[Federal Register Volume 83, Number 144 (Thursday, July 26, 2018)]
[Notices]
[Pages 35516-35525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15942]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83681; File No. SR-BX-2018-025]


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

July 20, 2018.
    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 July 9, 2018, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to a proposal to make permanent the pilot 
program for the Exchange's Retail Price Improvement (``RPI'') Program 
(the ``Program''), which is set to expire the earlier of approval of 
the filing to make this rule permanent or December 31, 2018.
    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 December 31, 2018.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 73702 (November 28, 
2014), 79 FR 72049 (December 4, 2014) (SR-BX-2014-048) (``RPI 
Approval Order'').
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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 
a 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.
---------------------------------------------------------------------------

    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, with it now 
scheduled to expire the earlier of approval of the filing to make this 
rule permanent or December 31, 2018.\9\
---------------------------------------------------------------------------

    \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); and Securities Exchange Act Release No. 83539 (June 28, 
2018), 83 FR 31203 (July 3, 2018) (SR-BX-2018-026).
---------------------------------------------------------------------------

    Specifically, BX Rule 4780(h) will be amended to delete that the 
Program is a pilot and that is scheduled to expire the earlier of 
approval of the filing to make this rule permanent or December 31, 
2018. BX Rule 4780(h) will continue to say that the Program will be 
limited to securities whose Bid Price on the Exchange is greater than 
or equal to $1.00 per share.
    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.'' \10\ 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

[[Page 35517]]

of an exchange are not designed to permit unfair discrimination.'' \11\ 
As the SEC acknowledged, the retail order segmentation was designed to 
create greater retail order flow competition and thereby increase 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.
---------------------------------------------------------------------------

    \10\ See RPI Approval Order, supra note 3 at 72051.
    \11\ Id.
---------------------------------------------------------------------------

    As discussed below, the Exchange believes that the Program data 
supports the conclusion that it provides valuable price improvement, 
more than $4 million since inception, to retail investors that they may 
not otherwise receive and that it is therefore appropriate to make the 
pilot Program permanent.
[GRAPHIC] [TIFF OMITTED] TN26JY18.000

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 a 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.\12\
---------------------------------------------------------------------------

    \12\ See supra note 5.
---------------------------------------------------------------------------

    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-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. A 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.\13\ RPI orders can 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.
---------------------------------------------------------------------------

    \13\ 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.
---------------------------------------------------------------------------

    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

[[Page 35518]]

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 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) \14\ 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.
---------------------------------------------------------------------------

    \14\ 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.
---------------------------------------------------------------------------

    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 \15\ 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.
---------------------------------------------------------------------------

    \15\ 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.
---------------------------------------------------------------------------

    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.\16\
---------------------------------------------------------------------------

    \16\ 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.
---------------------------------------------------------------------------

    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.

[[Page 35519]]

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 UTP Plan for Tape C securities) as well as through proprietary 
Exchange data feeds.\17\ 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.
---------------------------------------------------------------------------

    \17\ 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.
---------------------------------------------------------------------------

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 share.\18\ 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,\19\ 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 \20\ and operationally intuitive 
program, the Exchange believes that limiting the

[[Page 35520]]

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.
---------------------------------------------------------------------------

    \18\ 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.
    \19\ 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.
    \20\ 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).
---------------------------------------------------------------------------

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 \21\ 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 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.
---------------------------------------------------------------------------

    \21\ 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.
---------------------------------------------------------------------------

    The Exchange believes, in accordance with its filing establishing 
the pilot Program, that 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.'' \22\ The Exchange has fulfilled this 
obligation through the reports and assessments it has submitted to the 
Commission since the implementation of the pilot Program.
---------------------------------------------------------------------------

    \22\ See Securities Exchange Act Release No. 73410 (October 23, 
2014), 79 FR 64447 at 64450 (SR-BX-2014-048).
---------------------------------------------------------------------------

    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.\23\ The Exchange believes that it has achieved its goal of 
attracting retail order flow to BX, and has resulted in a significant 
price improvement to retail investors through a competitive pricing 
process. 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.
---------------------------------------------------------------------------

    \23\ RPI Approval Order, 79 FR at 72053.
---------------------------------------------------------------------------

    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 considerable 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
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

[[Page 35521]]

 
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] TN26JY18.001
                                                                                                  
    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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             1,001-2,000   2,001-4,000   4,001-7,500  7,500-15,000
                               Month                                  <=100 (%)    101-300 (%)   301-500 (%)    501-1,000        (%)           (%)           (%)           (%)       >15,000 (%)
-------------------------------------------------------------------------------------------------------------------(%)--------------------------------------------------------------------------
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

[[Page 35522]]

