[Federal Register Volume 84, Number 94 (Wednesday, May 15, 2019)]
[Notices]
[Pages 21868-21889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09966]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85811; File No. SR-BX-2019-011]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
of Proposed Rule Change To Make Permanent the Pilot Program for the 
Exchange's Retail Price Improvement Program, Which Is Set To Expire on 
June 30, 2019

May 9, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 26, 2019 Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to make permanent the pilot program for the 
Exchange's Retail Price Improvement (``RPI'') Program (the ``Program'' 
or ``BX RPI Program''), which is set to expire the earlier of approval 
of the filing to make this rule permanent or June 30, 2019.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqbx.cchwallstreet.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make permanent the Exchange's pilot RPI 
Program,\3\ currently scheduled to expire the earlier of approval of 
the filing to make this rule permanent or June 30, 2019.
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    \3\ Securities Exchange Act Release No. 73702 (November 28, 
2014), 79 FR 72049 (December 4, 2014) (SR-BX-2014-048) (``RPI 
Approval Order''). In addition to approving the RPI Program on a 
pilot basis, the Commission granted the Exchange's request for 
exemptive relief from Rule 612 of Regulation NMS, 17 CFR 242.612 
(``Sub-Penny Rule''), which among other things prohibits a national 
securities exchange from accepting or ranking orders priced greater 
than $1.00 per share in an increment smaller than $0.01. See id. As 
part of this filing, and pursuant to the Exchange's separate written 
request, the Exchange also requests that the exemptive relief from 
the Sub-Penny Rule be made permanent. See Letter from Jeffrey S. 
Davis, Vice President and Deputy General Counsel, Nasdaq BX, Inc. to 
Eduardo A. Aleman, Deputy Secretary, Securities and Exchange 
Commission dated April 26, 2019.
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Background
    In November 2014, the Commission approved the RPI Program on a 
pilot basis.\4\ The Program is designed to attract retail order flow to 
the Exchange, and allow such order flow to receive potential price 
improvement. The Program is currently limited to trades occurring at 
prices equal to or greater than $1.00 per share. Under the Program, a 
class of market participant called a Retail Member Organization 
(``RMO'') is eligible to submit certain retail order flow (``Retail 
Orders'') \5\ to the Exchange. BX members (``Members'') are permitted 
to provide potential price improvement for Retail Orders in the form of 
non-displayed interest that is priced more aggressively than the 
Protected National Best Bid or Offer (``Protected NBBO'').\6\
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    \4\ See id.
    \5\ A ``Retail Order'' is defined in BX Rule 4780(a)(2) by 
referencing BX Rule 4702, and BX Rule 4702(b)(6) says it is an order 
type with a non-display order attribute submitted to the Exchange by 
an RMO. A Retail Order must be an agency order, or riskless 
principal order that satisfies the criteria of FINRA Rule 5320.03. 
The Retail Order must reflect trading interest of a natural person 
with no change made to the terms of the underlying order of the 
natural person with respect to price (except in the case of a market 
order that is changed to a marketable limit order) or side of market 
and that does not originate from a trading algorithm or any other 
computerized methodology.
    \6\ The term Protected Quotation is defined in Chapter XII, Sec. 
1(19) and has the same meaning as is set forth in Regulation NMS 
Rule 600(b)(58). The Protected NBBO is the best-priced protected bid 
and offer. Generally, the Protected NBBO and the national best bid 
and offer (``NBBO'') will be the same. However, a market center is 
not required to route to the NBBO if that market center is subject 
to an exception under Regulation NMS Rule 611(b)(1) or if such NBBO 
is otherwise not available for an automatic execution. In such case, 
the Protected NBBO would be the best-priced protected bid or offer 
to which a market center must route interest pursuant to Regulation 
NMS Rule 611.
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    The Program was approved by the Commission on a pilot basis running 
one-year from the date of implementation.\7\ The Commission approved 
the Program on November 28, 2014.\8\ The Exchange implemented the 
Program on December 1, 2014 and the pilot has since been extended for a 
one-year period twice, as well as for a six-month period twice, with it 
now scheduled to expire the earlier of approval of the filing to make 
this rule permanent or June 30, 2019.\9\
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    \7\ See RPI Approval Order, supra note 3 at 72053.
    \8\ Id. at 72049.
    \9\ See Securities Exchange Act Release No. 76490 (November 20, 
2015), 80 FR 74165 (November 27, 2015) (SR-BX-2015-073); Securities 
Exchange Act Release No. 79446 (December 1, 2016), 81 FR 88290 
(December 7, 2016) (SR-BX-2016-065); Securities Exchange Act Release 
No. 82192 (December 1, 2017), 82 FR 57809 (December 7, 2017) (SR-BX-
2017-055); Securities Exchange Act Release No. 83539 (June 28, 
2018), 83 FR 31203 (July 3, 2018) (SR-BX-2018-026); and Securities 
Exchange Act Release No. 84847 (Dec. 18, 2018), 83 FR 66326 (Dec. 
26, 2018) (SR-BX-2018-063).
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    Specifically, BX Rule 4780 will be amended to delete 4780(h) that 
says the Program is a pilot and that it is scheduled to expire the 
earlier of

[[Page 21869]]

approval of the filing to make this rule permanent or June 30, 2019. 
[sic] BX Rule 4780(g) will be amended to include at the end of the 
subsection that the Program will be limited to securities whose Bid 
Price on the Exchange is greater than or equal to $1.00 per share. 
[sic] \10\
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    \10\ The Commission notes that the Exchange is not proposing to 
delete Rule 4780(h) in its entirety. Under the proposed rule change, 
Rule 4780(h) will state, ``The Program will be limited to securities 
whose Bid Price on the Exchange is greater than or equal to $1.00 
per share.'' Rule 4780(g) will remain unchanged under the proposed 
rule change.
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    The SEC approved the Program pilot, in part, because it concluded, 
``the Program is reasonably designed to benefit retail investors by 
providing price improvement to retail order flow.'' \11\ The Commission 
also found that ``while the Program would treat retail order flow 
differently from order flow submitted by other market participants, 
such segmentation would not be inconsistent with Section 6(b)(5) of the 
Act, which requires that the rules of an exchange are not designed to 
permit unfair discrimination.'' \12\ As the SEC acknowledged, the 
retail order segmentation was designed to create greater retail order 
flow competition and thereby increase
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    \11\ See RPI Approval Order, supra note 3 at 72051.
    \12\ Id.
    [GRAPHIC] [TIFF OMITTED] TN15MY19.001
    
the amount of this flow to transparent and well-regulated exchanges. 
This would help to ensure that retail investors benefit from 
competitive price improvement that exchange-based liquidity providers 
provide.
    As discussed below, the Exchange believes that the Program supports 
these conclusions. The Program does not harm retail investors. In fact, 
so far it has provided price improvement of more than $4 million since 
inception to retail investors that they may not otherwise have 
received. As a result, the Exchange believes that it is therefore 
appropriate to make the pilot Program permanent.
Definitions
    The Exchange adopted the following definitions under BX Rule 4780. 
First, the term ``Retail Member Organization'' (or ``RMO'') is defined 
as a Member (or a division thereof) that has been approved by the 
Exchange to submit Retail Orders.
    Second, the term ``Retail Order'' is defined by BX Rule 
4702(b)(6)(A) as an order type with a non-display order attribute 
submitted to the Exchange by an RMO. A Retail Order must be an agency 
Order, or riskless principal Order that satisfies the criteria of FINRA 
Rule 5320.03. The Retail Order must reflect trading interest of a 
natural person with no change made to the terms of the underlying order 
of the natural person with respect to price (except in the case of a 
market order that is changed to a marketable limit order) or side of 
market and that does not originate from a trading algorithm or any 
other computerized methodology.\13\
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    \13\ See supra note 5.
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    The criteria set forth in FINRA Rule 5320.03 adds additional 
precision to the definition of ``Retail Order'' by clarifying that an 
RMO may enter Retail Orders on a riskless principal basis, provided 
that (i) the entry of such riskless principal orders meet the 
requirements of FINRA Rule 5320.03, including that the RMO maintains 
supervisory systems to reconstruct, in a time[hyphen]sequenced manner, 
all Retail Orders that are entered on a riskless principal basis; and 
(ii) the RMO submits a report, contemporaneously with the execution of 
the facilitated order, that identifies the trade as riskless principal.
    The term ``Retail Price Improving Order'' or ``RPI Order'' or 
collectively ``RPI interest'' is defined as an Order Type with a Non-
Display Order Attribute that is held on the Exchange Book in order to 
provide liquidity at a price at least $0.001 better than the NBBO 
through a special execution process described in Rule 4780. An RPI 
Order may be entered in price increments of $0.001. An RPI Order will 
be posted to the Exchange Book regardless of its price, but an RPI 
Order may execute only against a Retail Order, and only if its price is 
at least $0.001 better than the NBBO.\14\ RPI orders can

[[Page 21870]]

be priced either as an explicitly priced limit order or implicitly 
priced as relative to the NBBO with an offset of at least $0.001.
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    \14\ Exchange systems prevent Retail Orders from interacting 
with RPI Orders if the RPI Order is not priced at least $0.001 
better than the Protected NBBO. The Exchange notes, however, that 
price improvement of $0.001 would be a minimum requirement and 
Members can enter RPI Orders that better the Protected NBBO by more 
than $0.001. Exchange systems accept RPI Orders without a minimum 
price improvement value; however, such interest execute at its floor 
or ceiling price only if such floor or ceiling price is better than 
the Protected NBBO by $0.001 or more.
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    The price of an RPI Order with an offset is determined by a 
Member's entry of the following into the Exchange: (1) RPI buy or sell 
interest; (2) an offset from the Protected NBBO, if any; and (3) a 
ceiling or floor price. RPI Orders submitted with an offset are similar 
to other peg orders available to Members in that the order is tied or 
``pegged'' to a certain price, and would have its price automatically 
set and adjusted upon changes in the Protected NBBO, both upon entry 
and any time thereafter. RPI sell or buy interest typically are entered 
to track the Protected NBBO, that is, RPI Orders typically are 
submitted with an offset. The offset is a predetermined amount by which 
the Member 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 Member 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. The Exchange also allows Members to 
enter RPI Orders that establish the exact limit price, which is similar 
to a non-displayed limit order currently accepted by the Exchange 
except the Exchange accepts sub-penny limit prices on RPI Orders in 
increments of $0.001. The Exchange monitors whether RPI buy or sell 
interest, adjusted by any offset and subject to the ceiling or floor 
price, is eligible to interact with incoming Retail Orders.
    Members and RMOs may enter odd lots, round lots or mixed lots as 
RPI Orders and as Retail Orders respectively. As discussed below, RPI 
Orders are ranked and allocated according to price and time of entry 
into the BX trading system (``System'') consistent with BX Rule 4757 
and therefore without regard to whether the size entered is an odd lot, 
round lot or mixed lot amount. Similarly, Retail Orders interact with 
RPI Orders and other price-improving orders available on the Exchange 
(e.g., non-displayed liquidity priced more aggressively than the NBBO) 
\15\ according to the Priority and Allocation rules of the Program and 
without regard to whether they are odd lots, round lots or mixed lots. 
Finally, Retail Orders are designated as Type 1 or Type 2 without 
regard to the size of the order.
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    \15\ Other price improving liquidity may include, but is not 
limited to: Booked non-displayed orders with a limit price that is 
more aggressive than the then-current NBBO; midpoint-pegged orders 
(which are by definition non-displayed and priced more aggressively 
than the NBBO); non-displayed orders pegged to the NBBO with an 
aggressive offset, as defined in BX Rule 4780(a)(4) as Other Price 
Improving Contra-Side Interest. Orders that do not constitute other 
price improving liquidity include, but are not limited to: Orders 
with a time-in-force instruction of IOC; displayed orders; limit 
orders priced less aggressively than the NBBO.
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    RPI Orders interact with Retail Orders as follows. Assume a Member 
enters RPI sell interest with an offset of $0.001 and a floor of $10.10 
while the Protected NBO is $10.11. The RPI Order could interact with an 
incoming buy Retail Order at $10.109. If, however, the Protected NBO 
was $10.10, the RPI Order could not interact with the Retail Order 
because the price required to deliver the minimum $0.001 price 
improvement ($10.099) would violate the Member's floor of $10.10. If a 
Member otherwise enters an offset greater than the minimum required 
price improvement and the offset would produce a price that would 
violate the Member's floor, the offset would be applied only to the 
extent that it respects the Member's floor. By way of illustration, 
assume RPI buy interest is entered with an offset of $0.005 and a 
ceiling of $10.112 while the Protected NBBO is at $10.11. The RPI Order 
could interact with an incoming sell Retail Order at $10.112, because 
it would produce the required price improvement without violating the 
Member's ceiling, but it could not interact above the $10.112 ceiling. 
Finally, if a Member enters an RPI Order without an offset (i.e., an 
explicitly priced limit order), the RPI Order will interact with Retail 
Orders at the level of the Member's limit price as long as the minimum 
required price improvement is produced. Accordingly, if RPI sell 
interest is entered with a limit price of $10.098 and no offset while 
the Protected NBBO is $10.11, the RPI Order could interact with the 
Retail Order at $10.098, producing $0.012 of price improvement. The 
System will not cancel RPI interest when it is not eligible to interact 
with incoming Retail Orders; such RPI interest will remain in the 
System and may become eligible again to interact with Retail Orders 
depending on the Protected NBBO. RPI Orders are not accepted during 
halts.
RMO Qualifications and Approval Process
    Under BX Rule 4780(b), any Member may qualify as an RMO if it 
conducts a retail business or routes retail orders on behalf of another 
broker-dealer. For purposes of BX Rule 4780, conducting a retail 
business shall include carrying retail customer accounts on a fully 
disclosed basis. Any Member that wishes to obtain RMO status is 
required to submit: (i) An application form; (ii) supporting 
documentation sufficient to demonstrate the retail nature and 
characteristics of the applicant's order flow \16\ and (iii) an 
attestation, in a form prescribed by the Exchange, that substantially 
all orders submitted by the Member as a Retail Order would meet the 
qualifications for such orders under proposed BX Rule 4780(b). The 
Exchange shall notify the applicant of its decision in writing.
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    \16\ For example, a prospective RMO could be required to provide 
sample marketing literature, website screenshots, other publicly 
disclosed materials describing the retail nature of their order 
flow, and such other documentation and information as the Exchange 
may require to obtain reasonable assurance that the applicant's 
order flow would meet the requirements of the Retail Order 
definition.
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    An RMO is required to have written policies and procedures 
reasonably designed to assure that it will only designate orders as 
Retail Orders if all requirements of a Retail Order are met. Such 
written policies and procedures must require the Member to (i) exercise 
due diligence before entering a Retail Order to assure that entry as a 
Retail Order is in compliance with the requirements of this rule, and 
(ii) monitor whether orders entered as Retail Orders meet the 
applicable requirements. If the RMO represents Retail Orders from 
another broker-dealer customer, the RMO's supervisory procedures must 
be reasonably designed to assure that the orders it receives from such 
broker-dealer customer that it designates as Retail Orders meet the 
definition of a Retail Order. The RMO must (i) obtain an annual written 
representation, in a form acceptable to the Exchange, from each broker-
dealer customer that sends it orders to be designated as Retail Orders 
that entry of such orders as Retail Orders will be in compliance with 
the requirements of this rule, and (ii) monitor whether its broker-
dealer customers' Retail Order flow continues to meet the applicable 
requirements.\17\
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    \17\ The Exchange or another self-regulatory organization on 
behalf of the Exchange will review an RMO's compliance with these 
requirements through an exam based review of the RMO's internal 
controls.

