SEC Grants Exchange "Quote Rule" Relief for Certain Orders and Securities

The SEC Division of Trading and Markets ("Division") permitted CboeBYX ("Exchange") to disseminate a retail liquidity identifier for certain orders and securities priced below one dollar without collecting and processing best bid, best offer, and quotation sizes.

In a no-action letter, the Division said that the relief responds to a request by the Exchange to modify its Retail Price Improvement Program, by introducing an "Enhanced Retail Price Improvement Order" and expanding the program to securities priced below $1.00. The Exchange sought to disseminate a "retail liquidity identifier" that displays the symbol and side of available price-improving interest without collecting and processing the best bid, best offer, and quotation sizes. The Division indicated that the relief was based on the Exchange's argument that the interest remains non-displayed and does not meet the definition of a "bid" or "offer" under Rule 600(b)(16) ("NMS security designation and definitions") because the identifier does not communicate a specific price.

The Division noted that the relief applies to the program as revised in the Exchange Proposal, under which the identifier is disseminated only when interest exists with a ranked price at least $0.001 better than the protected best bid or offer for securities priced at or above $1.00, or $0.0001 better for securities priced below $1.00. The Division further conditioned the relief on the requirement that the identifier reflect only the symbol and side of the interest and must not include the price or size.

Under the no-action position, the Division said that it would not recommend enforcement action against the Exchange or liquidity providers under Rule 602 of Regulation NMS ("Dissemination of quotations in NMS securities"), specifically Rule 602(a) and Rule 602(b)(1), concerning the dissemination of information through the identifier.