[Federal Register Volume 88, Number 36 (Thursday, February 23, 2023)]
[Notices]
[Pages 11499-11501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03699]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96944; File No. SR-NYSE-2023-11]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Rule 7.44 Relating to the Retail Liquidity Program

February 16, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on February 14, 2023, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 modify Rule 7.44 relating to the Retail 
Liquidity Program. The proposed rule change is available on the 
Exchange's website at www.nyse.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 self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to modify Rule 7.44, which sets forth the 
Exchange's Retail Liquidity Program (the ``Program'').\4\ The purpose 
of the Program is to attract retail order flow to the Exchange and 
allow such order flow to receive potential price improvement. Under 
Rule 7.44, a class of market participants called Retail Liquidity 
Providers (``RLPs'') and non-RLP member organizations are able to 
provide potential price improvement to retail investor orders in the 
form of a non-displayed order that is priced better than the best 
protected bid or offer, called a Retail Price Improvement Order (``RPI 
Order'').\5\ When there is an RPI Order in a particular security, the 
Exchange disseminates an indicator, known as the Retail Liquidity 
Identifier, that such interest exists.\6\ Retail Member Organizations 
(``RMOs'') can submit a Retail Order to the Exchange, which interacts, 
to the extent possible, with available contra-side RPI Orders and then 
may interact with other liquidity on the Exchange or elsewhere, 
depending on the Retail Order's instructions.\7\ The segmentation in 
the Program allows retail order flow to receive potential price 
improvement as a result of their order flow being deemed more desirable 
by liquidity providers. The Exchange recently modified the Program to 
be available for all securities traded on the Exchange.\8\
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    \4\ The Program was established on a pilot basis in 2012 and was 
approved by the Commission to operate on a permanent basis in 2019. 
See Securities Exchange Act Release No. 85160 (February 15, 2019), 
84 FR 5754 (February 22, 2019) (SR-NYSE-2018-28). In connection with 
the Commission's approval of the 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 (the ``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 Securities Exchange Act 
Release No. 67347 (July 3, 2012), 77 FR 40673 (July 10, 2012) (SR-
NYSE-2011-55). The Exchange notes that the change proposed in this 
filing has no substantive impact under the Sub-Penny Rule and thus 
does not require an update or revision to the exemptive relief 
previously granted by the Commission.
    \5\ See Rules 7.44(a)(1) (defining an RLP) and 7.44(a)(4) 
(defining RPI Order).
    \6\ See Rule 7.44(j).
    \7\ See Rule 7.44(a)(2) (defining RMO); Rules 7.44(a)(3) and 
7.44(k) (describing Retail Orders).
    \8\ See Securities Exchange Act Release No. 96112 (October 20, 
2022), 87 FR 64831 (October 26, 2022) (SR-NYSE-2022-47) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Modify 
Rule 7.44).
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    Rule 7.44(k) currently describes the operation of a Retail Order 
pursuant to the Program, which is defined in Rule 7.44(a)(3) as an 
agency order or a riskless principal order that meets the criteria of 
FINRA Rule 5320.03 that originates from a natural person and is 
submitted to the Exchange by an RMO, provided that no change is made to 
the

[[Page 11500]]

