19912 Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices

For the Commission, by the Division of on the proposed rule change. The text the ability of non-professional retail Trading and Markets, pursuant to delegated of these statements may be examined at investors to obtain meaningful price authority.24 the places specified in Item IV below. improvement by incentivizing market J. Matthew DeLesDernier, The self-regulatory organization has participants to compete to provide such Assistant Secretary. prepared summaries, set forth in price improvement. [FR Doc. 2021–07677 Filed 4–14–21; 8:45 am] Sections A, B, and C below, of the most Background BILLING CODE 8011–01–P significant aspects of such statements. In 2019 the Commission approved A. Self-Regulatory Organization’s IEX’s Retail Price Improvement Program SECURITIES AND EXCHANGE Statement of the Purpose of, and (‘‘Retail Program’’),17 which is designed COMMISSION Statutory Basis for, the Proposed Rule to provide retail investors with Change meaningful price improvement [Release No. 34–91523; File No. SR–IEX– 2021–06] 1. Purpose opportunities through trading at the Midpoint Price or better.18 As currently The purpose of the proposed rule structured, Members 19 that qualify as Self-Regulatory Organizations; change is to enhance the Exchange’s Retail Member Organizations Investors Exchange LLC; Notice of Retail Price Improvement Program for (‘‘RMOs’’) 20 are eligible to submit Retail Filing of Proposed Rule Change To the benefit of retail investors. orders to the Exchange. Any Member is Enhance the IEX Retail Price Specifically, the Exchange proposes to able to provide price improvement to Improvement Program for the Benefit make the following four changes: (i) Retail orders through orders priced to of Retail Investors Revise the definition of Retail order 6 in execute at the Midpoint Price or better, IEX Rule 11.190(b)(15) to apply only to April 9, 2021. including RLP orders that are only the trading interest of a natural person Pursuant to Section 19(b)(1) 1 of the eligible to execute against a Retail order that does not place more than 390 Securities Exchange Act of 1934 (the at the Midpoint Price and execute in equity orders per day on average during ‘‘Act’’) 2 and Rule price-time priority after other orders a calendar month for its own beneficial 19b–4 thereunder,3 notice is hereby resting on the Order Book priced to account(s); 7 (ii) provide Order Book 8 given that, on April 1, 2021, the trade at the Midpoint Price. Investors Exchange LLC (‘‘IEX’’ or the priority to Retail Liquidity Provider 9 10 As IEX noted in its Retail Program ‘‘Exchange’’) filed with the Securities (‘‘RLP’’) orders at the Midpoint Price rule filing,21 the Commission has and Exchange Commission (the ahead of other non-displayed orders consistently emphasized the importance ‘‘Commission’’) the proposed rule priced to execute at the Midpoint Price; of continued broad, long-term retail change as described in Items I and II (iii) disseminate a ‘‘Retail Liquidity participation in our capital markets. In below, which Items have been prepared Identifier’’ through the Exchange’s its Strategic Plan for fiscal years 2018– by the self-regulatory organization. The proprietary market data feeds and the 2022, the Commission highlighted its Commission is publishing this notice to appropriate securities information vision to ‘‘promote capital markets that solicit comments on the proposed rule processor (‘‘SIP’’) when RLP order inspire public confidence and provide a change from interested persons. interest aggregated to form at least one diverse array of financial opportunities round lot for a particular security is to retail and institutional investors, I. Self-Regulatory Organization’s available in the System,11 provided that Statement of the Terms of Substance of entrepreneurs, public companies, and the RLP order interest is resting at the other market participants’’, with its first the Proposed Rule Change Midpoint Price and is priced at least 12 13 goal to focus on the long-term interests Pursuant to the provisions of Section $0.001 better than the NBB or NBO; of Main Street (i.e., retail) investors.22 19(b)(1) under the Act,4 and Rule and (iv) amend the definition of RLP Against this backdrop, the Retail 19b–4 thereunder,5 IEX is filing with the orders so such orders can only be Program is designed to provide retail Commission a proposed rule change to midpoint peg orders,14 cannot be Discretionary Peg orders,15 and cannot enhance its Retail Price Improvement 17 See Securities Exchange Act Release No. 86619 Program for the benefit of retail include a minimum quantity (August 9, 2019), 84 FR 41769 (August 15, 2019) investors. restriction.16 The proposed changes are (SR–IEX–2019–05) (SEC order approving IEX’s The text of the proposed rule change designed to further support and enhance Retail Program). is available at the Exchange’s website at 18 On March 1, 2021, IEX filed an immediately effective rule change proposal to provide that, in 6 See IEX Rules 11.190(b)(15) and 11.232(a)(2). www.iextrading.com, at the principal addition to executing at the Midpoint Price, a Retail 7 office of the Exchange, and at the The existing restrictions applicable to a Retail order can execute against a displayed unprotected Commission’s Public Reference Room. order, that it must reflect trading interest of a odd lot order that is resting on the Order Book at natural person with no change made to the terms a price more aggressive than the Midpoint Price II. Self-Regulatory Organization’s of the underlying order of the natural person with (i.e., above the Midpoint Price in the case of an odd respect to price (except in the case of a market order lot buy order and below the Midpoint Price in the Statement of the Purpose of, and the that is changed to a marketable limit order) or side