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[[Page 21871]]

    If the Exchange disapproves the application, the Exchange provides 
a written notice to the Member. The disapproved applicant could appeal 
the disapproval by the Exchange as provided in proposed BX Rule 
4780(d), and/or reapply for RMO status 90 days after the disapproval 
notice is issued by the Exchange. An RMO also could voluntarily 
withdraw from such status at any time by giving written notice to the 
Exchange.
Failure of RMO To Abide by Retail Order Requirements
    BX Rule 4780(c) addresses an RMO's failure to abide by Retail Order 
requirements. If an RMO designates orders submitted to the Exchange as 
Retail Orders and the Exchange determines, in its sole discretion, that 
those orders fail to meet any of the requirements of Retail Orders, the 
Exchange may disqualify a Member from its status as an RMO. When 
disqualification determinations are made, the Exchange provides a 
written disqualification notice to the Member. A disqualified RMO may 
appeal the disqualification as provided in proposed BX Rule 4780(d) 
and/or reapply for RMO status 90 days after the disqualification notice 
is issued by the Exchange.
Appeal of Disapproval or Disqualification
    BX Rule 4780(d) provides appeal rights to Members. If a Member 
disputes the Exchange's decision to disapprove it as an RMO under BX 
Rule 4780(b) or disqualify it under BX Rule 4780(c), such Member 
(``appellant'') may request, within five business days after notice of 
the decision is issued by the Exchange, that the Retail Price 
Improvement Program Panel (``RPI Panel'') review the decision to 
determine if it was correct.
    The RPI Panel consists of the Exchange's Chief Regulatory Officer 
(``CRO''), or a designee of the CRO, and two officers of the Exchange 
designated by the Chief Executive Officer of BX. The RPI Panel reviews 
the facts and render a decision within the time frame prescribed by the 
Exchange. The RPI Panel may overturn or modify an action taken by the 
Exchange and all determinations by the RPI Panel constitute final 
action by the Exchange on the matter at issue.
Retail Liquidity Identifier
    Under BX Rule 4780(e), the Exchange disseminates an identifier when 
RPI interest priced at least $0.001 better than the Exchange's 
Protected Bid or Protected Offer for a particular security is available 
in the System (``Retail Liquidity Identifier''). The Retail Liquidity 
Identifier is disseminated through consolidated data streams (i.e., 
pursuant to the Consolidated Tape Association Plan/Consolidated 
Quotation System, or CTA/CQS, for Tape A and Tape B securities, and The 
Nasdaq Stock Market, LLC (``Nasdaq'') UTP Plan for Tape C securities) 
as well as through proprietary Exchange data feeds.\18\ The Retail 
Liquidity Identifier reflects the symbol and the side (buy or sell) of 
the RPI interest, but does not include the price or size of the RPI 
interest. In particular, CQS and UTP quoting outputs include a field 
for codes related to the Retail Liquidity Identifier. The codes 
indicate RPI interest that is priced better than the Exchange's 
Protected Bid or Protected Offer by at least the minimum level of price 
improvement as required by the Program.
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    \18\ The Exchange notes that the Retail Liquidity Identifier for 
Tape A and Tape B securities are disseminated pursuant to the CTA/
CQS Plan. The identifier is also available through the consolidated 
public market data stream for Tape C securities. The processor for 
the Nasdaq UTP quotation stream disseminates the Retail Liquidity 
Identifier and analogous identifiers from other market centers that 
operate programs similar to the RPI Program.
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Retail Order Designations
    Under BX Rule 4780(f), an RMO can designate how a Retail Order 
interacts with available contra-side interest as provided in Rule 4702.
    A Type 1-designated Retail Order will attempt to execute against 
RPI Orders and any other orders on the Exchange Book with a price that 
is (i) equal to or better than the price of the Type-1 Retail Order and 
(ii) at least $0.001 better than the NBBO. A Type-1 Retail Order is not 
routable and will thereafter be cancelled.
    A Type 2-designated Retail Order will first attempt to execute 
against RPI Orders and any other orders on the Exchange Book with a 
price that is (i) equal to or better than the price of the Type-2 
Retail Order and (ii) at least $0.001 better than the NBBO and will 
then attempt to execute against any other order on the Exchange Book 
with a price that is equal to or better than the price of the Type-2 
Retail Order, unless such executions would trade through a Protected 
Quotation. A Type-2 Retail Order may be designated as routable.
Priority and Order Allocation
    Under BX Rule 4780(g), competing RPI Orders in the same security 
are ranked and allocated according to price then time of entry into the 
System. Executions occur in price/time priority in accordance with BX 
Rule 4757. Any remaining unexecuted RPI interest remain available to 
interact with other incoming Retail Orders if such interest is at an 
eligible price. Any remaining unexecuted portion of the Retail Order 
will cancel or execute in accordance with BX Rule 4780(f). The 
following example illustrates this method:

 Protected NBBO for security ABC is $10.00-$10.05
 Member 1 enters an RPI Order to buy ABC at $10.015 for 500
 Member 2 then enters an RPI Order to buy ABC at $10.02 for 500
 Member 3 then enters an RPI Order to buy ABC at $10.035 for 
500

    An incoming Retail Order to sell 1,000 shares of ABC for $10.00 
executes first against Member 3's bid for 500 at $10.035, because it is 
the best-priced bid, then against Member 2's bid for 500 at $10.02, 
because it is the next best-priced bid. Member 1 is not filled because 
the entire size of the Retail Order to sell 1,000 is depleted. The 
Retail Order executes against RPI Orders in price/time priority.
    However, assume the same facts above, except that Member 2's RPI 
Order to buy ABC at $10.02 is for 100. The incoming Retail Order to 
sell 1,000 executes first against Member 3's bid for 500 at $10.035, 
because it is the best-priced bid, then against Member 2's bid for 100 
at $10.02, because it is the next best-priced bid. Member 1 then 
receives an execution for 400 of its bid for 500 at $10.015, at which 
point the entire size of the Retail Order to sell 1,000 is depleted.
    As a final example, assume the same facts as above, except that 
Member 3's order was not an RPI Order to buy ABC at $10.035, but 
rather, a non-displayed order to buy ABC at $10.03. The result would be 
similar to the result immediately above, in that the incoming Retail 
Order to sell 1,000 executes first against Member 3's bid for 500 at 
$10.03, because it is the best-priced bid, then against Member 2's bid 
for 100 at $10.02, because it is the next best priced bid. Member 1 
then receives an execution for 400 of its bid for 500 at $10.015, at 
which point the entire size of the Retail Order to sell 1,000 is 
depleted.
    All Regulation NMS securities traded on the Exchange are eligible 
for inclusion in the RPI Program. The Exchange limits the Program to 
trades occurring at prices equal to or greater than $1.00 per share. 
Toward that end, Exchange trade validation systems prevent the 
interaction of RPI buy or sell interest (adjusted by any offset) and 
Retail Orders at a price below $1.00 per

[[Page 21872]]

share.\19\ For example, if there is RPI buy interest tracking the 
Protected NBB at $0.99 with an offset of $0.001 and a ceiling of $1.02, 
Exchange trade validation systems would prevent the execution of the 
RPI Order at $0.991 with a sell Retail Order with a limit of $0.99. 
However, if the Retail Order was Type 2 as defined the Program,\20\ it 
would be able to interact at $0.99 with liquidity outside the Program 
in the Exchange's order book. In addition to facilitating an orderly 
\21\ and operationally intuitive program, the Exchange believes that 
limiting the Program to trades equal to or greater than $1.00 per share 
enabled it better to focus its efforts to monitor price competition and 
to assess any indications that data disseminated under the Program is 
potentially disadvantaging retail orders. As part of that review, the 
Exchange produced data throughout the pilot, which included statistics 
about participation, the frequency and level of price improvement 
provided by the Program, and any effects on the broader market 
structure.
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    \19\ As discussed above, the price of an RPI is determined by a 
Member's entry of buy or sell interest, an offset (if any) and a 
ceiling or floor price. RPI sell or buy interest typically tracks 
the Protected NBBO.
    \20\ Type 2 Retail Orders are treated as IOC orders that execute 
against displayed and non-displayed liquidity in the Exchange's 
order book where there is no available liquidity in the Program. 
Type 2 Retail Orders can either be designated as eligible for 
routing or as non-routable, as described above.
    \21\ Given the proposed limitation, the Program would have no 
impact on the minimum pricing increment for orders priced less than 
$1.00 and therefore no effect on the potential of markets executing 
those orders to lock or cross. In addition, the non-displayed nature 
of the liquidity in the Program simply has no potential to disrupt 
displayed, protected quotes. In any event, the Program would do 
nothing to change the obligation of exchanges to avoid and reconcile 
locked and crossed markets under NMS Rule 610(d).
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Rationale for Making the Program Pilot Permanent
    The Exchange established the RPI Program in an attempt to attract 
retail order flow to the Exchange by providing an opportunity price 
improvement to such order flow. The Exchange believes that the Program 
promotes transparent competition for retail order flow by allowing 
Exchange members to submit RPI Orders \22\ to interact with Retail 
Orders. BX also believes that such competition promotes efficiency by 
facilitating the price discovery process and generating additional 
investor interest in trading securities, thereby promoting capital 
formation and retail investment opportunities. The Program will 
continue to be limited to trades occurring at prices equal to or 
greater than $1.00 per share.
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    \22\ A Retail Price Improvement Order is defined in BX Rule 
4780(a)(3) by referencing BX Rule 4702 and BX Rule 4702(b)(5) says 
that it is as an order type with a non-display order attribute that 
is held on the Exchange Book in order to provide liquidity at a 
price at least $0.001 better than the NBBO through a special 
execution process described in Rule 4780.
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    The Exchange believes, in accordance with its filing establishing 
the pilot Program, which BX did ``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.'' \23\ The Exchange has fulfilled this 
obligation through the reports and assessments it has submitted to the 
Commission since the implementation of the pilot Program.
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    \23\ See Securities Exchange Act Release No. 73410 (October 23, 
2014), 79 FR 64447 at 64450 (SR-BX-2014-048).
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    The SEC stated in the RPI Approval Order that the Program could 
promote competition for retail order flow among execution venues, and 
that this could benefit retail investors by creating additional well-
regulated and transparent price improvement opportunities for 
marketable retail order flow, most of which is currently executed in 
the Over-the-Counter (``OTC'') markets without ever reaching a public 
exchange.\24\ The Exchange believes that the Program does not harm 
retail investors and so far has provided price improvement of more than 
$4 million since inception to retail investors that they may not 
otherwise have received. The data demonstrates that the Program has 
continued to grow over time and the Exchange has not detected any 
negative impact to market quality. The Exchange also has not received 
any complaints or negative feedback concerning the Program.
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    \24\ RPI Approval Order, 79 FR at 72053.
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    As seen in the table below, RMO orders and shares executed have 
continued to rise since the introduction of the Program in December 
2014. RMO executed share volume on BX accounted for 0.05% of total 
consolidated volume in eligible U.S. listed securities in Q4 2017. 
Despite its size relative to total consolidated trading, however, the 
Program has continued to provide some price improvement to RMO orders 
each month with total price improvement during market hours from the 
start of the Program through May 2018 totaling over $4.3 million.
    Retail orders are routed by sophisticated brokers using systems 
that seek the highest fill rates and amounts of price improvement. 
These brokers have many choices of execution venues for retail orders. 
When they choose to route to the Program, they have determined that it 
is the best opportunity for fill rate and price improvement at that 
time.

----------------------------------------------------------------------------------------------------------------
                                                                                                     Total RMO
                                                                     Total RMO      RMO shares         price
                              Month                               orders (market     executed       improvement
                                                                      hours)      (market hours)  (market hours)
----------------------------------------------------------------------------------------------------------------
Sep-14..........................................................               0               0              $0
Oct-14..........................................................               0               0               0
Nov-14..........................................................               0               0               0
Dec-14..........................................................           4,003         521,587           6,572
Jan-15..........................................................          66,903       9,723,791          55,480
Feb-15..........................................................          71,204      12,948,664          54,769
Mar-15..........................................................          62,216      10,818,042          49,232
Apr-15..........................................................          75,558      12,121,577          63,247
May-15..........................................................          98,859      16,723,281          81,268
Jun-15..........................................................         116,570      20,341,305         100,520
Jul-15..........................................................         133,917      22,310,364         111,657
Aug-15..........................................................         192,546      30,011,636         194,706
Sep-15..........................................................         141,496      23,199,937         110,415
Oct-15..........................................................         148,414      25,745,772         128,838
Nov-15..........................................................         123,267      20,788,967         120,037
Dec-15..........................................................         145,022      24,414,783         140,444

[[Page 21873]]

 
Jan-16..........................................................         162,025      30,010,815         181,781
Feb-16..........................................................         135,409      27,794,644         173,988
Mar-16..........................................................          93,729      17,688,230          88,900
Apr-16..........................................................          82,819      15,269,513          78,241
May-16..........................................................          70,192      13,336,738          71,145
Jun-16..........................................................          76,092      15,356,152          74,035
Jul-16..........................................................          65,121      13,532,803          59,305
Aug-16..........................................................          78,611      16,412,113          64,231
Sep-16..........................................................          84,240      17,368,907          46,792
Oct-16..........................................................         146,207      30,827,361          60,624
Nov-16..........................................................         103,046      19,744,407          60,391
Dec-16..........................................................         168,638      31,003,843          76,025
Jan-17..........................................................         140,203      23,474,999          58,887
Feb-17..........................................................         139,447      26,643,083          59,372
Mar-17..........................................................         161,154      30,595,963          73,250
Apr-17..........................................................         126,665      26,587,486          59,141
May-17..........................................................         143,927      31,368,371          78,979
Jun-17..........................................................         332,266      71,569,426         405,933
Jul-17..........................................................         210,309      39,061,892         155,669
Aug-17..........................................................         266,762      51,442,492         255,999
Sep-17..........................................................         154,846      29,831,646          69,634
Oct-17..........................................................         205,399      39,409,251          95,051
Nov-17..........................................................         370,064      94,703,209         169,738
Dec-17..........................................................         219,528      49,424,240         102,082
Jan-18..........................................................         248,419      47,080,453         113,956
Feb-18..........................................................         263,576      40,979,066         100,148
Mar-18..........................................................         597,460      40,896,277          98,779
Apr-18..........................................................       1,095,396      41,067,806          97,015
May-18..........................................................       1,031,527      31,843,167          81,199
                                                                 -----------------------------------------------
    Total.......................................................       8,353,052   1,193,994,059       4,327,477
----------------------------------------------------------------------------------------------------------------

                                                                                                  [GRAPHIC] [TIFF OMITTED] TN15MY19.002
                                                                                                  

[[Page 21874]]

[GRAPHIC] [TIFF OMITTED] TN15MY19.003

    The table below shows that between April 2017 and May 2018, roughly 
50% of RMO orders were for 100 shares or less and around 70% of orders 
were for 300 shares or less. Larger orders of 7,500 shares or more 
accounted for approximately 2%, ranging from 0.62% to 3.09%. Although 
large order were a small percentage of total orders, they make up a 
significant portion of total shares ordered, ranging from 21.11% to 
46.22%. Orders of 300 shares or less, which accounted for the vast 
majority of total RMO orders, accounted for only between 4.81% and 
15.38% of total shares ordered.