terms of the order with respect to price or side of market and the 
order does not originate from a trading algorithm or any other 
computerized methodology. Rule 7.44(k) provides that a Retail Order is 
a non-routable Limit IOC Order to buy (sell) that will trade only with 
available RPIs to sell (buy) and all other orders to sell (buy) with a 
working price below (above) the PBO (PBB) on the Exchange Book. Any 
quantity of a Retail Order to buy (sell) that does not trade with 
eligible orders to sell (buy) will be immediately and automatically 
cancelled. Rule 7.44(k) further provides that a Retail Order will be 
rejected on arrival if the PBBO is locked or crossed and may not be 
designated with a minimum trade size modifier (``MTS Modifier'').\9\
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    \9\ See Rule 7.31(i)(3) (providing that the MTS Modifier 
designates an order with a minimum trade size and an order with an 
MTS Modifier will be rejected if the MTS is less than a round lot or 
if the MTS is larger than the size of the order). The Exchange notes 
that the rule text currently providing that a Retail Order may not 
be designated with an MTS Modifier was introduced in connection with 
the Exchange's transition to the Pillar trading platform and was 
intended to ensure that Exchange rules continued to accurately 
reflect the operation of Retail Orders (as established prior to such 
transition). See Securities Exchange Act Release No. 85930 (May 23, 
2019), 84 FR 25100 (May 30, 2019) (SR-NYSE-2019-26) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change of New 
Rule 7.44 To Operate Its Retail Liquidity Program on Pillar, the 
Exchange's New Technology Trading Platform).
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    The Exchange now proposes to permit Retail Orders to be designated 
with an MTS Modifier and, accordingly, proposes to modify the last 
sentence of Rule 7.44(k) to reflect this change. The proposed change is 
intended to provide RMOs with the option to designate Retail Orders 
with a minimum trade size if they so choose. The Exchange believes that 
the proposed change would provide additional flexibility to RMOs 
entering Retail Orders, which could encourage retail order flow to the 
Exchange and promote additional opportunities for price improvement for 
such orders. The Exchange notes that the proposed change would not 
otherwise impact the operation of Retail Orders as set forth in current 
Exchange rules and would simply make an existing modifier available for 
use with Retail Orders. The Exchange also believes that the proposed 
change would allow it to compete with other exchanges' retail price 
improvement programs that permit retail orders to be designated with a 
minimum trade size.\10\
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    \10\ See, e.g., Investors Exchange LLC (``IEX'') Rules 
11.190(b)(9)(G), 11.190(b)(10)(G), and 11.232(a)(2) (providing that 
a Retail order may be a Discretionary Peg order or Midpoint Peg 
order, either of which may be designated with a minimum trade size). 
The Exchange notes that IEX's retail improvement program differs 
from the NYSE RLP in that the IEX program is designed to provide 
price improvement at the midpoint but does not believe that 
difference to be meaningful with respect to the ability to designate 
a retail order with a minimum trade size.
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    The Exchange also proposes non-substantive clarifying changes to 
Rules 7.44(a)(3) and 7.44(a)(4) \11\ relating to the size of Retail 
Orders and RPI Orders. Rules 7.44(a)(3) and 7.44(a)(4)(E) currently 
include text providing that Retail Orders and RPI Orders, respectively, 
may be an odd lot, round lot, or mixed lot. The Exchange now proposes 
to delete such rule text as extraneous because Exchange rules already 
provide that orders may be entered in any size unless otherwise 
specified.\12\
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    \11\ The Exchange also proposes a non-substantive change to Rule 
7.44(a)(4)(A) to improve the clarity of the rule text, with no 
change to the operation of the rule.
    \12\ See Rule 7.38(a).
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    Subject to the effectiveness of this proposed rule change, the 
Exchange will implement this change no later than in the second quarter 
of 2023 and announce the implementation date by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\13\ in general, and furthers the objectives of Section 
6(b)(5),\14\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed change would remove impediments 
to, and perfect the mechanism of, a free and open market and a national 
market system and, in general, protect investors and the public 
interest by allowing RMOs the option to designate Retail Orders with a 
minimum trade size, which could attract additional retail order flow to 
the Exchange, thereby promoting additional opportunities for price 
improvement and order execution on the Exchange and promoting 
competition with other exchanges operating retail price improvement 
programs that allow retail orders to be designated with a minimum trade 
size.\15\ The Exchange also believes that the proposed change would 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and promote just and equitable 
principles of trade because it would permit the use of the existing MTS 
Modifier with Retail Orders and would not otherwise impact the 
operation of Retail Orders as provided under current Exchange rules. 
The Exchange further believes that the proposed clarifying changes to 
Rule 7.44 would remove impediments to, and perfect the mechanism of, a 
free and open market and a national market system and, in general, 
protect investors and the public interest because they are intended 
only to streamline Exchange rules and would not impact the operation of 
existing Exchange rules.
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    \15\ See note 10, supra.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that, 
to the extent the proposed change encourages RMOs to direct additional 
Retail Orders to the Exchange and increases opportunities for price 
improvement and order execution, the proposed change would promote 
competition by making the Exchange a more attractive venue for order 
flow and enhancing market quality for all market participants. The 
Exchange also believes that the proposed change would promote 
competition with retail price improvement programs on other equities 
exchanges that permit retail orders to be designated with a minimum 
trade size.\16\
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    \16\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the foregoing proposed rule change does not: (i) significantly 
affect the protection

[[Page 11501]]

of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may 
designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) 
of the Act \19\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\20\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(2)(B).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2023-11 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-NYSE-2023-11. 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 office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2023-11 and should be submitted on 
or before March 16, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03699 Filed 2-22-23; 8:45 am]
BILLING CODE 8011-01-P


