilot basis.6 The pilot is scheduled to of the Act.8 Trading and Markets, pursuant to delegated expire upon the earlier of the approval authority.9 of this proposed rule change or IV. Solicitation of Comments December 31, 2018.7 According to the Eduardo A. Aleman, Interested persons are invited to Assistant Secretary. Exchange, the Program is designed to submit written data, views, and [FR Doc. 2018–25358 Filed 11–20–18; 8:45 am] attract retail order flow and allow such arguments concerning the foregoing, BILLING CODE 8011–01–P order flow to receive potential price including whether the proposed rule improvement.8 change is consistent with the Act. Under the Program, a class of market Comments may be submitted by any of SECURITIES AND EXCHANGE participant called a Retail Member the following methods: COMMISSION Organization (‘‘RMO’’) is eligible to submit certain retail order flow (‘‘Retail Electronic Comments [Release No. 34–84600; File No. SR– Orders’’) to the Exchange. A User 9 is • Use the Commission’s internet CboeBYX–2018–014] permitted to provide potential price comment form (http://www.sec.gov/ improvement for Retail Orders 10 by Self-Regulatory Organizations; Cboe rules/sro.shtml); or submitting Retail Price Improvement BYX Exchange, Inc.; Order Instituting • Send an email to rule-comments@ Proceedings To Determine Whether To (‘‘RPI’’) Orders, which are non- sec.gov. Please include File Number SR– displayed orders that are priced at least Approve or Disapprove a Proposed CFE–2018–001 on the subject line. $0.001 better than the best protected bid Rule Change To Make Permanent (‘‘PBB’’) or best protected offer (‘‘PBO’’) Paper Comments Exchange Rule 11.24, Which Sets (‘‘PBBO’’), as such terms are defined in Forth the Exchange’s Pilot Retail Price • Send paper comments in triplicate Improvement Program Regulation NMS, and that is identified to Secretary, Securities and Exchange as such.11 After an RPI Order is Commission, 100 F Street NE, November 15, 2018. submitted, the Exchange disseminates Washington, DC 20549–1090. an indicator through its proprietary data I. Introduction All submissions should refer to File feeds or through the Consolidated Tape On July 30, 2018, Cboe BYX Association/Consolidated Quotation Number SR–CFE–2018–001. This file Exchange, Inc. (‘‘BYX’’ or the Plan for Tape A and Tape B securities number should be included on the ‘‘Exchange’’) filed with the Securities subject line if email is used. To help the and Exchange Commission (the 6 In November 2012, the Commission approved Commission process and review your ‘‘Commission’’), pursuant to Section the Program on a pilot basis. See Securities comments more efficiently, please use 19(b)(1) of the Securities Exchange Act Exchange Act Release No. 68303 (November 27, only one method. The Commission will of 1934 (‘‘Act’’) 1 and Rule 19b–4 2012), 77 FR 71652 (December 3, 2012) (‘‘RPI post all comments on the Commission’s Approval Order’’) (SR–BYX–2012–019). thereunder,2 a proposed rule change to 7 The Exchange implemented the Program on internet website (http://www.sec.gov/ make permanent Exchange Rule 11.24, January 11, 2013, and has extended the pilot period rules/sro.shtml). Copies of the which sets forth the Exchange’s pilot five times. See Securities Exchange Act Release submission, all subsequent Retail Price Improvement Program. The Nos. 71249 (January 7, 2014), 79 FR 2229 (January amendments, all written statements proposed rule change was published for 13, 2014) (SR–BYX–2014–001); 74111 (January 22, with respect to the proposed rule 2015), 80 FR 4598 (January 28, 2015) (SR–BYX– comment in the Federal Register on 2015–05); 76965 (January 22, 2016), 81 FR 4682 change that are filed with the August 17, 2018.3 On September 27, (January 27, 2016) (SR–BYX–2016–01); 78180 (June Commission, and all written 2018, the Commission extended to 28, 2016), 81 FR 43306 (July 1, 2016) (SR–BYX– communications relating to the November 15, 2018, the time period in 2016–15); and 81368 (August 10, 2017), 82 FR proposed rule change between the 38960 (August 16, 2017) (SR–BYX–2017–18). which to approve, disapprove, or 8 See Notice, supra note 3 at 41128. Commission and any person, other than institute proceedings to determine 9 A ‘‘User’’ is defined in Exchange Rule 1.5(cc) as those that may be withheld from the whether to approve or disapprove, the any member or sponsored participant of the public in accordance with the proposed rule change.4 The Commission Exchange who is authorized to obtain access to the provisions of 5 U.S.C. 552, will be received no comments on the proposed System. 