case of an odd lot sell order). Executing against of market and that does not originate from a trading Statutory Basis for, the Proposed Rule such an odd lot order thus provides more price algorithm or any other computerized methodology, Change improvement to the Retail order than executing at will continue to apply. the Midpoint Price. See Securities Exchange Act In its filing with the Commission, the 8 See IEX Rule 1.160(p). Release No. 91324 (March 15, 2021), 86 FR 15015 self-regulatory organization included 9 See IEX Rules 11.190(b)(14) and 11.232(a)(3). (March 19, 2021) (SR–IEX–2021–03). statements concerning the purpose of 10 The term ‘‘Midpoint Price’’ means the midpoint 19 See IEX Rule 1.160(s). and basis for the proposed rule change of the NBBO. See IEX Rule 1.160(t). The term 20 See IEX Rule 11.232(a)(1). ‘‘NBBO’’ means the national best bid or offer, as set 21 See supra note 17. See also Securities Exchange and discussed any comments it received forth in Rule 600(b) of Regulation NMS under the Act, determined as set forth in IEX Rule 11.410(b). Act Release No. 86241 (June 28, 2019), 84 FR 32238 (July 5, 2019) (SR–IEX–2019–05) (IEX rule filing 24 17 CFR 200.30–3(a)(12). 11 See IEX Rule 1.160(nn). proposing Retail Program). 1 15 U.S.C. 78s(b)(1). 12 See IEX Rule 1.160(u). 22 See U.S. Securities and Exchange Commission, 2 13 15 U.S.C. 78a. See IEX Rule 1.160(u). Strategic Plan, Fiscal Years 2018–2022, available at 3 17 CFR 240.19b–4. 14 See IEX Rule 11.190(b)(9). https://www.sec.gov/files/SEC_Strategic_Plan_ 4 15 U.S.C. 78s(b)(1). 15 See IEX Rule 11.190(b)(10). FY18-FY22_FINAL_0.pdf (‘‘Commission Strategic 5 17 CFR 240.19b–4. 16 See IEX Rule 11.190(b)(11). Plan’’).

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices 19913

investors with access to the Exchange’s through the execution process described any other computerized methodology, deep pool of midpoint liquidity, in IEX Rule 11.232(e).28 Any Member which will now be defined as a ‘‘retail including RLP orders, thereby providing can submit RLP orders. customer’’ for clarity. An order from a enhanced opportunities for meaningful As discussed in the Retail Program retail customer can include orders price improvement at the Midpoint rule filing,29 IEX’s Retail Program is a submitted on behalf of accounts that are Price. The Exchange believes the Retail simple approach designed to provide held in a corporate legal form—such as Program has provided retail investors retail investors with the opportunity for an Individual Retirement Account, with better execution quality than they meaningful price improvement (by Corporation, or a Limited Liability are currently able to obtain through executing at the Midpoint Price or Company—that have been established existing exchange and over-the-counter better), by attracting counterparty for the benefit of an individual or group (‘‘OTC’’) order retail programs, by liquidity to the Exchange from Members of related family members, provided attracting counterparty liquidity to the and their clients seeking to interact with that the order is submitted by an Exchange from Members and their retail liquidity. individual. IEX proposes to add new clients seeking to interact with retail IEX’s Retail Program leverages IEX’s language to IEX Rule 11.190(b)(15) to liquidity.23 The Retail Program is market structure to provide enhanced specify that a Retail order may only be therefore consistent with the goals of the price improvement opportunities for submitted on behalf of a retail customer Commission to encourage markets that retail customers by incentivizing that does not place more than 390 are structured to benefit ordinary Members and their clients to provide equity orders per day on average during investors.24 liquidity to the orders of retail investors, a calendar month for its own beneficial Under the current Retail Program, the while enabling such investors to obtain account(s). term ‘‘Retail order’’ is defined as an materially better price improvement In addition, IEX proposes to add agency or riskless principal order that than may otherwise be available, in a Supplementary Material .01 to IEX Rule satisfies the criteria of Financial way that is mutually beneficial for retail 11.190(b) specifying how to determine Industry Regulatory Authority, Inc. investors and Members providing whether the 390 equity orders per day (‘‘FINRA’’) Rule 5320.03, which is liquidity. Based on experience with the on average threshold has been reached. submitted by a RMO, designated with a Retail Program, IEX believes that the Specifically, the Supplementary ‘‘Retail order’’ modifier, and reflects four proposed changes, noted above and Material would provide that a ‘‘parent’’ trading interest of a natural person, with described in detail below, would further order that is broken into multiple no change made to the terms of the enhance the Retail Program. ‘‘child’’ orders by a broker or dealer, or underlying order of the natural person by an algorithm housed at a broker or with respect to price (except in the case Proposal dealer or by an algorithm licensed from of a market order that is changed to a IEX proposes four enhancements to a broker or dealer, but which is housed marketable limit order) or side of the Retail Program, as described below. with the customer, counts as one order market, and that does not originate from even if the ‘‘child’’ orders are routed Retail Order Definition a trading algorithm or any other across multiple exchanges. In addition, computerized methodology.25 Retail IEX proposes to revise the definition any order that cancels and replaces an orders may either be Discretionary Peg of Retail order in IEX Rule 11.190(b)(15) existing order would count as a separate or midpoint peg orders with a Time-in- so that it is limited to retail investors order; except that an order that cancels Force