 
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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             1,001-2,000   2,001-4,000   4,001-7,500  7,500-15,000
                               Month                                  <=100 (%)    101-300 (%)   301-500 (%)    501-1,000        (%)           (%)           (%)           (%)       >15,000 (%)
-------------------------------------------------------------------------------------------------------------------(%)--------------------------------------------------------------------------
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
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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             1,001-2,000   2,001-4,000   4,001-7,500  7,500-15,000
                               Month                                  <=100 (%)    101-300 (%)   301-500 (%)    501-1,000        (%)           (%)           (%)           (%)       >15,000 (%)
-------------------------------------------------------------------------------------------------------------------(%)--------------------------------------------------------------------------
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
------------------------------------------------------------------------


[[Page 35523]]

    The data provided by the Exchange describes a valuable service that 
delivers considerable 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.
    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.
1. Economic Impact of the RPI Program on the Entire Market
    The Exchange detected no negative impact on BX quote quality from 
the Program. Because the size of the Program is within the normal day-
to-day fluctuations of market share between different venues, it is 
impossible to detect a correlation with a decline of order flow in 
another venue or order type. The Program did not negatively affect the 
overall quality of the market by causing liquidity-providing orders to 
move from the Exchange to the Program. The Program also did not 
diminish the quality of (or increase the toxicity of) other order types 
arriving at the Exchange.
    The Program is intended to attract off-exchange order flow back to 
transparent and well-regulated exchange trading systems. Given current 
market structure, BX believes that the Program improves overall market 
quality by attracting desirable order flow and liquidity-providers back 
to the vigorous order competition available on-exchange.
    Using correlation tests and visualization the Exchange failed to 
detect a significant relationship between the amount of RMO volume 
traded on BX and measurements of overall market quality. The results of 
correlation tests against 30-second realized spreads show minimal to no 
correlation.
    Additionally, through time series visualization BX detects no 
significant changes in BX market quality measures during the life of 
the pilot Program. Metrics including quoted spreads, volatility, 
realized spreads, and depth were examined using executions on BX and 
the NBBO weighted by volume executed on BX. Both quoted and realized 
spreads did not show any dramatic changes following the implementation 
of the Program or as it gained traction over time. Consolidated trade-
to-trade volatility appears to have decreased slightly in the middle of 
the Program.
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.\24\ 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.
---------------------------------------------------------------------------

    \24\ 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 BX trading system does not allow 
non-RMO orders to access RPI providing orders. BX BX [sic] trading 
system 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 successfully attracted retail orders to the Exchange 
and participation in the Program has continued to increase over time. 
The Exchange believes that the success of the Program is in that it 
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 meaningful 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 as the Program has continued to grow over time.

[[Page 35524]]

[GRAPHIC] [TIFF OMITTED] TN26JY18.002

    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
    From the beginning of 2017 through January 2018, 97.9% of RMO 
shares ordered and 98.5% of RMO shares executed were RMO Type 1 orders, 
while the remainder were RMO Type 2 orders. Type 1 orders had an 
aggregated fill rate of 19.2%, while Type 2 orders had a fill rate of 
4.1% in this timeframe.
    Of the RMO Type 1 executions, 94.9% of shares were executed against 
RPI liquidity and 5.1% against other non-RPI price-improving hidden 
liquidity. Of the RMO Type 2 executions, 23.7% of shares were executed 
against RPI liquidity, 14% against other non-RPI price-improving hidden 
liquidity, and 62.3% against other liquidity on the BX book. None of 
the Type 2 orders entered included routing instructions to allow for 
executions away from BX.
    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 a significant 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.
6. Overall Success in Achieving Intended Benefits
    The Program has successfully demonstrated the effectiveness of a 
transparent, on-exchange retail order price improvement functionality, 
and while small relative to total consolidated volume, has succeeded in 
achieving 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 additional opportunity for meaningful price 
improvement provides pressure on other more established venues to 
increase the price improvement that they provide. By doing this, the 
Program has a greater positive effect than the market share would 
directly indicate.
7. Can the Program Be Improved
    The Program provides a transparent, well-regulated, and competitive 
venue for retail orders to receive substantial 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 a success 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.

[[Page 35525]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\25\ in general, and with 
Section 6(b)(5) of the Act,\26\ 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f.
    \26\ 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.
    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.
    As described below in BX's statement regarding the burden on 
competition, the Exchange also believes that it is subject to 
significant competitive forces. 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. 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-BX-2018-025 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-2018-025. 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-2018-025, and should be submitted on 
or before August 16, 2018.
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Brent J. Fields,
Secretary.
[FR Doc. 2018-15942 Filed 7-25-18; 8:45 am]
BILLING CODE 8011-01-P