10 A ‘‘Retail Order’’ is defined in Exchange Rule available for website viewing and rule change. This order institutes 11.24(a)(2) as an agency order or riskless principal printing in the Commission’s Public proceedings under Section 19(b)(2)(B) of that meets the criteria of FINRA Rule 53250.03 that Reference Room, 100 F Street NE, the Act 5 to determine whether to originates from a natural person and is submitted Washington, DC 20549, on official approve or disapprove the proposed to the Exchange by a RMO, provided that no change business days between the hours of is made to the terms of the order with respect to rule change. price or side of market and the order does not 10:00 a.m. and 3:00 p.m. Copies of such originate from a trading algorithm or any filing also will be available for II. Summary of the Proposed Rule computerized methodology. See Exchange Rule inspection and copying at the principal Change 11.24(a)(2). office of the Exchange. All comments The Exchange proposes to amend 11 See Notice, supra note 3 at 41128. As more received will be posted without change. fully set forth in the Notice, RPI Orders may be Exchange Rule 11.24 to make permanent submitted with an explicit limit price, or an offset. Persons submitting comments are the Retail Price Improvement Program RPI Orders submitted with an offset are similar to cautioned that we do not redact or edit (the ‘‘Program’’), which sets forth the other peg orders in that the order is tied or personal identifying information from ‘‘pegged’’ to a certain price, and would have its khammond on DSK30JT082PROD with NOTICES comment submissions. You should 9 17 CFR 200.30–3(a)(73). price automatically set and adjusted upon changes to the Protected NBBO. The offset is a submit only information that you wish 1 15 U.S.C. 78s(b)(1). predetermined amount by which the User is willing 2 17 CFR 240.19b–4. to make available publicly. All to improve the Protected NBBO, subject to a ceiling 3 See Securities Exchange Act Release No. 83831 submissions should refer to File or floor price. The ceiling or floor price is the (August 13, 2018), 83 FR 41128 (‘‘Notice’’). amount above or below which the User does not Number SR–CFE–2018–001, and should 4 See Securities Exchange Act Release No. 84297, wish to trade. RPI Orders in their entirety (the buy 83 FR 49959 (October 3, 2018). or sell interest, the offset, and the ceiling or floor) 8 15 U.S.C. 78s(b)(1). 5 15 U.S.C. 78(s)(b)(2)(B). will remain non-displayed. VerDate Sep<11>2014 16:08 Nov 20, 2018 Jkt 247001 PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 E:\FR\FM\21NON1.SGM 21NON1

Federal Register / Vol. 83, No. 225 / Wednesday, November 21, 2018 / Notices 58803 and the Nasdaq UTP Plan for Tape C priority and order allocation of RPI under consideration. The Commission is securities, known as the Retail Liquidity Orders is more fully set forth in the instituting proceedings to allow for Identifier, indicating that such interest Notice.18 additional analysis of the proposed rule exists.12 The Retail Liquidity Identifier As part of the RPI Approval Order, the change’s consistency with Section reflects the symbol for the particular Exchange agreed to provide the 6(b)(5) of the Act,27 which requires that security and the side (buy or sell) of the Commission with a significant amount the rules of an exchange be designed, RPI interest, but does not include the of data to assist the Commission’s among other things, to prevent price or size of the RPI interest.13 evaluation of the Program.19 fraudulent and manipulative acts and To qualify as an RMO, a member Specifically, the Exchange represented practices, to promote just and equitable organization must conduct a retail that it would ‘‘produce data throughout principles of trade, to remove business or route retail orders on behalf the pilot, which will include statistics impediments to and perfect the of another broker-dealer.14 A member about participation, the frequency and mechanism of a free and open market organization must submit the following level of price improvement provided by and a national market system and, in to the Exchange for approval: (i) An the Program, and any effects on the general, to protect investors and the application form, (ii) supporting broader market structure.’’ 20 The public interest, and which prohibits the documentation, and (iii) an attestation Commission expected the Exchange to rules of an exchange from being that substantially all orders submitted as monitor the scope and operation of the designed to permit unfair retail orders will qualify as such. The Program and study the data produced discrimination between customers, Program provides for an appeal process during that time with respect to such issuers, brokers, or dealers, and with for a disapproved applicant, and a issues.21 Section 6(b)(8) of the Act, which withdraw process for RMOs. RMOs In the Notice, the Exchange states that requires that the rules of an exchange must have written policies and it believes that it has achieved its goal not impose any burden on competition procedures reasonably designed to of attracting retail order flow to the not necessary or appropriate in assure that they will only designate Exchange.22 The Exchange further states furtherance of the purposes of the Act.28 orders as Retail Orders if all that its analysis of the data collected The Program was intended to create requirements of a Retail Order are met. demonstrates that ‘‘there has been additional price improvement RMOs could be disqualified if they consistent retail investor interest in the opportunities for retail investors by submit Retail Orders that do not meet Program, which has provided tangible segmenting retail order flow on the the requirements of Retail Orders. If price improvement to those retail Exchange.29 When the Commission disqualified, RMOs may appeal and investors through a competitive pricing initially approved the Program on a reapply. process over the course of the pilot.’’ 