                                                        Distribution of RMO Orders by Order Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   <=100     101-300    301-500    501-1,000     1,001-2,000     2,001-4,000     4,001-7,500    7,500-15,000    >15,000
             Month               (percent)  (percent)  (percent)   (percent)      (percent)       (percent)       (percent)       (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Apr-17.........................      49.50      18.53       8.67         9.47            5.69            3.84            2.24            1.38       0.69
May-17.........................      46.55      23.79       8.25         8.42            5.26            3.71            2.12            1.29       0.62
Jun-17.........................      59.60      13.26       6.62         7.91            4.75            3.48            2.36            1.52       0.51
Jul-17.........................      57.30      14.61       7.32         8.50            5.17            3.28            2.00            1.19       0.65
Aug-17.........................      56.38      15.19       7.54         8.49            5.23            3.41            1.91            1.22       0.63
Sep-17.........................      53.16      16.29       7.69         8.79            5.71            4.05            2.22            1.38       0.70
Oct-17.........................      54.28      16.00       7.46         8.65            5.64            3.84            2.15            1.33       0.66
Nov-17.........................      47.76      15.30       8.19        10.23            7.38            5.10            2.95            2.04       1.06
Dec-17.........................      48.66      15.30       8.27        10.34            6.99            4.82            2.79            1.87       0.98
Jan-18.........................      53.60      14.93       7.73         9.20            5.98            4.04            2.28            1.53       0.71
Feb-18.........................      58.44      14.58       7.14         8.02            4.93            3.29            1.91            1.14       0.55
Mar-18.........................      55.29      17.97       8.63         8.38            5.12            2.64            1.07            0.61       0.28
Apr-18.........................      54.52      19.12       9.04         8.31            5.02            2.50            0.87            0.42       0.19
May-18.........................      50.44      20.21       9.89         9.10            5.77            2.88            0.96            0.50       0.26
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                    Distribution of RMO Shares Ordered by Order Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   <=100     101-300    301-500    501-1,000     1,001-2,000     2,001-4,000     4,001-7,500    7,500-15,000    >15,000
             Month               (percent)  (percent)  (percent)   (percent)      (percent)       (percent)       (percent)       (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Apr-17.........................       3.04       4.63       4.42         8.78           10.06           12.89           13.89           16.06      26.23
May-17.........................       3.28       6.49       4.49         8.34            9.98           13.38           14.28           16.05      23.71
Jun-17.........................       2.47       3.78       3.95         8.89           10.15           13.74           17.06           20.07      19.88
Jul-17.........................       2.82       4.20       4.36         9.31           10.78           12.94           14.44           16.47      24.67
Aug-17.........................       2.80       4.28       4.42         9.21           10.84           13.21           13.55           16.63      25.08
Sep-17.........................       2.88       4.16       3.98         8.36           10.50           14.04           14.17           16.78      25.14
Oct-17.........................       2.89       4.31       4.09         8.73           11.02           14.04           14.49           17.11      23.32
Nov-17.........................       1.80       3.01       3.26         7.48           10.45           13.51           14.27           18.89      27.33
Dec-17.........................       2.00       3.17       3.48         8.02           10.45           13.46           14.18           18.35      26.91

[[Page 21875]]

 
Jan-18.........................       2.50       3.78       4.01         8.82           11.05           13.94           14.30           18.35      23.26
Feb-18.........................       3.25       4.52       4.52         9.34           11.08           13.87           14.53           16.86      22.02
Mar-18.........................       5.73       6.96       6.80        12.44           14.90           14.65           11.00           12.34      15.17
Apr-18.........................       7.27       8.11       7.84        13.68           16.23           15.46           10.29            9.51      11.61
May-18.........................       6.31       7.54       7.50        13.09           16.40           15.66           10.00            9.80      13.70
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                    Distribution of RMO Shares Executed by Order Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   <=100     101-300    301-500    501-1,000     1,001-2,000     2,001-4,000     4,001-7,500    7,500-15,000    >15,000
             Month               (percent)  (percent)  (percent)   (percent)      (percent)       (percent)       (percent)       (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Apr-17.........................      11.39      15.32      11.28        16.25           12.77           10.87            9.27            9.25       3.61
May-17.........................      10.86      20.10      10.47        13.77           11.37           10.58            8.96            9.44       4.45
Jun-17.........................       7.65      10.05       8.48        14.31           11.28           11.85           12.00           18.69       5.68
Jul-17.........................      10.07      12.67      10.18        15.57           12.94           11.79            9.97           10.27       6.56
Aug-17.........................       9.93      12.98      10.89        17.05           14.16           11.94            9.38            8.23       5.45
Sep-17.........................      11.36      13.46      10.12        16.01           13.80           13.07            8.60            8.61       4.97
Oct-17.........................      10.83      13.37      10.07        16.40           14.46           12.48            9.47            7.96       4.96
Nov-17.........................       7.04      10.64      10.14        19.81           18.19           13.96            9.04            7.10       4.09
Dec-17.........................       8.25      11.27      10.37        19.49           17.05           13.33            8.82            7.13       4.28
Jan-18.........................       9.93      12.43      10.92        19.37           16.07           12.66            8.49            6.49       3.64
Feb-18.........................      12.63      14.31      11.81        19.45           15.07           11.22            6.81            5.55       3.16
Mar-18.........................      13.92      15.35      11.92        19.14           14.77           10.05            6.35            5.49       3.00
Apr-18.........................      14.81      15.76      11.86        18.35           13.47           10.21            6.75            5.41       3.39
May-18.........................      13.65      15.78      12.38        18.77           13.92           10.57            6.25            5.27       3.40
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The table below shows the average and median sizes of RMO removing 
orders.

                      Average and Median RMO Sizes
------------------------------------------------------------------------
                                               RMO taking order size
                  Year                   -------------------------------
                                                Avg           Median
------------------------------------------------------------------------
Apr-17..................................             863             111
May-17..................................             802             180
Jun-17..................................             743              82
Jul-17..................................             739             100
Aug-17..................................             753             100
Sep-17..................................             841             100
Oct-17..................................             793             100
Nov-17..................................           1,103             150
Dec-17..................................           1,044             132
Jan-18..................................             844             100
Feb-18..................................             690             100
Mar-18..................................             512             100
Apr-18..................................             454             100
May-18..................................             517             100
------------------------------------------------------------------------

    The data provided by the Exchange describes a valuable service that 
delivers some price improvement in a transparent and well-regulated 
environment. The Program represents just a fraction of retail orders, 
most of which are executed off-exchange by a wide range of order 
handling services that have considerably more market share and which 
operate pursuant to different rules and regulatory requirements. BX 
found no data or received any customer feedback that indicated any 
negative impact of the Program on overall market quality or for retail 
investors.
    As discussed herein, the Program is a minor participant in the 
overall market to price improve marketable retail order flow. As the 
Exchange has noted, although participation was low, retail investors 
that participated in the Program received price improvement on their 
orders, which was one of the stated goals of the Program. The Exchange, 
therefore, believes that this pilot data supports making the Program 
permanent.
    As discussed more fully below, the reports and assessments provided 
by the Exchange to the SEC have covered (i) the economic impact of the 
Program on the entire market; (ii) the economic impact of the Program 
on execution quality; (iii) whether only eligible participants are 
accessing Program liquidity; (iv) whether the Program is attracting 
retail participants; (v) the net benefits of the Program on 
participants; (vi) the overall success in achieving intended benefits; 
and (vii) whether the Program can be improved.

[[Page 21876]]

1. Economic Impact of the RPI Program on the Entire Market
    The following table illustrates the level of volume done through 
the Program relative to consolidated volume. The columns labeled `Daily 
Results' show the distribution of the percentage of RPI to consolidated 
volume for all stock/date combinations during 2017-2018. Only stock/
date combinations with positive consolidated volume are represented. 
The table shows that the overwhelming number of stock/date combinations 
are those in which BX RPI volume was less than 0.01% of consolidated 
volume. In most of these cases, BX RPI volume was zero. In only a 
comparative handful of cases does the percentage amount to a 
substantial portion of the security's volume.
    The columns labeled `Two-Year Aggregate' present results for stocks 
summed over the entire two-year period (sum of RPI Program volume to 
sum of consolidated volume). Only stocks listed during the entire two 
years are represented. Virtually all stocks have RPI volume less than 
0.5% of consolidated volume.

----------------------------------------------------------------------------------------------------------------
                                                           Daily results                Two-year aggregate
                  Distribution                   ---------------------------------------------------------------
                                                       Count        Percentage         Count        Percentage
----------------------------------------------------------------------------------------------------------------
>50%............................................              22          0.0005               0          0.0000
25%-50%.........................................              44          0.0011               0          0.0000
10%-25%.........................................             368          0.0090               0          0.0000
5%-10%..........................................           1,444          0.0355               0          0.0000
1%-5%...........................................          25,730          0.6321               0          0.0000
0.75%-1%........................................          11,835          0.2907               4          0.0542
0.50%-0.75%.....................................          22,413          0.5506              10          0.1354
0.25%-0.50%.....................................          56,130          1.3789              91          1.2321
0.10%-0.25%.....................................         111,937          2.7499             559          7.5684
0.05%-0.10%.....................................         105,651          2.5955             951         12.8757
0.01%-0.05%.....................................         220,649          5.4206           3,181         43.0680
<0.01%..........................................       3,514,320         86.3354           2,590         35.0663
----------------------------------------------------------------------------------------------------------------

Difference in Difference Analysis
    The aim of this analysis was to compare the values of a set of 
general market metrics prior to the December 2014 introduction of the 
Program to those prevailing after. The Exchange follows what is 
commonly termed the `difference-in-difference' approach (``DnD''). A 
DnD analysis involves identifying a group of subjects (stocks in this 
case) that receive a given `treatment.' In this case, the `treatment' 
is the introduction of the BX RPI Program. The Exchange would then 
observe the change (difference) in a set of empirical indicia of market 
quality, before and after Program introduction. The analysis is 
enhanced by observing the intertemporal change in the same indicia for 
a set of stocks that did not receive the treatment. The non-treated 
stocks would serve as `controls.' The impact of the Program could 
therefore be assessed by comparing the pre/post changes in the treated 
stocks with those from the control stocks, hence the difference in 
differences. Observed changes in the control stocks would account for 
environmental effects, such as changes in general market volatility, 
that are unrelated to the introduction of the BX RPI Program.
    The RPI introduction in December 2014 applied to all stocks traded 
on BX. Thus, control stocks in the strict sense are not available. The 
Exchange applies therefore a fallback approach, in which it identifies 
stocks with relatively high levels of RPI participation and use these 
as the `treatment' stocks. Those for which Program participation was 
light serve as the `control' stocks. The approach suffers from the 
limitation that Program participation is a determined by endogenous 
choice. It is possible that stocks with high levels of participation 
are systematically different from those with low participation. That 
is, the controls may be different from the treated stocks in important 
ways. With this caveat in mind, it is nevertheless of interest to see 
differences in outcomes between the two groups of stocks.
    While the treatment and control stocks differ substantially in 
terms of RPI participation, the validity of the DnD analysis is 
enhanced to the extent that the two groups are otherwise as similar to 
each other as possible. To achieve this objective, the Exchange first 
breaks its analysis into two parts: One dealing with active securities, 
the other with less active securities. The Exchange's set of active 
securities are those with consolidated average daily volume (``CADV'') 
of 500,000 shares or more both before and after Program introduction. 
The less active group have CADV between 50,000 and 500,000 shares both 
before and after Program introduction. Then, within each volume 
grouping, the Exchange conducts a `matched pairs' process to identify a 
smaller set of treatment and control groups that are as close to each 
other as possible across three dimensions: Consolidated average daily 
share volume, average price, and average time-weighted quoted NBBO 
dollar spread. The values of these variables prior to Program 
introduction were used.
    Data from the pre-treatment period was obtained from trading during 
the three months of September through November 2014. The Exchange looks 
at two post-treatment periods. The first is based on trading from 
January through December 2015. The second is based on trading from the 
two years from January 2017 through December 2018. Note that December 
2014, the month of Program introduction, is not used. Further, the 
Exchange excluded data from trading days when the Exchange closed early 
(such as the day after Thanksgiving) from the analysis.
    The overall set of four DnD analyses can be represented and 
hereafter labeled as follows:

------------------------------------------------------------------------
                                              Post-period dates
               CADV                -------------------------------------
                                           2015               2018
------------------------------------------------------------------------
500,000 or more...................  I                  III
Between 50,000 and 500,000........  II                 IV
------------------------------------------------------------------------

    For each of the four DnD analyses, the specific matched-pairs 
process employed the following steps:
    1. Daily averages for a set of variables are computed for each 
stock (excluding preferred stocks and warrants) listed on Nasdaq or 
NYSE for the appropriate pre/post time frames. For the 2017-2018 post-
period, stocks trading with a nickel tick size pursuant to the Tick 
Size Pilot were excluded.

[[Page 21877]]

    2. The initial universe of stocks are identified as having, in the 
post period, the appropriate CADV, an average share price greater than 
$2, positive average daily BX share volume, and being listed during at 
least 80% of the designated time frame. To exclude stocks that may have 
experienced stock splits or other extreme price movement, stocks with 
the 95th and 5th percentile of daily price within the period differed 
by more than a factor of two were excluded.
    3. These stocks are ranked on the percentage of consolidated volume 
that was done in the Program (in the post period). Selection of the 
treatment stocks starts with the top 100 stocks in terms of post-
introduction RPI Program volume as percentage of consolidated volume 
for the stock.
    4. Pre-period data for the provisional treatment stocks is 
obtained. During the pre-period, the treatment stocks must also have 
the appropriate CADV level, an average price greater than $2, positive 
BX share volume, listed during the entire pre-period, and not have 
experienced extreme price movement (measured as described in condition 
2 above). This process will generally result in fewer than 100 
remaining treatment candidates.
    5. The candidate control stocks are selected from those with low 
RPI Program volume as a percentage of consolidated volume. For the two 
high-volume analyses (I. and III.), the control stocks were selected 
from stocks whose RPI volume percentage was less than one-tenth that of 
the lowest RPI percentage from the treatment stocks. For the lower-
volume analyses (II. and IV.), the control stocks were selected from 
stocks whose RPI volume percentage was less than one-fifth that of the 
lowest RPI percentage from the treatment stocks. This change was made 
to ensure a sufficient number of control stocks.
    6. The control stocks must also have similar restrictions to the 
treatment stocks in both pre- and post-periods: CADV in the appropriate 
range, price greater than $2, positive BX volume, sufficient presence, 
and no extreme price movements during the period.
    7. Each treatment stock was compared with each candidate control 
stock. Using pre-period data, a discrepancy score was computed as:
[GRAPHIC] [TIFF OMITTED] TN15MY19.004

where the subscripts Tr and Cn refer to Treatment and Control values 
of the indicated variable. In words, the score is the sum of the 
absolute value of the percentage differences in the indicated 
values. The lower the score, the closer the match.

    8. Each treatment stock was paired with the best possible match, 
subject to the constraint that a given control stock could be used only 
once (often termed `sampling without replacement').
    9. Finally, only stock pairs with reasonable discrepancy scores 
were retained, recognizing the trade-off between quality of the matches 
and the resulting sample size. For the high-volume/2015 analysis (I.) 
the discrepancy scores were 1.2 or lower. For the low-volume/2015 
analysis (II,), the larger set of control stocks led to an upper bound 
of 0.6 for the discrepancy score. For both analyses with 2017-18 as the 
post period (III. and IV.) an upper bound of 2.0 was used, due to a 
smaller set of potential control stocks.
    Once a set of matched pairs was determined for a given analysis, 
the Exchange computed the DnD result using a standard linear regression 
framework. A DnD regression model can be expressed as:

[gamma]it = [alpha] + [beta]1 DGrp + [beta]2 DPeriod + [beta]3 
DGrp x DPrd + [epsi]it

where [gamma]it represents the metric of interest for 
stock i in time period t (pre or post). The `dummy' variables DGrp 
and DPrd are constructed such that DGrp = 1 when stock i is a 
treatment stock, and zero otherwise. Variable Dprd has value = 1 
when the observation is from the post period, zero otherwise. The 
coefficient [beta]3 of the interaction term represents 
the DnD result. Standard regression software provides both the 
estimated coefficient as well as its standard error and t-statistic. 
The level of statistical significance can be assessed using the t-
statistic.