of IOC or FOK, and are only who do not appear to be engaged in and replaces any ‘‘child’’ order resulting eligible to trade at the Midpoint Price or trading activity akin to that of a from a ‘‘parent’’ order that is broken into better.26 professional. Specifically, the definition multiple ‘‘child’’ orders, does not count An RMO is an IEX Member (or of Retail order would be amended to as a new order. division thereof) that has been approved apply only to the trading interest of a IEX also proposes to add by the Exchange to submit Retail natural person that does not place more Supplementary Material .02 to IEX Rule orders.27 Pursuant to IEX Rules than 390 equity orders per day on 11.190(b) to address the reasonable 11.232(a)(1) and (b), which describe the average during a calendar month for its policies and procedures that an RMO qualification and application process for own beneficial account(s). All other must have in place to ensure that Retail becoming an RMO, any Member may existing criteria specified in IEX Rule orders are appropriately represented on qualify as an RMO if it conducts a retail 11.190(b)(15) would continue to apply. the Exchange. Specifically, such business or routes Retail orders on IEX Rule 11.190(b)(15) currently policies and procedures should provide behalf of another broker-dealer. provides that a Retail order means an for a review of retail customers’ activity An RLP order is currently a order submitted by a Retail Member on at least a quarterly basis. Further, Discretionary Peg order that is only Organization (as defined in IEX Rule Retail orders for any retail customer that eligible to execute against Retail orders 11.232) and designated with a ‘‘Retail had an average of more than 390 equity order’’ modifier. A Retail order must be orders per day during any month of a 23 See discussion infra on the desirability of an agency order, or riskless principal calendar quarter are not eligible to be interacting with retail liquidity. entered as Retail orders for the next 24 order that satisfies the criteria of FINRA See supra note 22. calendar quarter. Retail Member 25 See supra note 6. An order from a natural Rule 5320.03. A Retail order must person can include orders submitted on behalf of reflect trading interest of a natural Organizations must conduct a quarterly accounts that are held in a corporate legal form— person with no change made to the review and make any appropriate such as an Individual Retirement Account, terms of the underlying order of the changes to the way in which they are Corporation, or a Limited Liability Company—that representing orders within five business have been established for the benefit of an natural person with respect to price individual or group of related family members, (except in the case of a market order that days after the end of each calendar provided that the order is submitted by an is changed to a marketable limit order) quarter. In addition, if during a quarter individual. or side of market and that does not the Exchange identifies a retail customer 26 See IEX Rule 11.232(a)(2). As with all pegged for which orders are being represented orders, Retail orders may only trade during the originate from a trading algorithm or Regular Market Session. See IEX Rule as Retail orders but that has averaged 11.190(a)(3)(E). 28 See IEX Rule 11.232(e). more than 390 equity orders per day 27 See IEX Rule 11.232(a)(1). 29 See supra note 21. during a month, the Exchange will

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES 19914 Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices

notify the RMO, and the RMO will be professional market participants. By Retail orders. The Exchange notes that required to change the manner in which expanding the pool of market other exchanges that offer retail it is representing the retail customer’s participants willing to compete for programs enable retail liquidity orders within five business days. providing price improvement to Retail providing orders that provide As noted above, the Exchange orders, IEX believes that more Retail immaterial sub-penny price believes that the price improvement orders will be able to obtain meaningful improvement to achieve queue priority benefits that accrue to Retail orders on price improvement for their orders. IEX by providing a retail order type that IEX should be limited to retail also notes that 390 orders per day trades first with retail liquidity customers who do not appear to be represents an order entered each minute providing orders before trading with engaged in trading activity akin to that during regular trading hours—from 9:30 other similarly priced orders.36 of a professional. IEX notes that the 390- a.m. eastern time to 4:00 p.m. eastern Thus, as proposed, IEX Rule order limitation is a threshold used by time—which IEX believes is a 11.232(e)(3)(A) would be amended to various options exchanges to reasonable and not overly restrictive provide that a Retail order to buy (sell) distinguish professional customers from limitation in that it contemplates active shall execute upon entry against sell retail customers, so that a customer that trading but not at the level of a (buy) orders resting on the Order Book is not a broker-dealer but enters more professional trader.34 IEX believes that in the following order: than 390 options orders per day (on limiting the pool of customers eligible to (i) Displayed sell (buy) orders at the NBO average during a calendar month) is enter Retail orders, as proposed, will (NBB) during a locked or crossed market; classified as a Professional Customer incentivize additional resting liquidity (ii) displayed sell (buy) odd lot orders and does not receive customer seeking to trade against such Retail priced to trade between the NBB (NBO) and execution priority.30 The 390-order orders (and provide price improvement) the