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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Notices
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because some Users submitting RML
Orders may be concerned with signaling to the market that there is interest to buy or sell at the non-displayed Midpoint Price. In particular, while a User submitting a smaller sized RML Order as part of a normal liquidity provision strategy might prefer to have its interest identified through the Retail Liquidity Identifier, it is possible that a larger sized RML Order could be entered and that the User submitting such order may prefer not to signal to the market that there is significant interest in that security at the Midpoint Price. While the Retail Liquidity Identifier would not identify the size associated with an RML
Order, a larger RML Order would likely result in the Retail Liquidity Identifier persisting for a longer period of time despite multiple executions of Retail Midpoint Orders against such order.
The Exchange acknowledges that since, as proposed, a User may elect not to designate an RML Order to be identified as such for purposes of the Retail Liquidity Identifier, RML Interest could be available without causing the dissemination of the Retail Liquidity Identifier. The Exchange nevertheless believes it is appropriate to limit dissemination of the Retail Liquidity Identifier to those cases when at least one round lot of designated RML
Interest is available in order to maintain the proposed optionality available to Users that wish to submit RML Orders but do not want indications of their midpoint interest disseminated by the Exchange. While different than the IEX
Retail Program, the Exchange notes that the ability for a User to elect whether to designate their RML Interest to be identified as such for purposes of the Retail Liquidity Identifier is similar in purpose and effect to the ability of a User to elect whether to designate their orders as displayed or non-displayed on an exchanges order bookfunctionality that is offered by most U.S. equities exchanges, including the Exchangeas it is simply intended to provide Users with the ability to decide which information they publicize in the marketplace.
Priority and Order Execution Retail Midpoint Orders and RML
Orders would only execute at the Midpoint Price, as stated in proposed Exchange Rule 11.22c1 and further described below. As discussed above, Retail Midpoint Orders and RML Orders are primarily intended to interact with each other; however, proposed Exchange Rule 11.22c2 provides that if there is: A A Limit Order 35 of Odd 35 See
Exchange Rule 11.8b.

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Lot 36 size that is displayed by the System Displayed Odd Lot Order and that is priced more aggressively than the Midpoint Price and/or B an order that is not displayed by the System Non-Displayed Order and that is priced more aggressively than the Midpoint Price, resting on the MEMX
Book, then an incoming Retail Midpoint Order would first execute against any such orders pursuant to the Exchanges standard price/time priority in accordance with Exchange Rule 11.9
and Exchange Rule 11.10 before executing against RML Orders resting on the MEMX Book.37 Proposed Exchange Rule 11.22c2 further provides that any such executions would be at the Midpoint Price irrespective of the prices at which such Displayed Odd Lot Orders and/or Non-Displayed Orders were ranked by the System on the MEMX Book.
The purpose of permitting a Retail Midpoint Order to first execute against Displayed Odd Lot Orders and/or NonDisplayed Orders that are priced more aggressively than the Midpoint Price is to ensure that the priority of more aggressively priced orders over less aggressively priced orders is maintained on the Exchange, consistent with Exchange Rule 11.9. The Exchange notes that its proposed handling of a Retail Midpoint Order in this regard is similar to Nasdaqs handling of a MELO, which is an order type that is similarly designed to interact with a specific contra-side order type at the Midpoint Price, in that MELOs will respect better priced liquidity, as MELOs that would otherwise be eligible to execute, will not execute if there is a more aggressively priced Order resting on the Nasdaq Book. 38 Thus, because the Exchanges 36 See
Exchange Rule 11.6q2.
Exchange notes that Displayed Odd Lot Orders and Non-Displayed Orders are the only types of orders that could rest on the MEMX Book at a price that is more aggressive than the Midpoint Price, as any displayed buy sell order that is at least one round lot in size would be eligible to form the NBB NBO as a Protected Quotation. The term Protected Quotation refers to a quotation that is a Protected Bid or Protected Offer. In turn, the term Protected Bid or Protected Offer refers to a bid or offer in a stock that is i displayed by an automated trading center; ii disseminated pursuant to an effective national market system plan; and iii an automated quotation that is the best bid or best offer of a national securities exchange or association. See Exchange Rule 1.5z.
38 SRNASDAQ2017074, Amendment No. 2, at page 20, available at https www.sec.gov/
comments/sr-nasdaq-2017-074/nasdaq20170742659324-161401.pdf. See also Nasdaq Rule 4702b14A. While the Exchanges proposed handling of Retail Midpoint Orders when there is a resting order priced more aggressively than the Midpoint Price similarly respects the more aggressively priced resting order, it differs from Nasdaqs handling of MELOs in this event, in that MELOs will not execute and will be held for 37 The
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proposal introduces new order types that are designed to interact with each other at the Midpoint Price but provides for a mechanism to respect the priority of more aggressively priced liquidity on the Exchange, similar to Nasdaqs handling of a MELO, the Exchange believes that this aspect of the proposal does not raise any novel issues for the Commission to consider.
The Exchange believes that it is appropriate to execute any such Displayed Odd Lot Orders and/or NonDisplayed Orders against a Retail Midpoint Order at the Midpoint Price instead of the prices at which such orders were ranked because RMOs that submit Retail Midpoint Orders to the Exchange are, by selecting an order type that is specifically limited to executing at the Midpoint Price, expecting to receive an execution at the Midpoint Price and not at any other prices.
Thus, the Exchange is proposing to address the needs of RMOs that focus their Retail Order trading on receiving executions at the Midpoint Price through the adoption of the Retail Midpoint Order, and the Exchange notes that use of this order type is completely voluntary and that RMOs may continue to submit their Retail Orders to the Exchange to execute against orders at prices different than the Midpoint Price, outside of the RML Program, as they can today. Moreover, based on informal discussions with market participants, the Exchange believes that there are benefits associated with executing Retail Orders submitted to the Exchange at one price level rather than multiple prices, such as simplified record-keeping for retail investors and execution reporting by RMOs. The Exchange also believes the Users submitting the contra-side Displayed Odd Lot Orders and/or NonDisplayed Orders would prefer an execution against an incoming Retail Midpoint Order at the Midpoint Price, as this would provide price improvement to such orders, which were originally priced more aggressively than the Midpoint Price.
After first executing against any resting Displayed Odd Lot Orders and/
or Non-Displayed Orders priced more aggressively than the Midpoint Price, as described above, a Retail Midpoint Order would then execute against RML
Orders resting on the MEMX Book in accordance with proposed Exchange Rule 11.22c3. Specifically, Retail execution until such resting order is no longer on the Nasdaq book or the Midpoint Price matches the price of such resting order, and the Exchange proposes to execute a Retail Midpoint Order against such resting order at the Midpoint Price. Thus, both implementations are designed to maintain the priority of more aggressively priced orders.

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