    The Exchange considered eight metrics of interest, all of which 
were computed during standard 9:30 a.m.-4:00 p.m. (Eastern time) 
trading hours:
     The time-weighted NBBO quoted spread, measured in dollars;
     The time-weighted NBBO relative (to the bid-ask midpoint) 
quoted spread, measured in basis points;
     The trade-weighted effective spread of all trades done on 
BX, measured in dollars;
     The trade-weighted relative effective spread of all trades 
done on BX, measured in basis points;
     As a measure of short-term volatility, the average high/
low range of consolidated trade prices during 5-minute windows. The 
daily high/low range measure is divided by the VWAP each day to yield a 
metric measured in percent;
     As another measure of short-term volatility, the average 
absolute change in consolidated trade-to-trade price changes. The 
trade-to-trade measure is divided by the VWAP each day to yield a 
metric measured in percent;
     The average share volume market share of TRF volume, 
including auctions and all trading hours; and
     The average share volume market share of BX volume, 
including auctions and all trading hours.
    In assessing the results of the DnD analysis, two caveats are worth 
bearing in mind. As shown above, BX RPI volume represents a very small 
fraction of consolidated volume. Further, the Program was introduced at 
a time when similar exchange-based retail programs were already in 
place. Among those programs was Nasdaq's retail program, which was 
discontinued at the time the BX RPI Program was introduced. To a large 
extent, the BX RPI volume replaced that of Nasdaq.
    It is also important to recognize that much, if not most, 
marketable retail order flow is routed to off-exchange market makers. 
For example, the Exchange examined Rule 606 disclosures from four 
prominent retail brokerages: E-Trade, TD Ameritrade, Charles Schwab, 
and Fidelity. For securities listed on the New York Stock Exchange LLC 
(``NTSE'') in the fourth quarter of 2018, only Fidelity reported 
routing any market orders to exchanges, and its total exchange 
percentage was only 2.1%. This practice of routing retail marketable 
orders to off-exchange venues has been in place for a long time, both 
before and after the introduction of the Program.
    Combining the smallness of the Program, the concurrent 
discontinuation of the Nasdaq retail program, and the continuing 
prevalence of off-exchange trading of retail orders, the incremental 
impact of the Program on market quality generally would not be expected 
to be large.
    A second caveat stems from the way that the treatment and control 
groups are created. The Exchange observes that some types of stocks 
have higher BX RPI Program usage than others. For example,

[[Page 21878]]

consider Nasdaq- and NYSE-listed securities trading in 2015 with CADV 
greater than 500,000 shares (a sample of 1,737 stocks, used in analysis 
I.). The Exchange found the following concerning the percentage of BX 
RPI volume relative to consolidated volume:

------------------------------------------------------------------------
                                                            RPI/consol.
                    Avg CADV of stock                        (percent)
------------------------------------------------------------------------
500,000-1,000,000.......................................           0.026
1,000,000-10,000,000....................................           0.015
10,000,000+.............................................           0.010
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                            RPI/consol.
                     Avg price level                         (percent)
------------------------------------------------------------------------
Less than $100..........................................           0.017
$100-$200...............................................           0.032
$200-$500...............................................           0.074
$500+...................................................           0.127
------------------------------------------------------------------------

    This sample shows higher Program percentages for less-active 
stocks, and much higher percentages for higher-priced stocks. This 
suggests that RPI usage across stocks does not randomly vary, but is 
driven by certain stock characteristics, some of which may not be 
directly observable.
    As noted above, Rule 606 disclosures show that the majority of 
retail market orders are routed off-exchange for execution. BX RPI 
activity is therefore itself somewhat anomalous in the first place. Why 
some retail flow reaches exchanges via the Program (or that of similar 
exchange programs), and why it varies across stocks is not clear.
    Since treatment and control stocks are determined on the basis of 
observed RPI usage--resulting from participant choice--they may be 
different in important ways. The DnD study attempts to take into 
account differences in average share volume, price, and spread in the 
pre-period. If, however, the two groups of stocks are nevertheless 
still not properly fully matched, it is possible that results drawn 
from the DnD may be spurious. `Spurious' in this context means a result 
that is robust statistically, but nevertheless does not indicate the 
impact of the intended factor. In other words, a spurious result is 
caused by some extraneous factor.
Matching Summary
    The full set of matched pairs data for each of the four analyses 
will be provided below, but the following table provides summary 
information. Shown are the number of matched pairs, and sample averages 
for the three matching variables. Also shown is the average of the 
discrepancy score used in the matching process.

                                                                                     Matched Pairs Averages
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Treatment                                                   Control
                           Analysis                                 N     ----------------------------------------------------------------------------------------------------------------------
                                                                            RMO (percent)        ADV         Price      Spread    RMO (percent)        ADV         Price      Spread     Score
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I.............................................................         44          0.0763       1,478,796     $50.79     $0.039          0.0033       1,464,376     $48.28     $0.031      0.492
II............................................................         71          0.1534         156,902      26.92      0.062          0.0123         157,105      27.22      0.064      0.264
III...........................................................         41          0.0531       4,325,804      35.51      0.029          0.0023       3,329,018      38.94      0.019      0.812
IV............................................................         49          0.0889         166,435      19.37      0.051          0.0082         179,551      23.95      0.046      0.684
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The table again illustrates the low level of Program participation, 
even for the treatment stocks. The RMO percentages are especially low 
for the higher volume samples (I and III). As intended, the RMO 
percentages for the control stocks are much lower still, averaging at 
least an order of magnitude lower than the treatment stocks.
    Other than these differences, the pairs exhibit strong average 
similarity in terms of the values of the pre-period matching variables. 
It can be seen that the average quality of matches is lower for the 
samples using 2017-18 as the post period (III and IV). As noted above, 
the maximum allowable discrepancy score was increased for these 
samples, needed to provide for a sample size similar to those of 
samples I and II.
Regression Results
    The following table provides the estimated coefficients for the DnD 
regressions for the indicated market indicator and sample. In addition 
to the estimated coefficient, the t-statistic is provided. This 
statistic can be used to gauge the statistical significance of the 
coefficient--the confidence that the true value of the coefficient is 
different than zero. The t-statistics are accompanied, as appropriate, 
with a set of asterisks indicating the associated level of 
significance: * = 10%, ** = 5%, and *** = 1%.
    It is useful to compare the results across the four samples to 
assess their consistency.

                                                                     Analysis Sample
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             I.                        II.                      III.                       IV.
                                                 -------------------------------------------------------------------------------------------------------
                                                     Coeff        t-stat       Coeff        t-stat       Coeff        t-stat       Coeff        t-stat
--------------------------------------------------------------------------------------------------------------------------------------------------------
NBBO Spreads:
    Dollar......................................       $0.018     *** 3.16       $0.011         0.93      -$0.003        -0.31      -$0.030      * -1.91
    bps.........................................         1.52         0.89         4.38         0.99         1.66         0.73         7.27         0.97
--------------------------------------------------------------------------------------------------------------------------------------------------------
BX Effective Spreads:
    Dollar......................................       $0.014     *** 4.31       $0.008         1.32      -$0.001        -0.32      -$0.008        -1.45
    bps.........................................         1.84         1.65         3.65         1.06         1.78         0.99         8.75       * 1.79
--------------------------------------------------------------------------------------------------------------------------------------------------------
Volatility:
    Hi-Lo Range.................................      -0.001%        -0.02       0.008%         0.38      -0.014%        -0.41      -0.022%        -0.78
    Trade-to-Trade..............................       0.003%         0.99       0.009%         1.03       0.004%         1.19       0.023%         1.49
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Share Change:
    TRF.........................................        2.86%         1.36        0.58%         0.24        3.13%        1.87*        1.75%         0.50
    BX..........................................        0.31%      ** 2.23        0.42%      ** 2.02       -0.56%     *** -2.7       -0.16%        -0.56
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 21879]]

Spreads
    Four spread measures are analyzed: NBBO quoted spreads and BX 
effective spreads, expressed in dollar and bps terms. The table above 
shows substantial consistency between the NBBO quoted and BX effective 
spread results across all samples.
    Sample I. indicates increases in dollar quoted and effective 
spreads of about 1\1/2\ cents. The results are statistically 
significant. Relative (bps) spreads also increased about 1\1/2\ basis 
points. The bps spread results do not meet the standards of statistical 
significance, however. Compared to Sample I, Sample II shows increases 
in dollar spreads of about the same amount and increases in bps spreads 
of a higher amount, likely due to the fact that the Sample II stocks 
tend to have lower share prices. None of the Sample II spread increases 
meet the standard of statistical significance, however. Both samples 
III and IV show small decreases in dollar spreads and increases in 
relative spreads. None of the results from sample III are statistically 
significant. From sample IV, one of the dollar spread decreases and one 
of the relative spread increases indicate marginal statistical 
significance.
    Overall, the Exchange does not see sufficient consistency across 
the four samples to conclude that the introduction of the Program 
caused spreads to widen.
Volatility
    Compared to the spread results, results on short-term volatility 
are easier to characterize. Across the two metrics and four samples, 
there is no evidence of a systematic increase or decrease in 
volatility, some estimates are positive, some negative, and none meet 
the standards of statistical significance.
Market Share
    The market share coefficients are expressed in market share points. 
For example, a value of 1% means that market share increased by one 
point (e.g., 30% to 31%). The nearer-term samples I and II suggest 
statistically significant increases in BX market share of about one-
third of a point. This increase may be partially reflective of the 
transfer of Nasdaq's retail program to BX. The more distant-term 
samples III and IV show, however, declines in BX share. The regressions 
on TRF share all produce positive coefficients, though only one has any 
level of statistical significance. Collectively, it can be safely 
stated that the introduction of the BX RPI program did not work towards 
decreasing TRF share. More likely what the results tell us is that the 
treatment stocks with relatively high RMO volume also had high levels 
of retail interest generally. As noted above, most retail flow is 
executed off exchange, hence the increase in TRF share.

I. Active Stocks (CADV > 500,000) and Post-Period = 2015

    For this sample, there were 44 matched pairs that emerged from this 
process. The pairs, along with values of selected variables, pre- and 
post-Program introduction, are shown as follows:

                                                  Table 1A--Retail Program Matched Sample CADV >500,000
                                                                     [Sep-Nov 2014]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Treatment stocks                                                              Control stocks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Avg sprd   Avg sprd                                                    Avg sprd   Avg sprd
             Symbol                     ADV       Avg price     ($)        (bps)           Symbol              ADV       Avg price     ($)       (bps)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ACAD............................       1,301,549     $26.71     $0.035      13.20   RSPP...............       1,006,435     $25.41     $0.042      16.44
AFSI............................         963,827      45.37      0.058      12.53   CNW................       1,035,534      47.10      0.027       5.85
ALK.............................       1,421,387      48.80      0.025       5.26   AER................       1,420,894      42.73      0.025       5.80
AVGO............................       2,296,967      84.93      0.042       4.94   DLPH...............       2,274,323      67.10      0.022       3.28
BDX.............................       1,544,016     122.52      0.039       3.22   SIAL...............       1,139,858     128.25      0.034       2.81
CAMP............................         712,958      18.53      0.027      14.71   MIK................         633,004      18.48      0.032      17.24
CELG............................       4,941,261      98.16      0.034       3.52   LYB................       5,063,747      98.75      0.028       2.90
CI..............................       1,621,670      95.17      0.033       3.45   MJN................       1,416,148      98.05      0.033       3.41
CLX.............................       1,176,737      96.35      0.027       2.77   DTE................       1,145,735      78.91      0.024       3.04
COST............................       2,068,993     130.14      0.031       2.38   ITW................       1,952,683      88.27      0.018       2.10
CRZO............................       1,162,062      51.73      0.069      13.56   JAH................       1,115,067      61.48      0.032       5.17
DXCM............................         639,488      44.44      0.052      11.72   KMT................         650,995      40.82      0.029       7.10
ENLK............................         737,216      30.01      0.050      16.82   MYGN...............         756,758      36.29      0.054      14.74
FSC.............................       1,199,762       9.10      0.010      11.20   EXG................       1,043,356       9.97      0.010      10.18
FSLR............................       2,507,147      59.85      0.040       6.73   CAM................       2,841,939      62.83      0.025       4.05
IBKR............................         507,360      25.51      0.024       9.42   WERN...............         542,473      26.12      0.022       8.38
ICLR............................         582,300      54.93      0.051       9.34   SLH................         582,309      55.54      0.042       7.47
ISIS............................       2,304,953      42.90      0.050      11.87   DO.................       2,028,802      37.29      0.026       6.93
JACK............................         550,619      67.89      0.057       8.37   REG................         509,779      57.69      0.031       5.39
LAZ.............................         704,069      50.59      0.045       9.02   HDB................         834,887      49.84      0.025       5.12
MANH............................         512,845      35.01      0.037      10.67   MR.................         610,957      30.32      0.030       9.83
MHK.............................         737,514     139.12      0.084       6.08   SLG................         788,370     109.07      0.057       5.28
MNST............................       1,194,231      96.92      0.051       5.33   EQT................       1,625,380      91.54      0.059       6.48
NXPI............................       4,256,770      68.85      0.031       4.48   CCI................       3,275,501      80.56      0.024       2.93
NYMT............................       1,596,486       7.76      0.010      12.98   PMCS...............       1,483,102       7.49      0.011      14.09
OLED............................         709,659      31.24      0.045      14.50   FET................         713,162      28.85      0.033      11.66
PSEC............................       3,891,913       9.79      0.010      10.25   SLM................       4,532,083       9.17      0.010      11.09
Q...............................         739,497      56.41      0.039       6.96   OIS................         913,560      59.56      0.048       7.97
RMTI............................         677,364       9.70      0.031      32.18   COUP...............         770,002      14.10      0.031      22.28
SINA............................       1,550,979      41.43      0.036       8.79   YPF................       1,668,599      33.94      0.031       9.11
SKYW............................         558,570       9.63      0.018      19.30   BEL................         504,230      11.61      0.018      15.88
SMCI............................         520,354      28.97      0.044      15.62   SERV...............         594,059      24.05      0.038      15.87
SNCR............................         615,801      45.95      0.068      14.76   LTRPA..............         688,159      30.63      0.069      22.17
SPLK............................       2,740,926      60.05      0.054       9.13   FTI................       2,360,200      54.47      0.024       4.39
SWKS............................       4,301,104      56.96      0.024       4.33   NOV................       4,357,777      75.03      0.023       3.04
TASR............................       3,094,977      17.08      0.017       9.88   LPI................       3,200,381      19.98      0.016       8.34

[[Page 21880]]