MidPoint Price; (iii) Retail Liquidity Provider orders priced threshold is also used by Cboe EDGX because of their non-professional to trade at the Midpoint Price; and 35 Exchange, Inc. (‘‘EDGX’’) with respect to characteristics. Thus, to the extent the (iv) nondisplayed orders priced to trade at its equity market to delineate Retail proposed change is successful in the Midpoint Price. Priority Orders, which receive execution increasing the pool of RLP and other priority, from other retail customers. contra-side liquidity it will benefit Retail Liquidity Identifier EDGX Retail Priority Orders may only Retail orders by increasing execution IEX proposes to disseminate a Retail be entered on behalf of a person that opportunities and price improvement. Liquidity Identifier through the Exchange’s proprietary market data does not place more than 390 equity RLP Order Book Priority orders per day on average during a feeds, TOPS 37 and DEEP,38 and the calendar month for its own beneficial IEX proposes to provide Order Book appropriate SIP when RLP order interest account(s).31 priority to RLP orders ahead of other aggregated to form at least one round lot EDGX and the options exchanges non-displayed orders priced to execute for a particular security is available in apply a comparable methodology and at the Midpoint Price. Currently, IEX the System, provided that the RLP order supervisory requirements to determine Rule 11.232(e)(3)(A)(iv) provides that interest is resting at the Midpoint Price whether the 390-order threshold has RLP orders are prioritized after all other and is priced at least $0.001 better than been reached as is proposed by IEX in non-displayed orders priced to trade at the NBB or NBO (‘‘RLP Interest’’). The this proposal.32 IEX understands that the Midpoint Price. This approach was purpose of the Retail Liquidity Identifier the impetus for EDGX’s and options adopted by IEX originally because RLP is to provide relevant market exchanges’ use of the 390-order orders were a new order type and are information to RMOs that there is RLP threshold is to limit priority benefits only eligible to trade against Retail Interest on IEX, thereby incentivizing and assist in ensuring that these benefits orders. However, IEX now believes that them to send Retail orders to IEX. The flow only to retail investors that are not RLP orders should have higher priority Exchange does not believe that such engaged in a significant amount of than other non-displayed orders priced market information constitutes a trading activity akin to that of a to trade at the Midpoint Price in order ‘‘quote’’ within the meaning of professional.33 to provide additional incentives for the Regulation NMS because it would not IEX believes that similarly restricting entry of RLP orders and concomitant include a specific price or size of the Retail orders to non-professional provision of price improvement to interest.39 The Retail Liquidity customers will expand the pool of Identifier will reflect the symbol and the market participants willing to provide 34 For example, an analysis of orders sent to IEX side (buy or sell) of the RLP Interest but by Members and customers conducting a will not include the price or size. While contra-side liquidity to trade with Retail proprietary trading business indicates that many of orders because the limitations will such Members and customers typically send an explicit price will not be narrow the pool of Retail orders to those millions of orders per day and even the less active disseminated, because RLP orders are from customers who are less likely to be send thousands of orders per day. only eligible to trade at the Midpoint 35 This approach was supported by Citadel Price, dissemination will thus reflect the Securities in a comment letter on EDGX’s retail 30 See, e.g., Nasdaq Stock Market LLC Options 1, priority proposal. Citadel Securities notes that 36 Section 1(a)(47); NYSE Arca, Inc. (‘‘Arca’’) Rule ‘‘[t]he market’s experience with [retail programs] See, e.g., Arca Rule 7.44–E(k) (Retail orders 6.1A–O(a)(4A). evidences the failure of an overly broad definition trade first with retail price improvement orders 31 See EDGX Rule 11.9 Interpretations and of ‘Retail Order’. [Retail programs] have not gained (akin to IEX’s RLP orders), and then with all other Policies .01. traction in the market, precisely because the [retail orders to sell (buy) with a working price below 32 See EDGX Rule 11.9 Interpretations and programs’] definition of ‘Retail Order’ includes (above) the NBO (NBB)); See also BYX Rule Policies .02. orders from both retail investors as well as active 11.24(f); and Nasdaq BX, Inc. (‘‘Nasdaq BX’’) Rule 33 See Securities Exchange Act Release No. 87200 professional traders. To the extent that the ‘Retail 4702(b)(6)(A). (October 2, 2019), 84 FR 53788, 53791 (October 8, Order’ flow routed to [retail programs] includes 37 See IEX Rule 11.330(a)(1). 2019) (SR–CboeEDGX–2019–012) (order approving orders from active professional traders and is thus 38 See IEX Rule 11.330(a)(3). EDGX Retail Priority Orders); see also Securities not as attractive to other market participants, those 39 The Exchange plans to submit a letter Exchange Act Release No. 89991 (September 24, market participants will simply elect not to post requesting that the staff of the Division of Trading 2020), 85 FR 61782, 61783 (September 30, 2020) [retail] liquidity and fill-rates for [retail] routes will and Markets not recommend any enforcement (SR–MIAX–2020–31) (giving priority to orders be low.’’ See Letter dated April 26, 2019 from action under Rule 602 of Regulation NMS (‘‘Quote submitted on behalf of non-professional customers Stephen John Berger, Citadel, to Eduardo A. Rule’’) based on the Exchange’s and its Members’ who submit less than 390 orders per day). Aleman, Commission. participation in the Retail Program.