23 pilot basis, it explained that it would Under the Program, there are two The Exchange also concluded that the monitor the Program throughout the types of Retail Orders. A Type 1 Retail data shows that the Program ‘‘had an pilot period for its potential effects on Order will interact with only available overall negligible impact on broader public price discovery and on the contra-side RPI Orders and other price market quality outside of the broader market structure.30 The improving contra-side interest.15 A Program.’’ 24 Commission expressed its view that the Type 1 Retail Order will not interact III. Proceedings To Determine Whether Program should not cause a major shift with other available contra-side interest To Approve or Disapprove the in market structure, but instead, it or route to away markets. The Proposed Rule Change and Grounds for would closely replicate the trading unexecuted portion of a Type 1 Retail Disapproval Under Consideration dynamics that exist in the over-the- Order will be immediately cancelled. A counter markets to present another The Commission is instituting competitive venue for retail order flow Type 2 Retail Order will interact first proceedings pursuant to Section with available contra-side RPI Orders execution.31 As explained above, the 19(b)(2)(B) of the Act 25 to determine Exchange provides an analysis of what and price-improving liquidity, and then whether the proposal should be any remaining portion will be executed it considers to be the economic benefits approved or disapproved. Institution of for retail investors and the marketplace as an immediate-or-cancel order.16 A proceedings is appropriate at this time Type 2-desiganted Retail Order can flowing from operation of the in view of the legal and policy issues Program.32 The Exchange also either be submitted as a BYX Only raised by the proposal. Institution of Order or an order eligible for routing.17 concludes, among other things, that the disapproval proceedings does not relatively modest volume in the The Program provides that RPI Orders indicate that the Commission has will be ranked and allocated according Program limits the potential impact of reached any conclusions with respect to the Program on the broader market to price-time priority. Executions occur any of the issues involved. Rather, as in price time priority. Any remaining quality on the Exchange, and that described in greater detail below, the Program has not had any significant unexecuted RPI interest remains Commission seeks and encourages available to interact with other impact on broader market quality.33 interested persons to provide additional Under the Commission’s Rules of incoming Retail Orders if such interest comment on the proposal. Practice, the ‘‘burden to demonstrate is at an eligible price. Pursuant to Section 19(b)(2)(B) of the that a proposed rule change is A more detailed description of how Act,26 the Commission is providing consistent with the [Act] and the rules the program operates, including but not notice of the grounds for disapproval and regulations issued thereunder . . . limited to how a member organization may qualify an apply to become a RMO; 18 See Notice, supra note 3. khammond on DSK30JT082PROD with NOTICES 27 15 U.S.C. 78f(b)(5). the different types of Retail Orders; and 19 See RPI Order, supra note 7, at 71657. 28 15 U.S.C. 78f(b)(8). 20 Id. 29 See RPI Approval Order, supra note 13, at 12 See Notice, supra note 3 at 41130. 21 Id. 71655 13 See id. 22 See Notice, supra note 3, at 41131. 30 See id. 14 See id. 23 Id. 31 See id. at 71656. 15 See id. 24 Id. 32 See supra notes 20—22, and Notice, supra note 16 See id. at 41130–31. 25 15 U.S.C. 78s(b)(2)(B). 3, at 41131–38. 17 See id. at 41131. 26 Id. 33 See id. at 413332; 41337. 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58804 Federal Register / Vol. 83, No. 225 / Wednesday, November 21, 2018 / Notices is on the [SRO] that proposed the rule IV. Procedure: Request for Written amendments, all written statements change.’’ 34 The description of a Comments with respect to the proposed rule proposed rule change, its purpose and The Commission requests that change that are filed with the operation, its effect, and a legal analysis interested persons provide written Commission, and all written of its consistency with applicable submissions of their views, data, and communications relating to the requirements must all be sufficiently arguments with respect to the issues proposed rule change between the detailed and specific to support an identified above, as well as any other Commission and any person, other than affirmative Commission finding,35 and concerns they may have with the those that may be withheld from the any failure of an SRO to provide this proposal. In particular, the Commission public in accordance with the information may result in the invites the written views of interested provisions of 5 U.S.C. 552, will be Commission not having a sufficient persons concerning whether the available for website viewing and basis to make an affirmative finding that proposal is consistent with Sections printing in the Commission’s Public a proposed rule change is consistent 6(b)(5) and 6(b)(8), or any other Reference Room, 100 F Street NE, with the Act and the applicable rules provision of the Exchange Act, or the Washington, DC 20549, on official and regulations.36 Moreover, rules and regulations thereunder. business days between the hours of ‘‘unquestioning reliance’’ on an SRO’s Although there do not appear to be any 10:00 a.m. and 3:00 p.m. Copies of such representations in a proposed rule issues relevant to approval or filing