 
TGTX............................         509,492      11.16      0.036      32.33   MEG................         592,554      14.46      0.028      19.67
TSCO............................       1,270,325      66.28      0.031       4.66   FLS................       1,201,366      68.85      0.033       4.74
TUP.............................         527,236      68.49      0.044       6.47   KRC................         535,203      63.70      0.037       5.78
UA..............................       2,678,432      67.54      0.032       4.80   NBL................       2,781,689      61.96      0.025       4.08
UBNT............................       1,115,056      36.37      0.051      14.34   ERJ................       1,106,399      37.84      0.021       5.52
VDSI............................         851,633      21.13      0.035      17.03   LQ.................         827,960      19.86      0.025      12.65
YRCW............................         750,968      20.65      0.036      17.55   STAY...............         627,766      21.90      0.029      13.44
ZLTQ............................         720,533      24.55      0.041      16.88   CTLT...............         679,346      24.50      0.045      18.20
                                 --------------------------------------------------                     ------------------------------------------------
    Avg.........................       1,478,796      50.79      0.039      10.76   Avg................       1,464,376      48.28      0.031       8.91
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                      Table 1B--Retail Program Matched Sample CADV >500,000
                                                                                             [2015]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Treatment stocks                                                                                  Control stocks
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                          RMO %    RMO %                          Avg sprd   Avg sprd                                RMO %    RMO %                          Avg sprd   Avg sprd
                 Symbol                     BX      Ind       ADV     Avg price     ($)        (bps)              Symbol               BX      Ind       ADV     Avg price     ($)       (bps)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ACAD...................................     3.07     0.06  1,448,310     $37.47     $0.050      13.46   RSPP......................     0.04     0.00  1,491,504     $26.31     $0.037      14.38
AFSI...................................     2.13     0.06    563,733      60.48      0.061      10.07   CNW.......................     0.22     0.00  1,314,088      42.22      0.025       6.04
ALK....................................     3.21     0.07  1,387,460      71.24      0.047       6.49   AER.......................     0.28     0.00  2,093,683      43.92      0.022       4.96
AVGO...................................     2.24     0.06  3,166,689     125.32      0.077       6.18   DLPH......................     0.20     0.00  2,148,818      80.26      0.033       4.11
BDX....................................     3.08     0.08  1,115,839     143.84      0.065       4.51   SIAL......................     0.10     0.00  1,009,690     138.89      0.015       1.10
CAMP...................................     3.90     0.07    511,751      18.28      0.028      15.24   MIK.......................     0.17     0.00    769,285      25.40      0.030      11.79
CELG...................................     3.98     0.08  5,171,549     118.39      0.059       4.96   LYB.......................     0.25     0.00  3,973,998      91.43      0.037       4.11
CI.....................................     3.06     0.08  2,008,125     134.28      0.073       5.40   MJN.......................     0.21     0.00  1,810,637      89.46      0.038       4.21
CLX....................................     3.17     0.08    891,999     113.19      0.048       4.24   DTE.......................     0.27     0.01  1,090,860      80.57      0.030       3.67
COST...................................     2.32     0.05  2,150,134     147.70      0.051       3.44   ITW.......................     0.16     0.00  1,750,442      92.38      0.025       2.76
CRZO...................................     2.40     0.06  1,330,366      42.86      0.055      13.12   JAH.......................     0.35     0.01  2,179,212      51.58      0.021       4.17
DXCM...................................     2.90     0.08    843,867      75.80      0.094      12.13   KMT.......................     0.29     0.00    940,811      31.32      0.026       8.52
ENLK...................................     2.54     0.06    771,866      21.79      0.047      22.55   MYGN......................     0.15     0.00    830,603      36.81      0.052      13.95
FSC....................................     2.17     0.06  1,166,959       6.75      0.010      15.32   EXG.......................     0.22     0.00    798,806       9.47      0.010      10.76
FSLR...................................     4.17     0.06  2,388,265      52.34      0.034       6.49   CAM.......................     0.17     0.00  3,147,765      54.73      0.021       3.96
IBKR...................................     4.22     0.09    565,525      37.70      0.037       9.90   WERN......................     0.31     0.01    706,866      28.13      0.023       8.33
ICLR...................................     2.14     0.08    504,514      69.04      0.108      15.63   SLH.......................     0.23     0.00  1,070,428      50.40      0.034       7.00
ISIS...................................     3.14     0.06  2,342,444      59.10      0.065      11.39   DO........................     0.29     0.00  2,342,540      26.18      0.023       8.44
JACK...................................     2.34     0.07    633,677      85.40      0.092      10.94   REG.......................     0.10     0.00    580,153      64.77      0.039       6.05
LAZ....................................     3.93     0.10    859,575      50.54      0.053      10.52   HDB.......................     0.29     0.01    914,212      59.33      0.034       5.74
MANH...................................     3.77     0.10    539,552      59.23      0.077      12.82   MR........................     0.21     0.00    623,598      27.00      0.025       9.47
MHK....................................     3.17     0.09    689,602     187.12      0.182       9.68   SLG.......................     0.12     0.00    702,818     118.81      0.088       7.49
MNST...................................     2.37     0.07  1,228,688     136.21      0.105       7.65   EQT.......................     0.18     0.00  1,556,329      75.25      0.055       7.45
NXPI...................................     2.55     0.06  3,865,611      91.55      0.052       5.71   CCI.......................     0.30     0.01  2,336,521      83.67      0.025       2.97
NYMT...................................     3.82     0.07  1,196,276       7.05      0.010      14.71   PMCS......................     0.13     0.00  3,442,623       9.05      0.010      12.01
OLED...................................     6.59     0.14    658,991      42.93      0.063      14.81   FET.......................     0.17     0.00  1,113,426      17.10      0.022      13.33
PSEC...................................     3.80     0.07  2,747,484       7.81      0.010      12.96   SLM.......................     0.06     0.00  3,593,895       8.77      0.010      12.01
Q......................................     3.25     0.08    746,869      68.71      0.048       6.98   OIS.......................     0.07     0.00  1,109,903      35.88      0.037      10.89
RMTI...................................     4.62     0.07    726,795      11.47      0.031      27.33   COUP......................     0.05     0.00    689,630      11.56      0.024      20.81
SINA...................................     3.74     0.06  1,351,205      42.49      0.041       9.53   YPF.......................     0.28     0.00  1,301,107      23.91      0.024      10.05
SKYW...................................     4.56     0.08    540,128      16.11      0.027      17.05   BEL.......................     0.05     0.00    520,858      11.45      0.015      13.50
SMCI...................................     4.34     0.10    623,673      30.57      0.044      14.48   SERV......................     0.09     0.00  1,084,056      34.47      0.027       7.96
SNCR...................................     3.23     0.08    531,811      42.90      0.066      15.60   LTRPA.....................     0.04     0.00    570,674      29.05      0.034      11.75
SPLK...................................     3.13     0.07  1,908,069      62.58      0.053       8.53   FTI.......................     0.08     0.00  3,385,051      36.74      0.016       4.52
SWKS...................................     7.33     0.13  4,040,788      89.48      0.047       5.24   NOV.......................     0.26     0.00  5,929,343      45.85      0.015       3.23
TASR...................................     4.96     0.06  2,066,379      25.79      0.022       8.55   LPI.......................     0.34     0.00  3,845,352      11.60      0.013      11.79
TGTX...................................     7.27     0.12    597,807      14.62      0.042      29.22   MEG.......................     0.26     0.00  1,314,175      15.20      0.017      11.22
TSCO...................................     4.01     0.10    942,912      87.47      0.063       7.18   FLS.......................     0.33     0.00  1,488,778      50.86      0.025       4.96
TUP....................................     3.09     0.07    583,728      61.66      0.054       8.90   KRC.......................     0.16     0.00    567,612      69.92      0.051       7.33
UA.....................................     5.23     0.09  2,652,795      85.27      0.038       4.39   NBL.......................     0.21     0.00  4,862,641      40.75      0.017       4.21
UBNT...................................     3.42     0.06    664,805      31.72      0.048      14.89   ERJ.......................     0.13     0.00    979,065      30.32      0.017       5.58
VDSI...................................     5.87     0.08  1,258,250      22.45      0.037      17.11   LQ........................     0.09     0.00  1,511,426      20.36      0.014       6.87
YRCW...................................     3.30     0.06    640,874      16.21      0.028      17.65   STAY......................     0.31     0.01    520,061      18.89      0.028      14.43
ZLTQ...................................     2.71     0.06    598,245      31.73      0.055      17.10   CTLT......................     0.18     0.00    718,026      28.92      0.040      14.02
                                        ---------------------------------------------------------------                            -------------------------------------------------------------
    Avg................................     3.64     0.08  1,391,454      62.38      0.054      11.59   Avg.......................     0.19     0.00  1,698,440      44.98      0.028       8.22
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 21881]]

II. Less Active Stocks (CADV Between 50,000 and 500,000) and Post-
Period = 2015

    For this sample, there were 71 matched pairs that emerged from the 
process. The pairs, along with values of the matching variables (pre-
period), are shown as follows:

                                              Table 2A--Retail Program Matched Sample >50,000 and <500,000
                                                                     [Sep-Nov 2014]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Treatment stocks                                                              Control stocks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Avg sprd   Avg sprd                                                    Avg sprd   Avg sprd
             Symbol                     ADV       Avg price     ($)        (bps)           Symbol              ADV       Avg price     ($)       (bps)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AB..............................         257,695     $26.20     $0.052      19.81   TBI................         218,856     $25.33     $0.047      18.60
ACET............................         201,593      20.49      0.053      26.13   DFRG...............         213,718      21.87      0.052      23.95
ADC.............................          65,799      29.22      0.072      24.58   ORA................          66,867      27.55      0.069      25.05
AFOP............................         354,650      13.00      0.027      20.64   LQDT...............         343,166      12.97      0.025      18.91
ALDW............................         190,282      18.43      0.050      27.26   NEWP...............         171,264      17.79      0.044      24.54
APU.............................         310,097      45.68      0.046      10.16   WST................         306,905      46.65      0.050      10.72
ARII............................         258,499      70.06      0.171      24.73   AXE................         240,764      85.14      0.162      19.11
AVAV............................         259,080      29.89      0.052      17.50   MBFI...............         282,952      29.29      0.047      16.12
BEAT............................         222,665       7.49      0.025      34.28   SPWH...............         227,710       6.86      0.025      35.76
BIP.............................         218,853      39.85      0.051      12.70   ALE................         229,126      48.74      0.049      10.09
BOI.............................         103,890      16.93      0.030      17.74   MMD................         101,908      17.98      0.034      18.95
BSTC............................          51,863      36.16      0.264      73.16   OPB................          51,453      29.37      0.201      67.86
BTO.............................          57,833      22.56      0.038      17.08   EMF................          59,607      17.77      0.041      23.11
CLFD............................          75,466      13.16      0.069      52.54   ZPIN...............          91,340      13.90      0.089      64.59
CLMS............................         110,782      12.66      0.037      28.97   MHG................         111,804      13.89      0.033      23.75
CLMT............................         313,715      27.57      0.063      23.09   MRKT...............         401,812      23.98      0.059      24.76
CMP.............................         259,246      86.79      0.108      12.46   SPB................         235,834      88.42      0.106      12.00
CODI............................         217,722      17.82      0.036      20.41   HZO................         176,311      17.93      0.036      20.33
CSCD............................         110,524      10.99      0.056      51.94   UNTD...............         127,615      11.83      0.046      38.70
CTT.............................         223,611      11.18      0.022      19.48   FLY................         205,417      12.99      0.022      17.28
CUI.............................          78,138       7.18      0.045      63.45   CRCM...............          98,265       8.40      0.047      56.22
CVTI............................         219,409      18.92      0.076      41.35   KANG...............         277,438      18.93      0.074      39.12
DBL.............................          78,900      23.75      0.044      18.48   KIO................          74,822      17.56      0.043      24.31
EDF.............................          65,045      18.69      0.053      28.45   BCA................          71,870      19.26      0.055      28.43
EPAM............................         395,347      43.65      0.063      14.35   HIBB...............         415,031      44.48      0.062      13.90
ETB.............................          60,457      15.78      0.023      14.75   ZF.................          53,909      15.10      0.022      14.95
EZCH............................         158,140      22.41      0.058      25.94   CMRE...............         173,076      21.06      0.057      23.49
FDUS............................          68,041      17.12      0.061      35.44   OKSB...............          58,803      16.97      0.066      38.50
FGP.............................         160,267      27.28      0.060      22.18   IBOC...............         172,092      26.03      0.060      23.28
FNHC............................         271,398      27.32      0.079      28.80   WMS................         260,316      21.05      0.066      31.32
GLAD............................         128,184       9.02      0.026      28.43   IRR................         101,145       9.95      0.026      25.71
GLRE............................         136,838      32.52      0.059      18.18   STC................         120,951      32.12      0.061      19.03
GNCMA...........................         193,608      11.39      0.026      22.57   PGI................         204,861      11.66      0.025      21.87
GOOD............................         112,763      17.57      0.031      17.67   CPF................         114,830      18.46      0.031      16.70
GSIG............................          72,335      12.22      0.049      40.42   XOXO...............          67,052      12.46      0.049      40.03
GSL.............................          66,072       3.78      0.031      85.13   CO.................          68,003       4.99      0.030      59.74
GSVC............................         139,253      10.14      0.034      33.84   ICD................         135,638       9.33      0.038      43.28
HII.............................         283,916     103.19      0.102       9.93   TFX................         243,588     110.37      0.132      12.05
HIIQ............................          96,520      10.25      0.090      88.44   EDN................          94,386      11.67      0.104      89.69
HQH.............................         162,147      29.19      0.042      14.44   COLB...............         204,528      26.38      0.045      17.12
HQL.............................         103,968      22.85      0.040      17.48   CTY................          93,639      23.60      0.036      15.29
IGOV............................          69,992      99.56      0.179      17.99   KOF................          62,191     102.39      0.183      17.93
IXYS............................         141,164      11.00      0.036      32.65   BPI................         133,490      11.62      0.027      23.09
LDP.............................          70,450      24.46      0.048      19.73   DFP................          64,754      22.87      0.048      20.82
MAIN............................         202,931      31.39      0.039      12.33   MLI................         201,430      30.24      0.039      13.07
NDP.............................          93,945      24.11      0.067      28.08   ABCB...............         105,401      23.68      0.070      29.89
NNBR............................         157,009      24.33      0.074      30.40   CVT................         193,466      25.67      0.069      26.96
NTWK............................          78,357       3.40      0.028      84.86   FCSC...............          68,500       2.82      0.035     122.37
ORBK............................         134,253      15.36      0.034      22.01   AHP................         142,241      16.22      0.034      20.99
OXLC............................          80,719      15.90      0.045      28.60   CTS................          82,703      17.22      0.044      25.67
PATK............................          65,356      42.36      0.198      46.71   VRTV...............          64,527      46.69      0.243      52.21
PEO.............................         103,616      27.93      0.050      18.13   LADR...............          97,465      18.89      0.057      30.07
PGP.............................         131,368      23.08      0.086      37.58   EXLS...............         133,974      26.59      0.078      29.49
PICO............................          71,762      20.61      0.069      33.51   VVI................          79,994      22.39      0.065      28.97
PLOW............................         205,124      20.54      0.035      17.05   CSU................         217,750      22.23      0.035      15.69
RDI.............................          69,021       9.43      0.045      48.22   CNCO...............          75,311       8.59      0.050      59.16
RM..............................         193,431      16.19      0.048      29.46   DL.................         202,788      14.91      0.053      36.12
RNST............................          67,326      28.53      0.100      35.11   FBRC...............          65,432      26.48      0.125      47.49
SIGI............................         144,844      24.23      0.046      19.12   CCU................         144,842      21.38      0.044      20.58
SOCL............................         122,280      19.37      0.029      15.22   PCN................         121,440      16.22      0.027      16.49
SPH.............................         166,532      44.68      0.092      20.53   CCMP...............         152,708      44.34      0.100      22.72

[[Page 21882]]