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00046 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices 19915

availability of price improvement at the share, its MPV is $0.0001, so the Additionally, IEX’s rules provide that Midpoint Price. A number of other Midpoint Price will not always Discretionary Peg orders are prioritized exchanges that offer retail programs also represent at least $0.001 in price behind any non-displayed interest at the disseminate a Retail Liquidity Identifier improvement.44 Therefore, IEX will discretionary price (in this case the on their proprietary market data feeds only disseminate RLP Interest for sub- Midpoint Price),46 so it would be and the appropriate SIP if such interest dollar securities if the spread in the inconsistent with the priority rules for would provide at least $0.001 of price security is greater than or equal to RLP Discretionary Peg orders to have improvement.40 IEX’s proposal is $0.002, meaning the Midpoint Price priority over non-RLP midpoint peg comparable, but (as discussed below) represents at least $0.001 price orders that do rest at the Midpoint Price. because the RLP orders will be resting improvement over the NBB or NBO. Similarly, permitting an RLP order to at the Midpoint Price, IEX’s Retail With respect to the requirement that an include a minimum quantity condition Liquidity Indicator will reflect at least RLP order must be resting at the would reduce the determinism of the $0.005 of price improvement for any Midpoint Price in order to be included order’s availability to trade at the orders priced at or above $1.00 per share in the RLP Interest to be disseminated, Midpoint Price. IEX also believes that unless the NBBO is locked or crossed. the Exchange notes that an RLP order the protections that Discretionary Peg The Exchange believes that it is could have a limit price less aggressive orders receive because they do not appropriate to limit dissemination of the than the Midpoint Price in which case exercise price discretion to the Retail Liquidity Identifier to those cases it would not be eligible to trade with an Midpoint Price during periods of quote when at least one round lot of RLP order incoming Retail order and therefore instability, or by utilizing a minimum interest is available in order to limit should not be included in the Retail quantity condition to avoid potential dissemination to cases in which there is Liquidity Identifier dissemination since information leakage, are less necessary a material amount of RLP trading it would not reflect interest available to when trading against Retail orders. interest available on the IEX Order trade with Retail orders. Moreover, IEX believes that the Book. RLP Order Type Definition proposed changes will increase As proposed, IEX would only execution rates for Retail orders because disseminate the Retail Liquidity IEX proposes to amend the definition RLP orders will not be subject to Identifier when the RLP order interest is of RLP orders so such orders can only contingencies based on quote instability resting at the Midpoint Price and is be midpoint peg orders, instead of or minimum quantity requirements. priced at least $0.001 better than the Discretionary Peg orders, and cannot NBB or NBO, consistent with the rules include a minimum quantity condition. Implementation of the other exchanges that disseminate Currently an RLP order is a If the Commission approves this Retail Liquidity Identifiers 41 as well as Discretionary Peg order that is only proposed rule change, the Exchange will the SIP Plans’ requirements.42 Because eligible to execute against Retail orders implement it within 90 days of approval RLP orders are proposed to be only through the execution process described and provide at least ten (10) days’ notice midpoint peg orders, they will always in IEX Rule 11.232(e). to Members and market participants of represent at least $0.001 price In connection with the proposed the implementation timeline. improvement over the NBB or NBO, changes, described above, to with two exceptions: (i) Locked or disseminate a Retail Liquidity Identifier 2. Statutory Basis crossed markets and (ii) sub-dollar and provide enhanced priority to RLP The proposed rule change is quotes when the security’s spread is less orders, IEX believes that it is consistent with Section 6(b) of the than $0.002.43 When the market is appropriate that RLP orders be midpoint Act,47 in general, and furthers the locked, under IEX Rule 11.190(h)(3)(C) peg orders. Specifically, IEX notes that objectives of Section 6(b)(5),48 in the Exchange considers the Midpoint midpoint peg orders post on the Order particular, in that it is designed to Price to be equal to the locking price Book at the Midpoint Price while prevent fraudulent and manipulative and when the market is crossed, under Discretionary Peg orders post on the acts and practices, to promote just and IEX Rule 11.190(h)(3)(D) the Exchange Order Book at the less aggressive of the equitable principles of trade, to foster considers the Midpoint Price to be order’s limit price or a price one cooperation and coordination with indeterminable. In these situations, RLP