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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

not have the type of technology to enable them to compete with such market participants. Therefore, the Exchange believes that it is consistent with the public interest and the protection of investors to provide retail investors with these enhanced execution opportunities. Additionally, as discussed above, the Exchange believes that the opportunity to obtain meaningful price improvement at the Midpoint Price should operate as a powerful incentive for RMOs to send Retail Orders to the Exchange in the form of Retail Midpoint Orders, thereby contributing to the Exchanges midpoint liquidity to the benefit of all Users.
While the Exchange typically has resting non-displayed liquidity priced to execute at the Midpoint Price, a key aspect of the proposed RML Program is to further incentivize Users and their clients to enter additional nondisplayed interest that will trade with Retail Orders and offer meaningful price improvement at the Midpoint Price i.e., in the form of RML Orders in a deterministic manner.
In addition, the proposal to execute Retail Midpoint Orders against RML
Orders only at the Midpoint Price is also designed to facilitate RMOs compliance with their best execution obligations when acting as agent on behalf of a Retail Order.50 Specifically, as noted in FINRA Regulatory Notice 1546
Guidance on Best Execution Obligations in Equity, Options and Fixed Income Markets, when conducting its review of execution quality in any security, a firm should consider, among other things, whether it could obtain mid-point price improvement on one venue versus less price improvement on another venue.51
Further, limiting the execution of Retail Midpoint Orders against RML Orders to the Midpoint Price is designed to be a simple approach that does not introduce unnecessary complexity to the order entry and execution process on the Exchange, as both orders are proposed to be a type of Midpoint Peg Order. The Exchange notes that under the initial implementation of the IEX Retail Program, approved by the Commission in 2019, IEX Retail Orders and IEX RLP
Orders were only eligible to trade at the Midpoint Price.52 Accordingly, the 50 All Users that handle customer orders as agent are required to be FINRA members, and therefore are subject to FINRA guidance. See 17 CFR
240.15b91a.
51 See FINRA Regulatory Notice 1546, endnote 25, available at https www.finra.org/sites/default/
files/notice_doc_file_ref/Notice_Regulatory_1546.pdf.
52 See Securities Exchange Act Release No. 86619
August 9, 2019, 84 FR 41769 August 15, 2019

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Exchange does not believe this aspect of the proposal raises any novel issues that have not been considered by the Commission.
The Exchange further believes that it is appropriate and consistent with the Act to execute Retail Midpoint Orders against Displayed Odd Lot Orders and/
or Non-Displayed Orders priced more aggressively than the Midpoint Price at the Midpoint Price, rather than at the prices at which such orders are ranked on the MEMX Book, as doing so would ensure that the priority of more aggressively priced orders is maintained on the Exchange, as described above, in a manner that provides the expected execution price to RMOs that submit Retail Midpoint Orders and provides price improvement to Users that submit more aggressively priced orders. As noted above, by selecting an order type that is specifically limited to executing at the Midpoint Price, an RMO would expect to receive an execution of their Retail Midpoint Order at the Midpoint Price and not at any other prices, and thus, the Exchange is proposing to address the needs of RMOs that focus their Retail Order trading on receiving executions at the Midpoint Price in a deterministic manner through the adoption of the Retail Midpoint Order.
Additionally, as noted above, use of this order type is completely voluntary, and 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, 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 believes such benefits, in addition to the simplicity and transparency of the RML Program achieved by permitting executions of the proposed new order types only at the Midpoint Price, outweigh the potential additional price improvement SRIEX201905 order granting approval of a proposed rule change to establish the IEX Retail Program. The Exchange notes that IEX
subsequently amended the IEX Retail Program to permit executions at prices other than the Midpoint Price in certain limited circumstancesi.e., against displayed odd lots priced at or more aggressively than the Midpoint Pricealthough the Exchange is instead proposing to execute Retail Midpoint Orders against Displayed Odd Lot Orders priced more aggressively than the Midpoint Price at the Midpoint Price in this circumstance, as described above. See Securities Exchange Act Release No.
91324 March 15, 2021, 86 FR 15015 March 19, 2021 SRIEX202103 Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Allow Retail Orders to Trade with Certain Aggressively Priced Displayed Odd Lot Orders.

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that Retail Midpoint Orders could receive if they were permitted to execute against Displayed Odd Lot Orders and/or Non-Displayed Orders priced more aggressively than the Midpoint Price at the prices at which such orders were ranked, in a manner consistent with the objectives of Section 6b5 of the Act 53 described above.
The Exchange believes that first executing a Retail Midpoint Order against any resting Displayed Odd Lot Orders and/or Non-Displayed Orders priced more aggressively than the Midpoint Price ahead of RML Orders is consistent with the Act because, notwithstanding the RML Programs goal of matching Retail Midpoint Orders against RML Orders at the Midpoint Price in a deterministic manner, doing so ensures that the priority of more aggressively priced orders is maintained on the Exchange, as described above.
Maintaining price priority in this regard, consistent with its current rules, reflects the Exchanges overall goal of incentivizing Users to submit aggressively priced orders to the Exchange, which contribute to the overall market quality and attract liquidity on the Exchange, thereby promoting just and equitable principles of trade and removing impediments to and perfecting the mechanism of a free and open market and a national market system. Furthermore, as the proposed RML Program provides for a mechanism to respect the priority of more aggressively priced liquidity on the Exchange prior to executing Retail Midpoint Orders against RML Orders at the Midpoint Price, similar to Nasdaqs handling of MELOs, as described above, the Exchange believes that this aspect of the proposal does not raise any novel issues for the Commission to consider.
The Exchange believes that providing execution priority to RML Orders that are designated to be identified as such for purposes of the Retail Liquidity Identifier ahead of RML Orders that are not so designated is consistent with the Act, as the Exchange believes that designated RML Orders would attract additional liquidity to the Exchange.
Specifically, as noted above, the Exchange believes that dissemination of the Retail Liquidity Identifier is likely to be an important factor in attracting incoming Retail Midpoint Orders, and thus increases the likelihood of execution for resting RML Orders.
Therefore, the Exchange believes that it removes impediments to and perfects the mechanism of a free and open market and national market system to provide execution priority to designated 53 15

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