 
STON............................         153,931      25.88      0.054      21.03   FTGC...............         169,252      29.57      0.057      19.47
TCP.............................         344,465      64.50      0.174      26.97   REX................         278,567      76.26      0.216      29.37
TSYS............................         221,965       2.90      0.015      50.11   NWY................         195,275       3.00      0.014      47.97
TYG.............................         139,676      46.69      0.068      14.62   RLI................         127,939      46.15      0.073      15.77
TZOO............................          69,120      14.37      0.053      36.99   TRNO...............          82,554      20.20      0.053      26.35
USAC............................         112,111      23.46      0.086      36.95   FCB................         112,509      22.70      0.068      30.05
VCIT............................         350,756      86.24      0.050       5.74   IT.................         378,372      77.79      0.057       7.36
VICR............................         102,170      10.56      0.047      46.34   MODN...............         101,103       9.77      0.040      41.39
VNQI............................         180,925      55.63      0.065      11.80   TTC................         172,945      60.46      0.069      11.38
WLDN............................         180,819      13.99      0.061      43.65   CTRE...............         156,847      15.28      0.076      49.33
                                 --------------------------------------------------                     ------------------------------------------------
    Avg.........................         156,902      26.92      0.062      29.52   Avg................         157,105      27.22      0.064      29.67
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                Table 2B--Retail Program Matched Sample CADV >50,000 and <500,000
                                                                                             [2015]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Treatment stocks                                                                                  Control stocks
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                              RMO %    RMO %                          Avg sprd   Avg sprd                            RMO %    RMO %                          Avg sprd   Avg sprd
                   Symbol                       BX      Ind       ADV     Avg price     ($)        (bps)            Symbol             BX      Ind       ADV     Avg price     ($)       (bps)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AB.........................................     4.85     0.10    283,950     $27.72      0.057      20.57   TBI...................     0.99    0.018    327,753     $25.81      0.043      16.70
ACET.......................................     3.36     0.10    194,984      24.10      0.070      29.08   DFRG..................     0.89    0.020    297,903      17.26      0.040      23.26
ADC........................................     4.02     0.12    111,520      31.60      0.069      21.85   ORA...................     0.36    0.010    155,890      35.60      0.069      19.55
AFOP.......................................     4.21     0.12    187,767      17.48      0.047      26.62   LQDT..................     0.66    0.018    295,434       8.67      0.023      26.90
ALDW.......................................     6.34     0.14    211,968      21.16      0.083      39.15   NEWP..................     0.70    0.020    166,386      17.51      0.043      24.82
APU........................................     9.81     0.22    241,899      45.41      0.088      19.29   WST...................     0.47    0.011    326,681      56.83      0.078      13.72
ARII.......................................     3.00     0.11    237,155      48.93      0.159      32.51   AXE...................     0.34    0.012    209,412      68.79      0.144      21.14
AVAV.......................................     4.46     0.13    168,446      25.36      0.058      22.75   MBFI..................     0.47    0.010    325,804      32.33      0.042      13.17
BEAT.......................................     7.55     0.17    296,257      11.21      0.033      29.78   SPWH..................     0.44    0.008    267,713      10.37      0.028      27.50
BIP........................................     5.15     0.14    267,495      42.32      0.052      12.31   ALE...................     0.78    0.017    270,205      50.93      0.061      12.01
BOI........................................    11.17     0.11     67,209      15.57      0.035      22.31   MMD...................     1.60    0.010     75,235      18.12      0.033      18.56
BSTC.......................................     3.99     0.16     62,235      46.54      0.384      84.03   OPB...................     0.42    0.010    105,939      33.95      0.148      45.12
BTO........................................    11.38     0.13     63,715      25.43      0.067      25.78   EMF...................     1.71    0.009     64,025      13.71      0.039      29.43
CLFD.......................................     4.73     0.12     62,636      14.74      0.073      49.97   ZPIN..................     0.00    0.000    115,886      14.97      0.092      60.98
CLMS.......................................     4.28     0.12     88,411      11.46      0.037      32.81   MHG...................     0.23    0.007     92,686      12.50      0.030      23.96
CLMT.......................................    11.61     0.27    382,050      25.64      0.068      26.69   MRKT..................     0.48    0.009    489,213      27.57      0.034      12.38
CMP........................................     3.54     0.13    261,808      85.71      0.117      13.76   SPB...................     0.59    0.018    305,016      95.53      0.125      13.39
CODI.......................................     6.63     0.11    136,610      16.50      0.036      21.86   HZO...................     0.55    0.014    292,698      20.59      0.046      23.22
CSCD.......................................     4.29     0.10     55,917      14.67      0.072      49.56   UNTD..................     0.68    0.020    139,792      13.95      0.051      37.41
CTT........................................     9.67     0.19    146,655      11.28      0.026      23.10   FLY...................     0.83    0.015    272,441      14.23      0.026      18.44
CUI........................................    11.61     0.14     89,869       5.88      0.033      55.75   CRCM..................     0.89    0.013    110,412       6.56      0.033      50.20
CVTI.......................................     3.22     0.11    228,099      25.99      0.086      33.45   KANG..................     0.75    0.020    487,020      17.09      0.077      23.08
DBL........................................    14.29     0.16     80,224      24.61      0.054      22.03   KIO...................     0.09    0.001     50,652      15.54      0.045      24.89
EDF........................................     8.88     0.13     75,205      14.49      0.046      31.99   BCA...................     0.19    0.003     69,946      15.52      0.053      35.07
EPAM.......................................     4.16     0.12    406,072      68.22      0.118      17.42   HIBB..................     0.60    0.015    436,936      42.95      0.064      14.94
ETB........................................    17.61     0.16     67,536      15.99      0.036      22.28   ZF....................     3.71    0.013     51,579      14.40      0.022      15.40
EZCH.......................................     4.09     0.11    211,056      20.50      0.045      22.80   CMRE..................     0.44    0.014    155,171      16.42      0.053      32.86
FDUS.......................................    22.17     0.58     55,373      15.15      0.081      53.87   OKSB..................     0.66    0.018     50,424      17.27      0.083      48.02
FGP........................................     6.51     0.11    308,815      21.93      0.056      25.44   IBOC..................     0.68    0.018    198,814      26.18      0.066      25.39
FNHC.......................................     3.85     0.13    112,184      27.04      0.106      39.41   WMS...................     0.48    0.010    367,087      28.23      0.056      19.77
GLAD.......................................    14.23     0.13    123,421       8.40      0.026      30.82   IRR...................     1.22    0.004     84,619       7.47      0.028      36.62
GLRE.......................................     8.05     0.16    161,813      27.53      0.051      18.79   STC...................     0.49    0.018     99,664      39.07      0.105      27.08
GNCMA......................................     5.95     0.23    209,254      17.12      0.047      27.32   PGI...................     0.72    0.016    367,369      11.00      0.025      21.53
GOOD.......................................     7.01     0.13    111,685      16.47      0.036      22.37   CPF...................     0.88    0.018    279,459      22.42      0.036      15.91
GSIG.......................................     7.36     0.19     66,110      13.76      0.063      45.96   XOXO..................     0.64    0.018     96,502      16.14      0.052      32.59
GSL........................................    13.49     0.12     77,050       4.97      0.039      78.15   CO....................     1.17    0.012    214,376       5.90      0.025      44.07
GSVC.......................................     5.92     0.13    106,508       9.66      0.037      38.66   ICD...................     0.79    0.015     59,744       6.65      0.069     105.07
HII........................................     3.59     0.12    320,027     122.86      0.181      14.90   TFX...................     0.29    0.008    274,659     126.57      0.161      12.63
HIIQ.......................................     9.88     0.13     54,023       5.90      0.062     107.65   EDN...................     0.01    0.000     71,865      14.27      0.138      97.30
HQH........................................     5.60     0.11    131,438      33.75      0.071      21.24   COLB..................     0.72    0.017    252,185      30.71      0.053      17.17
HQL........................................     7.91     0.11     72,120      26.93      0.063      23.67   CTY...................     0.07    0.000    104,496      24.76      0.036      14.70
IGOV.......................................     9.75     0.15     64,028      91.31      0.228      24.92   KOF...................     0.27    0.011     77,285      78.17      0.152      19.49
IXYS.......................................     4.77     0.12    158,931      12.29      0.037      30.67   BPI...................     1.00    0.014    104,923       9.01      0.033      37.18
LDP........................................    12.69     0.18     90,233      23.32      0.041      17.84   DFP...................     0.53    0.005     58,638      22.84      0.057      24.84
MAIN.......................................    11.52     0.18    250,344      30.21      0.039      13.05   MLI...................     0.76    0.020    169,670      32.97      0.060      18.41
NDP........................................    16.50     0.20     80,808      17.27      0.073      42.22   ABCB..................     0.72    0.019    174,169      27.51      0.062      23.20
NNBR.......................................     4.31     0.11    278,757      22.38      0.066      29.71   CVT...................     0.55    0.015    201,431      29.61      0.074      24.99
NTWK.......................................    31.44     0.18     59,023       5.45      0.054     100.56   FCSC..................     0.55    0.009    225,454       4.86      0.032      69.06
ORBK.......................................     4.99     0.12    200,734      17.83      0.036      20.44   AHP...................     0.55    0.011    187,416      15.38      0.033      21.60
OXLC.......................................     7.91     0.14     94,543      13.68      0.062      46.48   CTS...................     0.69    0.017     91,415      18.20      0.055      29.86
PATK.......................................     3.49     0.11    103,595      46.14      0.195      42.49   VRTV..................     0.03    0.001     74,483      41.62      0.212      50.66
PEO........................................     8.37     0.12     83,844      21.78      0.060      27.53   LADR..................     0.40    0.008    148,102      16.48      0.040      24.34
PGP........................................     7.64     0.11     59,681      19.06      0.103      54.99   EXLS..................     0.36    0.012    166,403      37.01      0.100      27.04

[[Page 21883]]

 
PICO.......................................     8.54     0.24    106,325      14.10      0.052      37.85   VVI...................     0.58    0.019     88,074      28.13      0.073      26.07
PLOW.......................................     3.71     0.11    129,709      21.61      0.056      25.71   CSU...................     0.42    0.011    211,558      23.61      0.047      20.09
RDI........................................     8.49     0.24     56,701      13.43      0.062      45.66   CNCO..................     0.46    0.003     83,811       6.80      0.041      61.30
RM.........................................     4.55     0.12     91,913      16.20      0.067      39.49   DL....................     0.28    0.009    126,155      15.56      0.073      47.88
RNST.......................................     5.29     0.13    148,755      31.50      0.067      21.21   FBRC..................     0.33    0.009     50,866      22.22      0.130      59.07
SIGI.......................................     4.57     0.12    212,634      30.13      0.053      17.68   CCU...................     0.34    0.007    138,285      21.45      0.048      22.78
SOCL.......................................    10.32     0.24     88,315      19.22      0.051      26.48   PCN...................     3.92    0.018    108,881      14.36      0.022      15.23
SPH........................................     6.54     0.15    208,257      38.56      0.099      25.93   CCMP..................     0.52    0.018    145,234      45.64      0.111      24.49
STON.......................................     4.23     0.13    160,946      28.62      0.092      32.56   FTGC..................     0.23    0.003    134,541      23.49      0.053      22.65
TCP........................................     4.12     0.14    171,426      58.19      0.292      52.28   REX...................     0.40    0.014    162,351      57.40      0.192      33.82
TSYS.......................................     3.48     0.11    375,242       3.64      0.014      40.50   NWY...................     1.34    0.009     94,970       2.45      0.017      71.30
TYG........................................     8.09     0.17    279,394      36.74      0.075      21.32   RLI...................     0.55    0.020    139,447      53.38      0.113      21.01
TZOO.......................................     5.83     0.15    124,874      10.07      0.042      42.08   TRNO..................     0.37    0.010    178,560      21.55      0.048      22.62
USAC.......................................     9.30     0.20    130,583      18.40      0.106      57.48   FCB...................     0.77    0.019    217,494      30.48      0.061      20.50
VCIT.......................................     4.89     0.12    451,992      85.91      0.053       6.15   IT....................     0.61    0.016    406,922      85.95      0.081       9.42
VICR.......................................     7.09     0.18     56,688      11.89      0.070      62.03   MODN..................     1.11    0.019     91,268      11.19      0.041      36.74
VNQI.......................................    13.04     0.33    374,913      54.84      0.055      10.17   TTC...................     0.63    0.019    265,760      69.75      0.082      11.78
WLDN.......................................     9.82     0.23     77,911      12.01      0.064      54.70   CTRE..................     0.12    0.003    227,593      12.27      0.042      34.08
                                            ---------------------------------------------------------------                        -------------------------------------------------------------
    Avg....................................     7.81     0.15    160,108      26.98      0.075      34.20   Avg...................     0.68     0.01    183,525      27.80      0.066      29.96
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

III. Active Stocks (CADV > 500,000) and Post-Period = 2017-2018

    For this sample, there were 41 matched pairs that emerged from the 
process. The pairs, along with values of the matching variables (pre-
period), are shown as follows:

                                                  Table 3A--Retail Program Matched Sample CADV >500,000
                                                                     [Sep-Nov 2014]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Treatment stocks                                                              Control stocks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Avg sprd   Avg sprd                                                    Avg sprd   Avg sprd
             Symbol                     ADV       Avg price     ($)        (bps)           Symbol              ADV       Avg price     ($)       (bps)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AA..............................      19,848,728     $16.29     $0.010       6.17   ITUB...............      15,391,611     $15.06     $0.010       6.70
AG..............................       1,868,134       7.10      0.010      15.21   CUZ................       1,707,347      12.49      0.010       8.27
AINV............................       1,804,765       8.30      0.010      12.24   BVN................       1,783,634      11.21      0.011      10.10
AMBA............................       2,103,392      42.35      0.062      14.79   PLD................       2,692,357      39.81      0.011       2.90
APO.............................       1,356,506      23.15      0.021       9.23   BRX................       1,278,575      23.37      0.017       7.12
AXAS............................       2,961,152       4.58      0.010      22.80   CIG................       5,661,208       6.35      0.010      16.10
BCRX............................       1,244,583      11.27      0.021      18.89   CLI................         899,677      19.58      0.016       8.08
BUD.............................       1,367,716     110.28      0.030       2.76   TOT................       1,409,344      60.36      0.023       3.83
BX..............................       4,891,093      31.38      0.014       4.46   COG................       6,157,960      32.25      0.012       3.76
CLNE............................       1,664,000       7.39      0.012      16.09   DRH................       1,577,838      13.54      0.010       7.59
CMCM............................         892,660      20.49      0.057      27.49   MDU................       1,080,599      27.56      0.019       6.71
CSIQ............................       3,978,563      32.55      0.034      10.54   CNQ................       4,352,711      37.08      0.012       3.35
DO..............................       2,028,802      37.29      0.026       6.93   HCP................       2,538,605      42.25      0.012       2.73
DSX.............................         726,289       8.85      0.012      14.11   FNB................         879,836      12.44      0.010       8.36
F...............................      34,678,316      15.13      0.010       6.65   FOXA...............      13,032,567      34.41      0.010       2.95
FEYE............................       8,234,032      31.44      0.022       7.22   HST................       6,716,845      22.14      0.010       4.62
FNSR............................       2,320,485      16.88      0.012       7.33   TPH................       2,159,710      13.94      0.012       8.68
GME.............................       2,808,482      41.86      0.018       4.25   SNY................       2,182,012      51.81      0.018       3.45
GNW.............................       9,907,097      12.24      0.010       8.49   SAN................      10,583,634       9.09      0.010      11.05
GRPN............................      16,296,242       6.85      0.010      14.75   SLM................       4,532,083       9.17      0.010      11.09
HAIN............................         566,626     103.28      0.083       8.09   SLG................         788,370     109.07      0.057       5.28
HALO............................       1,250,394       9.12      0.011      12.49   HTA................       1,419,408      12.29      0.010       8.48
IRBT............................         712,902      33.02      0.045      13.54   LHO................         859,601      36.72      0.018       5.05
JWN.............................       1,472,964      70.84      0.025       3.49   ETR................       1,607,873      79.55      0.025       3.10
LSCC............................       1,168,221       6.88      0.011      15.53   RPAI...............       1,047,067      15.36      0.011       6.95
LYG.............................       3,517,062       4.88      0.010      20.51   GGB................       7,013,600       4.81      0.010      21.01
MMP.............................         839,403      82.37      0.094      11.51   AVB................         926,288     150.78      0.072       4.79
NOK.............................      18,264,234       8.24      0.010      12.15   BBD................      11,667,774      15.32      0.010       6.59
O...............................       2,027,017      44.15      0.014       3.16   NI.................       2,220,002      40.72      0.013       3.30
OHI.............................       1,490,422      36.76      0.013       3.43   AIV................       1,214,436      34.32      0.013       3.71
RCII............................         819,241      30.46      0.024       7.91   RLJ................         735,277      30.37      0.016       5.38
SINA............................       1,550,979      41.43      0.036       8.79   IBN................       1,251,526      54.07      0.024       4.51
SNE.............................       3,075,849      18.86      0.010       5.40   DRE................       2,595,753      18.25      0.010       5.62
SPWR............................       2,347,451      32.45      0.025       7.78   FTI................       2,360,200      54.47      0.024       4.39
STX.............................       2,989,069      59.38      0.022       3.76   NBL................       2,781,689      61.96      0.025       4.08

[[Page 21884]]