also will be available for change would not be sufficient to justify disapproval that would be facilitated by inspection and copying at the principal Commission approval of a proposed rule an oral presentation of views, data, and office of the Exchange. All comments arguments, the Commission will received will be posted without change. change.37 consider, pursuant to Rule 19b–4, any Persons submitting comments are The Commission questions whether cautioned that we do not redact or edit the information and analysis provided request for an opportunity to make an oral presentation.39 personal identifying information from by the Exchange support the Exchange’s comment submissions. You should Interested persons are invited to conclusions that the Program has submit only information that you wish submit written data, views, and achieved its goals, including whether to make publicly available. All arguments regarding whether the the Program has not had a significant submissions should refer to File proposal should be approved or impact on broader market quality. The Number SR–CboeBYX–2018–014 and disapproved by December 12, 2018. Any Commission seeks additional person who wishes to file a rebuttal to should be submitted on or before information and analysis concerning the any other person’s submission must file December 12, 2018. Rebuttal comments Program’s impact on the broader market; that rebuttal by December 26, 2018. should be submitted by December 26, for example, additional information to Comments may be submitted by any 2018. support the view that the Program has of the following methods: For the Commission, by the Division of not had a material adverse impact on Trading and Markets, pursuant to delegated market quality. The Commission Electronic Comments authority.40 believes it is appropriate to institute • Use the Commission’s internet Eduardo A. Aleman, proceedings to allow for additional comment form (http://www.sec.gov/ Assistant Secretary. consideration and comment on the rules/sro.shtml); or [FR Doc. 2018–25341 Filed 11–20–18; 8:45 am] issues raised herein, any potential • Send an email to rule-comments@ BILLING CODE 8011–01–P response to comments or supplemental sec.gov. Please include File Number SR– information provided by the Exchange, CboeBYX–2018–014 on the subject line. and any additional independent SMALL BUSINESS ADMINISTRATION Paper Comments analysis by the Commission. The Commission believes that these issues • Send paper comments in triplicate Data Collection Available for Public raise questions as to whether the to Secretary, Securities and Exchange Comments Exchange has met its burden to Commission, 100 F Street NE, demonstrate, based on the data and Washington, DC 20549–1090. 60-Day notice and request for ACTION: analysis provided, that permanent All submissions should refer to File comments. approval of the Program is consistent Number SR–CboeBYX–2018–014. The file number should be included on the SUMMARY: The Small Business with the Act, and specifically, with its subject line if email is used. To help the Administration (SBA) intends to request requirements that the Program be Commission process and review your approval, from the Office of designed to perfect the mechanism of a comments more efficiently, please use Management and Budget (OMB) for the free and open market and the national only one method. The Commission will collection of information described market system, protect investors and the post all comments on the Commission’s below. The Paperwork Reduction Act public interest, and not be unfairly (PRA) requires federal agencies to discriminatory; or not impose an internet website (http://www.sec.gov/ rules/sro.shtml). Copies of the publish a notice in the Federal Register unnecessary or inappropriate burden on concerning each proposed collection of competition.38 submission, all subsequent information before submission to OMB, 39 Section 19(b)(2) of the Exchange Act, as and to allow 60 days for public 34 Rule 700(b)(3), Commission Rules of Practice, amended by the Securities Act Amendments of comment in response to the notice. This khammond on DSK30JT082PROD with NOTICES 17 CFR 201.700(b)(3). 35 See id. 1975, Public Law 94–29 (June 4, 1975), grants the notice complies with that requirement. Commission flexibility to determine what type of 36 See id. proceeding—either oral or notice and opportunity DATES: Submit comments on or before 37 See Susquehanna Int’l Group, LLP v. Securities for written comments—is appropriate for January 22, 2019. and Exchange Commission, 866 F.3d 442, 446–47 consideration of a particular proposal by a self- ADDRESSES: Send all comments to (D.C. Cir. 2017) (rejecting the Commission’s reliance regulatory organization. See Securities Act on an SRO’s own determinations without sufficient Amendments of 1975, Senate Comm. on Banking, Daniel Upham, Chief, Microenterprise evidence of the basis for such determinations). Housing & Urban Affairs, S. Rep. No. 75, 94th 38 See 15 U.S.C. 78f(b)(4), (5), and (8). Cong., 1st Sess. 30 (1975). 40 17 CFR 200.30–3(a)(57) and (58). VerDate Sep<11>2014 16:08 Nov 20, 2018 Jkt 247001 PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 E:\FR\FM\21NON1.SGM 21NON1


Document Created: 2018-11-21 03:11:25
Document Modified: 2018-11-21 03:11:25
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 58802 
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