minimum price variation less aggressive persons engaged in facilitating orders are repriced as specified in the than the NBB or NBO (as applicable) transactions in securities, and to remove applicable rule provision and would not and exercise price discretion to the impediments to and perfect the provide any price improvement to an Midpoint Price except during periods of mechanism of a free and open market incoming Retail order, and therefore quote instability when Discretionary Peg and a national market system, and, in will not comprise RLP Interest for orders are not permitted to trade at a general, to protect investors and the purposes of the Retail Liquidity price more aggressive than their resting public interest. Indicator. Similarly, when a particular price.45 Thus, disseminating a Retail The Commission has consistently security is priced less than $1.00 per Liquidity Identifier of RLP Interest at emphasized that the U.S. capital the Midpoint Price would be markets should be structured with the 40 See, e.g., BYX Rule 11.24(e); Nasdaq BX Rule unnecessarily complicated if RLP orders interests of retail investors in mind 49 4780(e). were to continue to be Discretionary Peg and the enhancements to the Retail 41 See supra note 40. orders since they do not explicitly post Program proposed in this rule change 42 See January 26, 2021 CQS Participant Input Binary Specification Version 2.6a, available at to the Order Book at the Midpoint Price. proposal are explicitly designed with https://www.ctaplan.com/publicdocs/ctaplan/CQS_ that goal in mind. The four proposed Pillar_Input_Specification.pdf and May 2020 UTP 44 For example, if a security’s NBB is $0.505 and enhancements to the Retail Program are Data Feed Services Specification Version 1.5, NBO is $0.506, the Midpoint Price would be individually and collectively designed available at https://www.utpplan.com/DOC/ $0.5055, which is $0.0005 more than the NBB and UtpBinaryOutputSpec.pdf. less than NBO, so it would not represent at least 46 43 The minimum price variant (‘‘MPV’’) for bids, $0.001 price improvement over the NBB or NBO, See IEX Rule 11.220(a)(1)(C)(vii). offers, or indications of interest priced less than and therefore will not comprise RLP Interest for 47 15 U.S.C. 78f(b). $1.00 per share is $0.0001. See IEX Rule purposes of the Retail Liquidity Indicator. 48 15 U.S.C. 78f(b)(5). 11.210(a)(2). 45 See IEX Rule 11.190(g). 49 See supra note 22.

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00047 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES 19916 Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices

to benefit retail investors by providing ordinary retail investors from active orders is not unfairly discriminatory enhanced opportunities for such traders akin to professionals.50 since any Member can enter an RLP investors to obtain meaningful price The Exchange also believes that the order. Further, as discussed in the improvement. The four enhancements counting methodology and additional Purpose section, this proposed change is are designed to work in tandem to policies and procedures that RMOs consistent with the approach of several narrow the pool of market participants must comply with to reasonably ensure other exchanges that provide immaterial eligible to enter Retail orders to those that Retail orders are appropriately sub-penny price improvement to who are less likely to be professional represented on the Exchange are achieve queue priority by providing a traders and thereby attract increased consistent with the Act. In this regard retail order type that trades first with contra-side liquidity seeking to trade IEX notes that such methodology and retail liquidity providing orders before against and provide meaningful price policies and procedures are trading with other similarly priced improvement to such Retail orders, as substantially identical to those in place orders.51 well as to publicize when there is non- at EDGX. The Exchange has a robust Additionally, the Exchange believes trivial contra-side price improving regulatory program, including an exam that it is consistent with the Act to interest available, and fine tune the process implemented by FINRA, in disseminate a Retail Liquidity Identifier, requirements applicable to such interest place to monitor for compliance with as described in the Purpose section. The so that it is more deterministic. existing RMO requirements, which will purpose of the Retail Liquidity Identifier The Exchange also believes that the be enhanced for this proposal. is to provide relevant market proposed rule change is consistent with The Exchange believes that its information to RMOs that there is RLP the protection of investors because it is proposal to narrow the definition of Interest on IEX. The dissemination is designed to increase competition among Retail order is not unfairly thus designed to augment the total mix execution venues by enhancing IEX’s discriminatory but rather is designed to of information available to RMOs that Retail Program which offers the promote a competitive process for retail may benefit Retail orders they represent. potential for meaningful price