 
SYNA............................       1,066,414      71.57      0.092      12.64   CPT................         642,738      72.84      0.031       4.31
TERP............................         626,425      28.72      0.080      27.81   HR.................         601,104      25.09      0.015       6.18
UA..............................       2,678,432      67.54      0.032       4.80   EQR................       2,303,635      66.21      0.018       2.77
ULTA............................       1,061,441     116.53      0.092       7.86   BXP................         890,862     121.67      0.066       5.45
WPC.............................         525,756      66.30      0.034       5.07   KRC................         535,203      63.70      0.037       5.78
X...............................       8,326,606      37.65      0.015       4.14   EXC................       6,409,198      34.91      0.011       3.02
                                 --------------------------------------------------                     ------------------------------------------------
    Avg.........................       4,325,804      35.51      0.029      10.49   Avg................       3,329,018      38.94      0.019       6.27
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                      Table 3B--Retail Program Matched Sample CADV >500,000
                                                                                          [2017--2018]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Treatment stocks                                                                                  Control stocks
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Avg                                                                                        Avg      Avg
                   Symbol                     RMO  %   RMO  %      ADV        Avg      sprd   Avg sprd              Symbol               RMO  %   RMO  %      ADV        Avg      sprd     sprd
                                                BX      Ind                  price     ($)      (bps)                                      BX      Ind                  price     ($)     (bps)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AA.........................................     1.30     0.04    4,075,295   $41.33   $0.022     5.27   ITUB..........................     0.04    0.001   12,139,536   $12.55   $0.010     8.11
AG.........................................     1.71     0.04    3,361,556     7.04    0.010    14.70   CUZ...........................     0.02    0.001    3,842,736     8.86    0.010    11.51
AINV.......................................     1.93     0.06      865,116     6.18    0.011    17.22   BVN...........................     0.02    0.001    1,343,091    13.68    0.012     8.61
AMBA.......................................     3.68     0.10    1,006,023    48.50    0.062    12.93   PLD...........................     0.09    0.004    2,672,000    61.33    0.018     2.88
APO........................................     1.38     0.04    1,098,761    29.62    0.030     9.93   BRX...........................     0.07    0.003    3,076,634    18.10    0.011     5.96
AXAS.......................................     1.33     0.04    1,492,938     2.15    0.010    48.85   CIG...........................     0.11    0.003    4,402,939     2.48    0.010    41.72
BCRX.......................................     1.86     0.06    1,176,068     6.02    0.013    21.42   CLI...........................     0.07    0.003      593,039    22.59    0.019     8.24
BUD........................................     1.22     0.04    1,764,121   105.16    0.032     3.12   TOT...........................     0.09    0.002    1,764,192    55.96    0.012     2.08
BX.........................................     2.61     0.05    4,550,664    32.76    0.013     3.94   COG...........................     0.10    0.003    6,100,394    24.46    0.011     4.34
CLNE.......................................     1.31     0.04    1,346,149     2.36    0.010    45.01   DRH...........................     0.01    0.000    2,300,351    11.21    0.010     9.17
CMCM.......................................     1.85     0.05    1,059,402    10.70    0.023    21.69   MDU...........................     0.06    0.003      842,527    27.03    0.014     5.05
CSIQ.......................................     4.27     0.13    1,025,349    14.98    0.021    13.76   CNQ...........................     0.11    0.003    2,808,082    32.12    0.010     3.28
DO.........................................     1.05     0.04    2,326,499    15.80    0.013     8.14   HCP...........................     0.08    0.003    3,666,607    27.46    0.011     3.94
DSX........................................     2.44     0.06      589,433     4.02    0.012    29.70   FNB...........................     0.09    0.004    2,706,799    13.63    0.010     7.60
F..........................................     1.77     0.05   40,375,950    11.11    0.010     9.11   FOXA..........................     0.13    0.003   10,396,614    35.77    0.010     3.02
FEYE.......................................     1.96     0.05    4,768,737    15.54    0.010     6.81   HST...........................     0.03    0.001    6,942,056    19.29    0.010     5.28
FNSR.......................................     2.49     0.06    3,459,073    21.85    0.015     6.74   TPH...........................     0.08    0.003    1,937,468    14.46    0.011     7.61
GME........................................     1.35     0.04    3,433,058    18.21    0.011     6.34   SNY...........................     0.05    0.001    1,609,403    44.08    0.011     2.51
GNW........................................     1.76     0.04    4,516,565     3.75    0.010    27.39   SAN...........................     0.10    0.002    6,841,859     6.04    0.010    16.83
GRPN.......................................     1.16     0.04    8,719,062     4.22    0.010    24.46   SLM...........................     0.08    0.003    3,172,237    11.18    0.010     9.37
HAIN.......................................     1.33     0.04    1,583,844    33.81    0.023     6.98   SLG...........................     0.05    0.002      803,572   100.37    0.074     7.37
HALO.......................................     1.60     0.05    1,125,888    16.21    0.021    12.87   HTA...........................     0.06    0.003    1,542,950    28.57    0.013     4.41
IRBT.......................................     2.76     0.07      906,753    79.44    0.114    14.03   LHO...........................     0.07    0.003    1,633,753    30.43    0.015     5.08
JWN........................................     1.13     0.04    2,630,160    49.12    0.029     5.96   ETR...........................     0.08    0.003    1,375,231    79.52    0.032     3.97
LSCC.......................................     1.27     0.04      983,954     6.48    0.011    16.82   RPAI..........................     0.05    0.002    1,794,420    12.83    0.010     8.10
LYG........................................     1.86     0.06    6,256,365     3.44    0.010    29.36   GGB...........................     0.09    0.002    9,702,367     3.88    0.010    26.36
MMP........................................     1.37     0.05      830,180    69.21    0.060     8.74   AVB...........................     0.08    0.003      680,029   178.52    0.138     7.73
NOK........................................     3.01     0.08   14,759,305     5.62    0.010    17.95   BBD...........................     0.03    0.001   11,438,559     9.63    0.010    10.66
O..........................................     1.09     0.04    1,910,582    56.53    0.021     3.69   NI............................     0.08    0.003    3,013,746    25.14    0.011     4.20
OHI........................................     1.17     0.04    2,090,596    30.98    0.012     3.77   AIV...........................     0.04    0.002    1,089,725    43.30    0.021     4.90
RCII.......................................     1.90     0.07    1,785,282    11.67    0.012    10.61   RLJ...........................     0.04    0.002    1,419,592    21.45    0.012     5.44
SINA.......................................     2.01     0.07      980,389    88.41    0.105    11.94   IBN...........................     0.07    0.002    7,497,988     9.05    0.010    11.20
SNE........................................     1.21     0.04      983,669    44.35    0.016     3.55   DRE...........................     0.02    0.001    2,533,025    27.60    0.011     3.89
SPWR.......................................     3.72     0.10    2,639,031     7.70    0.011    13.99   FTI...........................     0.11    0.003    3,833,234    29.62    0.010     3.52
STX........................................     1.33     0.04    4,569,307    45.84    0.017     3.69   NBL...........................     0.10    0.003    5,080,490    30.49    0.011     3.66
SYNA.......................................     1.26     0.04      798,985    45.96    0.064    14.12   CPT...........................     0.07    0.003      589,346    87.99    0.068     7.76
TERP.......................................     0.92     0.04      582,896    11.83    0.015    12.75   HR............................     0.05    0.002      835,377    30.63    0.017     5.58
UA.........................................     2.66     0.06    4,079,322    17.47    0.011     6.29   EQR...........................     0.05    0.002    1,868,111    64.58    0.023     3.62
ULTA.......................................     1.29     0.04    1,064,638   251.09    0.229     9.18   BXP...........................     0.06    0.003      731,983   124.60    0.097     7.86
WPC........................................     1.41     0.05      521,446    65.49    0.049     7.57   KRC...........................     0.04    0.002      552,027    72.00    0.060     8.31
X..........................................     2.61     0.04   13,020,309    30.64    0.012     4.06   EXC...........................     0.05    0.002    5,496,241    39.40    0.010     2.66
                                            -----------------------------------------------------------                                ---------------------------------------------------------
    Avg....................................     1.84     0.05    3,783,237    33.48    0.029    13.52   Avg...........................     0.07     0.00    3,479,764    36.88    0.022     7.64
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

IV. Less Active Stocks (CADV Between 50,000 and 500,000) and Post-
Period = 2017-2018

    For this sample, there were 49 matched pairs that emerged from the 
process. The pairs, along with values of the matching variables (pre-
period), are shown as follows:

[[Page 21885]]



                                            Table 4A--Retail Program Matched Sample >50,000 and <500,000 CADV
                                                                     [Sep-Nov 2014]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Treatment stocks                                                              Control stocks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Avg sprd   Avg sprd                                                    Avg sprd   Avg sprd
             Symbol                     ADV       Avg price     ($)        (bps)           Symbol              ADV       Avg price     ($)       (bps)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AI..............................         380,780     $26.88     $0.020       7.45   DSL................         361,600     $21.43     $0.022      10.36
ANIK............................         240,282      39.38      0.089      22.92   WABC...............         223,670      48.09      0.083      17.22
APU.............................         310,097      45.68      0.046      10.16   WST................         306,905      46.65      0.050      10.72
AUDC............................         153,063       4.91      0.022      45.54   RVT................         191,392      14.93      0.020      13.56
BLX.............................         130,799      32.10      0.060      18.85   STC................         120,951      32.12      0.061      19.03
COHU............................         104,702      11.53      0.044      38.27   CSGS...............         157,547      26.18      0.047      18.17
DBL.............................          78,900      23.75      0.044      18.48   TRNO...............          82,554      20.20      0.053      26.35
DMB.............................          55,155      11.99      0.023      19.20   CHT................          77,541      30.23      0.032      10.48
DSM.............................         126,484       8.06      0.014      16.91   FRA................         131,349      13.84      0.013       9.68
FDUS............................          68,041      17.12      0.061      35.44   LION...............          76,072      14.50      0.082      57.41
FRSH............................         132,657       9.45      0.068      71.68   CBU................         127,820      35.74      0.063      17.62
GAIN............................         110,718       7.34      0.015      20.05   EOS................         144,318      13.72      0.015      11.22
GASS............................         155,935       8.44      0.028      33.44   CENTA..............         144,524       8.25      0.032      39.17
GBDC............................         188,201      16.89      0.029      16.92   NCI................         176,055      14.60      0.028      19.24
GLAD............................         128,184       9.02      0.026      28.43   TI.................         159,450      11.04      0.020      17.79
GMLP............................         163,282      35.15      0.146      41.52   UMBF...............         157,424      56.89      0.146      25.85
GOOD............................         112,763      17.57      0.031      17.67   CPF................         114,830      18.46      0.031      16.70
GSVC............................         139,253      10.14      0.034      33.84   NBHC...............         160,159      19.39      0.035      18.25
HTGC............................         341,319      15.10      0.019      12.93   NFBK...............         271,599      13.78      0.019      13.77
IEP.............................         129,299     105.09      0.255      24.34   LANC...............         127,008      88.16      0.207      23.53
KCAP............................         302,537       7.93      0.016      19.82   ETJ................         306,544      11.54      0.015      13.14
LRAD............................         234,963       2.87      0.020      71.58   MFG................         335,904       3.60      0.010      28.25
MAGS............................         352,530       4.58      0.052     114.83   RTRX...............         445,328      10.54      0.043      40.96
MAIN............................         202,931      31.39      0.039      12.33   MLI................         201,430      30.24      0.039      13.07
MUA.............................          52,623      13.29      0.023      17.06   GHY................         173,681      16.48      0.020      12.16
MUE.............................          65,631      13.24      0.017      13.04   ISF................          67,500      25.39      0.019       7.65
NANO............................         111,903      14.88      0.051      34.61   MG.................         120,243      18.37      0.049      26.63
NDP.............................          93,945      24.11      0.067      28.08   THR................         115,353      24.59      0.057      23.42
NEP.............................         188,649      34.86      0.185      53.54   PLXS...............         171,711      38.76      0.084      21.71
OIA.............................          93,055       6.77      0.013      19.36   AWP................         257,107       6.89      0.011      15.68
PBT.............................         145,410      12.85      0.030      23.84   DAKT...............         171,820      12.89      0.031      24.21
PCK.............................          59,924       9.45      0.024      25.50   ETV................         207,431      14.89      0.019      12.73
PFLT............................          67,807      14.02      0.045      31.98   DGRW...............          66,466      29.59      0.043      14.58
PFMT............................         311,460       8.16      0.025      30.92   FSS................         280,570      14.16      0.024      16.88
PGP.............................         131,368      23.08      0.086      37.58   EXLS...............         133,974      26.59      0.078      29.49
PMF.............................          58,501      14.07      0.025      17.56   SKYY...............          66,651      27.35      0.035      12.85
PMX.............................          73,074      10.85      0.020      18.60   CII................         136,940      14.78      0.016      11.17
SDLP............................         456,457      28.00      0.075      26.78   FUL................         468,387      42.02      0.049      11.58
SHLO............................          50,103      16.93      0.107      63.20   UFCS...............          56,599      29.25      0.125      42.48
SJT.............................          96,558      18.27      0.062      34.17   GRAM...............          92,291      14.22      0.057      40.66
SLRC............................         214,437      18.95      0.025      13.39   PFS................         201,034      17.16      0.023      13.22
SPH.............................         166,532      44.68      0.092      20.53   CNMD...............         162,637      40.04      0.086      21.35
TCPC............................         332,634      16.60      0.028      16.75   NFJ................         271,825      17.73      0.027      15.41
TOUR............................         318,343      17.36      0.073      42.30   SYKE...............         253,700      21.34      0.040      18.74
TSLX............................         138,306      16.95      0.043      25.68   FBC................         136,538      16.29      0.038      23.25
VOC.............................         132,226      11.27      0.041      38.08   CCU................         144,842      21.38      0.044      20.58
WBK.............................         174,452      29.49      0.034      11.61   IFGL...............         147,189      30.54      0.034      11.29
WLDN............................         180,819      13.99      0.061      43.65   FTGC...............         169,252      29.57      0.057      19.47
WSR.............................          98,234      14.57      0.031      21.33   SOCL...............         122,280      19.37      0.029      15.22
                                 --------------------------------------------------                     ------------------------------------------------
    Avg.........................         166,435      19.37      0.051      29.83   Avg................         179,551      23.95      0.046      19.88
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                Table 4B--Retail Program Matched Sample CADV >50,000 and <500,000
                                                                                           [2017-2018]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Treatment stocks                                                                                  Control stocks
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                          RMO  %   RMO  %                         Avg Sprd   Avg Sprd                                RMO  %   RMO  %                         Avg Sprd   Avg Sprd
                 Symbol                     BX      Ind       ADV     Avg Price     ($)        (bps)              Symbol               BX      Ind       ADV     Avg Price     ($)       (bps)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AI.....................................     2.45     0.06    458,637     $11.93     $0.012       9.87   DSL.......................     0.85    0.011    373,997     $20.14     $0.015       7.60
ANIK...................................     2.03     0.06    123,465      46.77      0.191      40.89   WABC......................     0.33    0.010    100,762      57.73      0.231      40.12
APU....................................     3.36     0.08    237,312      42.89      0.077      17.90   WST.......................     0.29    0.010    367,026      96.31      0.129      13.20
AUDC...................................     1.72     0.06    117,591       7.79      0.032      42.65   RVT.......................     0.55    0.008    288,150      15.18      0.017      11.22
BLX....................................     2.13     0.08    130,009      26.09      0.056      21.57   STC.......................     0.16    0.006    157,476      42.53      0.090      21.17
COHU...................................     2.33     0.09    284,253      20.78      0.049      24.11   CSGS......................     0.10    0.004    197,396      40.89      0.083      20.47
DBL....................................     4.52     0.07     74,432      22.32      0.049      21.63   TRNO......................     0.11    0.005    345,017      34.66      0.034      10.00
DMB....................................     9.72     0.07     58,671      12.71      0.021      16.46   CHT.......................     0.15    0.007    148,554      35.08      0.025       7.01
DSM....................................     5.07     0.07    113,155       7.98      0.013      16.39   FRA.......................     0.54    0.010    163,372      14.05      0.013       9.26

