SEC Issues No-Action Relief from Reg. NMS in Connection with NYSE Arca's Proposal to Establish Retail Price Improvement Program
The SEC Division of Trading and Markets issued no-action relief from Rule 602 of Regulation NMS ("Dissemination of Quotations in NMS Securities" or the "Quote Rule") to NYSE Arca, Inc. with respect to certain activity contemplated by the operation of a proposed Retail Liquidity Program.According to the letter, the Retail Liquidity Program would establish an alternative venue for the execution of retail orders, creating two new classes of market participants (Retail Member Organizations and Retail Liquidity Providers) and two new order types (Retail Orders and Retail Price Improvement Orders).
The Quote Rule requires national securities exchanges to make available to vendors the best bid, best offer and aggregate quotation sizes for each subject security listed, or admitted to unlisted trading privileges, that is communicated on any national securities exchange by any broker or dealer. According to the letter, the Retail Price Improvement Orders do not meet the definition of "bid" or "offer" in the SEC Rule 600(b)(8) ("NMS Security Designation and Definitions") because they do not communicate a specific price.
Therefore, the no-action relief permits (i) NYSE Arca not to collect, process or make available to vendors the best bid, best offer or quotation sizes communicated by members of NYSE Arca pursuant to SEC Rule 602(a), or (ii) the Liquidity Providers, on the theory that these bids and offers are not subject to the Quote Rule. The no-action relief is premised on the Retail Liquidity Program's operation pursuant to a pilot or permanent status approved by the SEC. If the pilot expires without the SEC's permanently approving the Program, the no-action position will be withdrawn immediately upon expiration.