executions while providing retail The Exchange notes that other improvement to orders of retail investors with the potential to receive exchanges disseminate comparable investors, including through meaningful price improvement. All information regarding available contra- incentivizing market participants to retail programs, including IEX’s, side liquidity available to execute provide additional liquidity to execute provide for differentiation of retail against retail orders, as noted in the against the orders of retail investors. orders from other orders. The proposed Purpose section. Specifically, the Exchange believes changes are merely incremental, Further, the Exchange believes it is that limiting the use of Retail orders to designed to enhance IEX’s ability to consistent with the Act to amend the only those retail investors who do not compete for retail order flow and retail definition of RLP orders to make them liquidity and thereby provide benefits to appear to be engaged in trading activity midpoint peg orders instead of retail investors from the better price that akin to that of a professional is Discretionary Peg orders, so that the liquidity providers are willing to give consistent with the protection of availability of such orders to trade at the their orders. investors and the public interest Midpoint Price is more deterministic, as The Exchange also believes that because it is designed to enable the described in the Purpose section. IEX providing Order Book priority to RLP benefits of the Retail Program to accrue also believes that the proposed changes orders ahead of other non-displayed to less sophisticated market participants will benefit Retail orders to the extent orders priced to execute at the Midpoint that may be underserved by existing that their execution rates, and resulting Price is consistent with the protection of trading alternatives. Moreover, as price improvement, increase. investors and the public interest discussed in the Purpose section and The Commission consistently because it is designed to provide above, limiting the use of Retail orders highlights the need to ensure that the additional incentives for the entry of in this manner is designed to U.S. capital markets are structured with RLP orders and concomitant provision incentivize additional resting liquidity the interests of retail investors in mind, of price improvement to Retail orders, seeking to trade against and provide and recently highlighted its focus on the as discussed in the Purpose section. The price improvement to Retail orders. ‘‘long-term interest of Main Street Exchange also notes that Retail orders Further, the Exchange believes that Investors’’ as its number one strategic will still be able to execute against other 52 using a threshold of 390 orders per day goal for fiscal years 2018 to 2022. The orders priced to execute at the Midpoint on average during a calendar month Exchange believes the proposed Price so the proposed changes is not (which is equivalent to one order per enhancements to its Retail Program will creating a segmented liquidity pool. minute during the trading day) is a better serve the retail investing public Additionally, the Exchange believes that reasonable way to differentiate between by providing them with expanded providing Order Book priority to RLP less active retail investors and those that opportunities for meaningful price improvement on eligible trades. are more akin to market professionals. 50 This approach was suggested by Citadel IEX believes that it is consistent with Securities in a comment letter on the EDGX retail B. Self-Regulatory Organization’s the protection of investors and the priority proposal which did not initially include the Statement on Burden on Competition 390 orders per day on average limitation. In its public interest to treat an investor that The Exchange does not believe that enters more than one order per minute comment letter, Citadel Securities noted that the definition of ‘‘Retail Order’’ used by various the proposed rule change will impose as a professional trader, and notes that equities exchanges does not adequately distinguish any burden on competition that is not this threshold is used to differentiate retail investors’ orders from those of active necessary or appropriate in furtherance professional traders. Citadel went on to suggest that between priority and professional of the purposes of the Act. To the customers in the options industry and EDGX leverage the definition of ‘‘professional customer’’ used by various options exchanges that contrary, IEX believes that the proposed by EDGX for its retail priority program. is defined as a trader who places ore than 390 enhancements to our Retail Program Thus, identifying Retail orders based on orders in listed options per day on average during would continue to enhance competition the average number of orders entered for a calendar month for their own beneficial account. See Letter dated April 26, 2019 from Stephen John a beneficial account is a familiar and Berger, Citadel, to Eduardo A. Aleman, 51 See supra note 36. objective approach to distinguish Commission. 52 See supra note 22.