[[Page 21886]]

 
FDUS...................................     3.45     0.09     97,448      15.30      0.044      28.40   LION......................     0.26    0.011    109,864      23.17      0.074      32.01
FRSH...................................     3.36     0.08    110,611       5.09      0.044      86.28   CBU.......................     0.23    0.007    243,704      57.33      0.103      18.12
GAIN...................................     3.01     0.08    172,450      10.23      0.019      18.48   EOS.......................     0.66    0.009    131,800      15.50      0.022      14.38
GASS...................................     4.18     0.06     57,778       3.70      0.035      94.13   CENTA.....................     0.16    0.007    234,333      34.78      0.075      21.63
GBDC...................................     3.77     0.10    211,753      18.77      0.023      12.44   NCI.......................     0.22    0.009    296,999      21.09      0.027      13.06
GLAD...................................     2.68     0.07    134,680       9.33      0.020      21.33   TI........................     0.18    0.003    149,165       8.43      0.020      23.55
GMLP...................................     2.77     0.08    357,537      19.24      0.039      20.40   UMBF......................     0.32    0.009    222,813      73.14      0.177      24.31
GOOD...................................     2.19     0.09    152,848      19.98      0.037      18.77   CPF.......................     0.21    0.008    139,636      29.65      0.060      20.33
GSVC...................................     6.04     0.15    137,911       6.04      0.030      51.88   NBHC......................     0.13    0.005    139,900      34.36      0.070      20.52
HTGC...................................     3.95     0.10    476,844      13.11      0.012       9.55   NFBK......................     0.20    0.008     99,333      16.56      0.047      28.86
IEP....................................     8.34     0.13    100,497      59.83      0.232      38.77   LANC......................     0.33    0.010    105,903     134.53      0.506      37.19
KCAP...................................    11.65     0.18    117,403       3.41      0.017      49.08   ETJ.......................     0.43    0.008    276,325       9.37      0.013      13.59
LRAD...................................    11.15     0.13     60,046       2.17      0.032     152.85   MFG.......................     0.13    0.005    367,028       3.57      0.010      28.38
MAGS...................................     6.89     0.12     59,713       5.48      0.055     103.25   RTRX......................     0.13    0.005    334,303      23.33      0.066      28.37
MAIN...................................     4.44     0.13    245,561      38.49      0.032       8.32   MLI.......................     0.29    0.010    207,388      31.27      0.053      17.02
MUA....................................    12.42     0.07     55,118      14.03      0.027      19.28   GHY.......................     0.50    0.011    169,952      14.32      0.013       9.08
MUE....................................     5.46     0.06     63,559      12.96      0.020      15.65   ISF.......................     1.87    0.011     60,764      25.70      0.024       9.32
NANO...................................     3.12     0.11    251,457      29.99      0.067      22.73   MG........................     0.12    0.006     71,628      20.70      0.082      40.44
NDP....................................     4.23     0.07     75,449      13.12      0.051      39.75   THR.......................     0.17    0.008    123,398      21.67      0.057      25.99
NEP....................................     3.02     0.09    255,681      40.17      0.093      23.05   PLXS......................     0.30    0.010    174,481      57.60      0.125      21.74
OIA....................................    16.93     0.10     73,578       7.67      0.017      22.76   AWP.......................     0.69    0.012    402,327       6.15      0.011      17.48
PBT....................................     4.83     0.10    100,106       8.91      0.033      37.49   DAKT......................     0.20    0.010    173,399       9.13      0.023      25.10
PCK....................................    18.47     0.07     71,701       9.15      0.021      23.21   ETV.......................     0.49    0.008    205,388      15.31      0.016      10.33
PFLT...................................     3.58     0.11    197,419      13.65      0.020      14.98   DGRW......................     0.09    0.002    226,271      39.48      0.016       3.99
PFMT...................................     8.21     0.07     68,953       2.11      0.054     265.29   FSS.......................     0.24    0.008    271,757      20.34      0.032      15.75
PGP....................................     6.66     0.07     65,178      15.61      0.071      46.24   EXLS......................     0.26    0.009    149,278      56.40      0.142      24.91
PMF....................................     8.46     0.07     79,512      13.26      0.024      18.20   SKYY......................     0.42    0.008    219,272      46.15      0.032       7.24
PMX....................................    14.86     0.06     65,449      11.50      0.019      16.19   CII.......................     0.61    0.010    130,256      15.59      0.018      11.60
SDLP...................................     6.34     0.09    377,760       3.42      0.017      50.24   FUL.......................     0.31    0.012    362,459      51.90      0.062      12.11
SHLO...................................     1.77     0.06    135,927       9.68      0.058      60.99   UFCS......................     0.36    0.012     76,492      47.53      0.233      48.58
SJT....................................     5.54     0.10    186,679       6.96      0.028      40.45   GRAM......................     0.41    0.008    236,863       3.44      0.044     134.58
SLRC...................................     2.38     0.09    103,705      21.28      0.040      18.90   PFS.......................     0.18    0.007    184,245      25.94      0.043      16.64
SPH....................................     5.60     0.15    279,196      24.42      0.046      18.83   CNMD......................     0.36    0.012    154,890      58.57      0.184      31.64
TCPC...................................     4.35     0.11    227,052      15.54      0.019      11.89   NFJ.......................     0.46    0.007    264,566      12.95      0.014      10.78
TOUR...................................     1.30     0.07    200,307       7.59      0.031      43.03   SYKE......................     0.17    0.007    155,555      29.58      0.075      25.34
TSLX...................................     2.64     0.08    244,727      19.71      0.022      11.23   FBC.......................     0.23    0.008    249,281      32.55      0.052      16.08
VOC....................................    12.82     0.11     56,733       4.58      0.042      92.38   CCU.......................     0.17    0.008    182,729      26.46      0.053      19.89
WBK....................................     1.96     0.07    265,250      23.11      0.017       7.36   IFGL......................     0.04    0.001    110,807      28.91      0.028       9.67
WLDN...................................     3.13     0.10     91,458      29.62      0.155      52.79   FTGC......................     0.35    0.007     92,367      20.22      0.031      15.42
WSR....................................     1.66     0.07    363,836      12.96      0.019      15.03   SOCL......................     0.55    0.011     63,186      31.00      0.075      24.28
                                        ---------------------------------------------------------------                            -------------------------------------------------------------
    Avg................................     5.53     0.09    164,212      16.33      0.045      39.05   Avg.......................     0.34    0.008    198,201      32.45      0.070      21.82
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Economic Impact of the BX RPI Program on Execution Quality
    To assess the execution quality of the Program, BX focused on 
symbol-day combinations when during market hours: (i) An RMO execution 
occurred on BX, (ii) a non-RMO execution occurred on BX, and (iii) a 
tape-eligible trade occurred on BX. Symbol day combinations are 
aggregated to overall daily statistics by either a simple average or by 
volume weighting by RMO executed volume during market hours.\25\ This 
results in the number and identity of symbols captured in each daily 
average changing from day to day. Using this data, the Exchange 
examined whether the economic outcomes for RMO trades differs from non-
RMO trades and/or all trades.
---------------------------------------------------------------------------

    \25\ Both RMO and non-RMO execution quality values are weighted 
by RMO volume and a very small number of extreme outlier symbol-day 
stats have been removed from the analysis.
---------------------------------------------------------------------------

    When comparing average price improvement for RMO and non-RMO 
executions for a subset of 100 stocks with the largest number of RMO 
shares executed, the price improvement seen in RMO and non-RMO trades 
is comparable over the life of the Program. When volume weighting the 
average price improvement by RMO volume to emphasize those stock/day 
combinations with the highest volume traded in RMO, average price 
improvement on BX for both RMO and non-RMO trades appear generally 
comparable over time, with RMO price improvement generally beating non- 
RMO. Note that this price improvement measure does not take rebates 
into account.
    In the subset of active RMO symbols, RMO volume-weighted effective 
and realized spreads for RMO and all executions, which includes RMO 
executions, are generally comparable throughout the duration of the 
Program.
    Similar to regular, liquidity-taking orders on BX, the Program 
offers inverted pricing where RMO orders receive a rebate (on top of 
the price improvement they receive) when executing against RPI 
liquidity, while there is a fee associated with RPI orders which post 
non-displayed, price-improving liquidity. RPI orders are charged 
$0.0025 per share. Retail Orders currently receive a rebate of $0.0021 
per share when executing against RPI liquidity, a rebate of $0.0000 per 
share when executing against other hidden, price-improvising liquidity, 
and a rebate of $0.0017 per share when executing against other 
displayed liquidity on the BX book.
3. Are Only Eligible Participants Accessing Program Liquidity
    Only RMOs that have been approved by BX can enter RMO orders that 
access the Program liquidity, and the System does not allow non-RMO 
orders to access RPI providing orders. The System

[[Page 21887]]

does not allow non-RMO orders to access RPI providing orders. BX Rule 
4780(c) enables BX at its sole discretion to disqualify RMO members 
that submit orders that fail to meet any of the requirements of the 
rule.
4. Is the Program Attracting Retail Participation
    The Program has attracted some retail orders to the Exchange and 
participation in the Program has continued to increase over time. The 
Exchange believes that the Program provided tangible price improvement 
and transparency to retail investors through a competitive pricing 
process.
    Brokers route retail orders to a wide range of different trading 
systems. The Program offers a transparent and well-regulated option 
providing competition and price improvement. BX believes that it has 
achieved its goal of attracting retail order flow to BX and, as stated 
above, it has resulted in a significant price improvement to retail 
investors through a competitive pricing process. The Exchange also has 
not detected any negative impact to market quality or to retail 
investors as the Program has continued to grow over time.
    On average, an RMO execution continues to get more price 
improvement than the minimum $0.001 price improvement required of an 
RPI liquidity-providing order in the Program, and over time the price 
improvement seen on BX in non-RMO orders does not appear to be 
negatively impacted by the introduction of the Program.
5. Net Benefits of the Program on Participants
    The Exchange believes that the Program through retail order 
segmentation does create greater retail order flow competition and 
thereby increases the amount of this flow to BX. This helps to ensure 
that retail investors benefit from the price improvement that liquidity 
providers are willing to provide. The Program promotes competition for 
retail order flow by allowing Exchange members to submit RPI Orders to 
interact with Retail Orders. Such competition promotes efficiency by 
facilitating the price discovery process and generating additional 
investor interest in trading securities, thereby promoting capital 
formation.
    The Program also promotes competition for retail order flow among 
execution venues, and this benefits retail investors by creating 
additional price improvement opportunities for marketable retail order 
flow, most of which is currently executed in the OTC markets without 
ever reaching a public exchange. The Exchange believes that it has 
achieved its goal of attracting retail order flow to BX, and has 
resulted in price improvement to retail investors through a competitive 
pricing process. The data also demonstrates that the Program has 
continued to grow over time and the Exchange has not detected any 
negative impact to market quality or to retail investors.
    The price improvement chart below demonstrates retail firms have 
received price improvement through their use of the Program that they 
otherwise may not have received. This is a net benefit to the retail 
firms as well as the firms who are able to compete to interact with the 
retail firms.
[GRAPHIC] [TIFF OMITTED] TN15MY19.005

6. Overall Success in Achieving Intended Benefits
    The Program has demonstrated the effectiveness of a transparent, 
on-exchange retail order price improvement functionality, and while 
small relative to total consolidated volume, has achieved its goals of 
attracting retail order flow and providing those orders with price 
improvement totaling tens of thousands of dollars each month.
    The Program provides additional competition to the handling of 
retail orders. The added opportunity for price improvement provides 
pressure on other more established venues to increase the price 
improvement that they provide. By doing this, the

[[Page 21888]]

Exchange believes that the Program may have a greater positive effect 
than the market share would directly indicate.
Can the Program Be Improved
    The Program provides a transparent, well-regulated, and competitive 
venue for retail orders to receive price improvement. The size of the 
Program is somewhat limited by the rules that prevent BX from matching 
features offered by non-exchange trading venues. Nonetheless, the 
Exchange believes the Program is worthwhile and it will continue to 
look for ways to further innovate and improve the Program. The Exchange 
believes that making the pilot permanent is appropriate and through 
this filing seeks to make permanent the current operation of the 
Program.
Conclusion
    In conclusion, the Exchange notes the Program provided 
opportunities for retail investors to get significant price improvement 
on an exchange where they otherwise would not have had the opportunity 
to do so. The Exchange believes the Program did not have a negative 
impact on the market quality as evidenced by the lack of consistent 
statistical evidence of an impact and the small size of the Program.
    Accordingly, the Exchange believes that the pilot Program's rules, 
as amended, should be made permanent. Additionally, the Exchange notes 
that the proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed rule change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\26\ in general, and with 
Section 6(b)(5) of the Act,\27\ in particular, in that it is designed 
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 not to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f.
    \27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that making the pilot Program permanent is 
consistent with these principles because the Program is reasonably 
designed to attract retail order flow to the exchange environment, 
while helping to ensure that retail investors benefit from the better 
price that liquidity providers are willing to give their orders. During 
the pilot period, BX has provided data and analysis to the Commission, 
and this data and analysis, as well as the further analysis in this 
filing, shows that the Program has operated as intended and is 
consistent with the Act. The data and analysis provided to the 
Commission staff demonstrates that the Program provided tangible price 
improvement to retail investors through a competitive pricing process 
unavailable in non-exchange venues and otherwise had an insignificant 
impact on the marketplace. Making the Program permanent would encourage 
the additional utilization of, and interaction with, the Exchange and 
provide retail customers with an additional venue for price discovery, 
liquidity, competitive quotes, and price improvement.
    Additionally, the Exchange believes the proposed rule change is 
designed to facilitate transactions in securities and to remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system because the competition promoted by the 
Program facilitates the price discovery process and potentially 
generate additional investor interest in trading securities. Making the 
pilot Program permanent will allow the Exchange to continue to provide 
the Program's benefits to retail investors on a permanent basis and 
maintain the improvements to public price discovery and the broader 
market structure. The data provided by BX to the SEC staff demonstrates 
that the Program provided tangible price improvement and transparency 
to retail investors through a competitive pricing process.
    For the reasons stated above, the Exchange believes that making the 
Program permanent would promote just and equitable principles of trade 
and remove impediments to and perfect the mechanism of a free and open 
market.
    As described below in BX's statement regarding the burden on 
competition, the Exchange also believes that it is subject to 
significant competitive forces and it would increase competition among 
execution venues, encourage additional liquidity, and offer the 
potential for price improvement to retail investors.
    For all of these reasons, the Exchange believes that the proposal 
is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. BX 
believes that making the Program permanent would continue to enhance 
competition for retail order flow among execution venues and contribute 
to the public price discovery process.
    The Exchange believes that the data supplied to the Commission and 
experience gained over the life of the pilot have demonstrated that the 
Program creates price improvement opportunities for retail orders that 
are equal to what would be provided under OTC internalization 
arrangements, thereby benefiting retail investors and increasing 
competition between execution venues. BX also believes that making the 
Program permanent will promote competition between execution venues 
operating their own retail liquidity programs. Such competition will 
lead to innovation within the market, thereby increasing the quality of 
the national market system.
    Additionally, the Exchange notes that it operates in a highly 
competitive market in which market participants can easily direct their 
orders to competing venues, including off-exchange venues. In such an 
environment, the Exchange must continually review, and consider 
adjusting the services it offers and the requirements, it imposes to 
remain competitive with other U.S. equity exchanges.
    For the reasons described above, BX believes that the proposed rule 
change reflects this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 21889]]

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 rule-comments@sec.gov. Please include 
File Number SR-BX-2019-011 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-BX-2019-011. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 the filing also will be available for inspection 
and copying at the principal offices 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 available publicly. All submissions 
should refer to File Number SR-BX-2019-011, and should be submitted on 
or before June 5, 2019.
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09966 Filed 5-14-19; 8:45 am]
 BILLING CODE 8011-01-P