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices 19917

and execution quality for retail Paper Comments SECURITIES AND EXCHANGE customers. • COMMISSION The Exchange does not believe that Send paper comments in triplicate the proposed rule change will impose to Secretary, Securities and Exchange [Release No. 34–91521; File No. SR– any burden on intermarket competition Commission, 100 F Street NE, CboeBZX–2021–024] Washington, DC 20549–1090. since competing venues have and can Self-Regulatory Organizations; Cboe continue to adopt similar retail All submissions should refer to File BZX Exchange, Inc.; Notice of Filing of programs, subject to the SEC rule Number SR–IEX–2021–06. This file a Proposed Rule Change to List and change process. The Exchange operates number should be included on the Trade Shares of the WisdomTree in a highly competitive market in which subject line if email is used. To help the Bitcoin Trust Under BZX Rule market participants can easily direct Commission process and review your 14.11(e)(4), Commodity-Based Trust their orders to competing venues, Shares including off-exchange venues. comments more efficiently, please use The Exchange also does not believe only one method. The Commission will April 9, 2021. post all comments on the Commission’s that the proposed rule change will Pursuant to Section 19(b)(1) of the impose any burden on intramarket internet website (http://www.sec.gov/ Securities Exchange Act of 1934 (the competition that is not necessary or rules/sro.shtml). Copies of the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 appropriate in furtherance of the submission, all subsequent notice is hereby given that on March 26, purposes of the Act. While orders amendments, all written statements 2021, Cboe BZX Exchange, Inc. (the submitted by some Members will be with respect to the proposed rule ‘‘Exchange’’ or ‘‘BZX’’) filed with the treated differently, as described in the change that are filed with the Securities and Exchange Commission Purpose section, those differences are Commission, and all written (the ‘‘Commission’’) the proposed rule not based on the type of Member communications relating to the change as described in Items I, II, and entering orders but on whether the order proposed rule change between the III below, which Items have been is for a retail customer, and there is no Commission and any person, other than prepared by the Exchange. The restriction on whether a Member can those that may be withheld from the Commission is publishing this notice to handle retail customer orders. Further, public in accordance with the solicit comments on the proposed rule any Member can enter an RLP order. provisions of 5 U.S.C. 552, will be change from interested persons. C. Self-Regulatory Organization’s available for website viewing and I. Self-Regulatory Organization’s Statement on Comments on the printing in the Commission’s Public Statement of the Terms of Substance of Proposed Rule Change Received From Reference Room, 100 F Street NE, the Proposed Rule Change Members, Participants, or Others Washington, DC 20549 on official The Exchange rule change to list and Written comments were neither business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the trade shares of the WisdomTree Bitcoin solicited nor received. 3 filing also will be available for Trust (the ‘‘Trust’’), under BZX Rule 14.11(e)(4), Commodity-Based Trust III. Date of Effectiveness of the inspection and copying at the principal Shares. The shares of the Trust are Proposed Rule Change and Timing for office of the Exchange. All comments Commission Action referred to herein as the ‘‘Shares.’’ received will be posted without change. The text of the proposed rule change Within 45 days of the date of Persons submitting comments are is also available on the Exchange’s publication of this notice in the Federal cautioned that we do not redact or edit website (http://markets.cboe.com/us/ Register or within such longer period personal identifying information from equities/regulation/rule_filings/bzx/), at up to 90 days (i) as the Commission may comment submissions. You should the Exchange’s Office of the Secretary, designate if it finds such longer period submit only information that you wish and at the Commission’s Public to be appropriate and publishes its to make available publicly. All Reference Room. reasons for so finding or (ii) as to which submissions should refer to File the Exchange consents, the Commission Number SR–IEX–2021–06 and should II. Self-Regulatory Organization’s will: (a) By order approve or disapprove be submitted on or before May 6, 2021. Statement of the Purpose of, and such proposed rule change, or (b) Statutory Basis for, the Proposed Rule institute proceedings to determine For the Commission, by the Division of Change whether the proposed rule change Trading and Markets, pursuant to delegated authority.53 In its filing with the Commission, the should be disapproved. Exchange included statements J. Matthew DeLesDernier, IV. Solicitation of Comments concerning the purpose of and basis for Assistant Secretary. the proposed rule change and discussed Interested persons are invited to [FR Doc. 2021–07676 Filed 4–14–21; 8:45 am] any comments it received on the submit written data, views, and BILLING CODE 8011–01–P proposed rule change. The text of these arguments concerning the foregoing, statements may be examined at the including whether the proposed rule places specified in Item IV below. The change is consistent with the Act. Exchange has prepared summaries, set Comments may be submitted by any of forth in sections A, B, and C below, of the following methods: the most significant aspects of such Electronic Comments statements. • Use the Commission’s internet comment form (http://www.sec.gov/ 1 15 U.S.C. 78s(b)(1). rules/sro.shtml); or 2 17 CFR 240.19b–4. • 3 The Trust was formed as a Delaware statutory Send an email to rule-comments@ trust on March 8, 2021 and is operated as a grantor sec.gov. Please include File Number SR– trust for U.S. federal tax purposes. The Trust has IEX–2021–06 on the subject line. 53 17 CFR 200.30–3(a)(12). no fixed termination date.

VerDate Sep<11>2014 17:35 Apr 14, 2021 Jkt 253001 PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 E:\FR\FM\15APN1.SGM 15APN1 jbell on DSKJLSW7X2PROD with NOTICES