OMB by the Commission with regard to this collection of information
should be in writing, with reference to File Number S7-29-22 and be
submitted to the Securities and Exchange Commission, Office of FOIA/PA
Services, 100 F Street NE, Washington, DC 20549-2736. As OMB is
required to make a decision concerning the collection of information
between 30 and 60 days after publication, a comment to OMB is best
assured of having its full effect if OMB receives it within 30 days of
publication.

VII. Economic Analysis

A. Introduction

    The Commission is mindful of the economic effects that may result
from the proposed amendments, including the benefits, costs, and the
effects on efficiency, competition, and capital formation.\498\ The
following economic analysis identifies and considers the costs and
benefits--including the effects on efficiency, competition, and capital
formation--that could result from the proposed amendments to Rule 605.
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    \498\ Exchange Act section 3(f) requires the Commission, when it
is engaged in rulemaking pursuant to the Exchange Act and is
required to consider or determine whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f). In
addition, Exchange Act section 23(a)(2) requires the Commission,
when making rules pursuant to the Exchange Act, to consider among
other matters the impact that any such rule will have on competition
and not to adopt any rule that would impose a burden on competition
that is not necessary or appropriate in furtherance of the purposes
of the Exchange Act. See 15 U.S.C. 78w(a)(2).
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    When the Commission adopted Rule 11Ac1-5, which was later re-
designated as Rule 605, in 2000, it stated that the

rule should facilitate comparisons across market centers and provoke
more vigorous competition on execution quality and broker-dealer order
routing performance.\499\ However, under current Rule 605 reporting
requirements, variations across broker-dealers in terms of the
execution quality achieved by their order routing services are not
currently observable by market participants using publicly available
execution quality reports. Furthermore, in the subsequent decades,
substantial changes in equity markets, including increases in trading
speeds and fragmentation, have made it so that Rule 605 reports are
less informative than they were when the Rule was adopted. Furthermore,
the Commission believes that the proposed amendments to Rule 605,
including expanding the scope of reporting entities, modernizing its
content, and broadening its accessibility, would increase the relevance
and use of the information contained in Rule 605 reports, and promote
competition among market centers and broker-dealers. This increase in
competition would ultimately lead to improved execution quality for
investors.
---------------------------------------------------------------------------

    \499\ See Adopting Release, 65 FR 75414 (Dec. 1, 2000) at 75417.
---------------------------------------------------------------------------

    The Commission recognizes that the proposed amendments would entail
additional costs to market centers and broker-dealers of disclosing the
required execution quality information. Market centers would face
initial compliance costs when updating their methods for preparing Rule
605 reports, and broker-dealers that were previously not required to
publish Rule 605 reports would face initial compliance costs, including
but not limited to developing the systems and processes and organizing
the resources necessary to generate the reports pursuant to Rule 605,
and ongoing compliance costs to continue to publish Rule 605 reports
each month.
    The Commission has considered and is describing the economic
effects of the proposed amendments to Rule 605 and wherever possible
has quantified the likely economic effects of the proposed amendments.
The Commission has incorporated data and other information, such as
academic literature, to assist in the analysis of the economic effects
of the proposal. However, because the Commission does not have, and in
certain cases does not believe that it can reasonably obtain, data that
may inform on certain economic effects, the Commission is unable to
quantify those economic effects. Further, even in cases where the
Commission has some data, the number and type of assumptions necessary
to quantify certain economic effects would render any such
quantification unreliable. Our inability to quantify certain costs,
benefits, and effects does not imply that such costs, benefits, or
effects are less significant. The Commission requests that commenters
provide relevant data and information to assist the Commission in
quantifying the economic consequences of the proposed amendments to
Rule 605.

B. Market Failure

    The Commission is proposing to update the disclosure of order
execution information and expand the scope of reporting entities under
Rule 605 to achieve a variety of improvements to market participants'
access to information about execution quality, which the Commission
does not believe are likely to occur through a market-based solution.
    Because equity markets have changed substantially since the initial
adoption of Rule 605's predecessor in 2000, and yet the content of the
disclosures required by Rule 605 has not been substantively updated
since then,\500\ the utility of Rule 605 reports has been eroded, which
has limited the Rule's ability to address the market failures
identified in the Adopting Release, including market centers' limited
incentives to produce publicly available, standardized execution
quality reports.\501\ Instead, the metrics currently required to be
reported by Rule 605 are no longer as useful for comparing execution
quality across market centers as they were when Rule 605 was adopted,
and other metrics that would be useful for this purpose are not
currently included in reporting requirements, which limits the current
benefits of Rule 605 for promoting competition among market centers and
improving execution quality for all types of investors.
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    \500\ In 2018, while amending Rule 606, the Commission also
modified Rule 605 to require that the public order execution quality
report be kept publicly available for a period of three years. See
supra note 11.
    \501\ See Adopting Release, 65 FR 75414 (Dec. 1, 2000) at 75414-
15.
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    The Commission does not believe that updates to Rule 605 metrics
are likely to be achieved through a market-based solution.\502\ Even if
all markets centers were incentivized to voluntarily produce updated
statistics for competitive or reputational reasons (e.g., they may lose
business if their competitors provide reports and they do not), under
current rules, there is little incentive for all market centers to
agree on a standardized set of updated statistics. For example, market
centers may be incentivized to design ad hoc reports to highlight areas
where they believe they compare well to their competitors. Without a
standardized set of statistics, it could be difficult for market
participants to easily compare execution quality across market centers.
---------------------------------------------------------------------------

    \502\ In the Adopting Release, the Commission stated that, while
some market centers may have voluntarily made order execution
information privately available to independent companies or broker-
dealers, the information in these reports generally had not been
publicly disseminated. To the extent such information had been made
available, not all of it was useful or in a form that would allow
for cross-market comparisons. See Adopting Release, 65 FR 75414
(Dec. 1, 2000) at 75431.
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    Furthermore, it may be difficult for certain market participants to
compute accurate and relevant execution quality metrics from data
sources other than data collected pursuant to Rule 605, due to the lack
of granularity and significant time delay of many other publicly
available datasets, which can lead to imprecise or stale measures. This
limits certain market participants' ability to conduct analyses that
examine and compare execution quality across market centers and may
thereby further inform investors. Therefore, rulemaking to modernize
the information required by Rule 605 may prove beneficial.\503\
---------------------------------------------------------------------------

    \503\ See supra sections IV.A and IV.B describing, respectively,
the proposed amendments modifying the scope of orders covered and
information required to be disclosed pursuant to Rule 605.
---------------------------------------------------------------------------

    In addition to the need to modernize the content of Rule 605, it
may also be appropriate to expand the scope of entities that would be
required to prepare Rule 605 reports to include larger broker-
dealers.\504\ Broker-dealers and their customers are subject to a
classic principal-agent relationship in which the customer (the
principal) submits an order to a broker-dealer (the agent) to handle
its execution on the customer's behalf; however, information
asymmetries prevent the customer from being able to directly observe
the broker-dealer's handling of the customer's order.\505\ This limits
the extent to which broker-dealers need to compete for order flow on
the basis of

execution quality, which may result in lower execution quality for
their customers.
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    \504\ See supra note 1 defining ``larger broker-dealer'' as a
broker-dealer that meets or exceeds the ``customer account
threshold,'' as defined in proposed Rule 605(a)(7). See also supra
section III.A describing the proposed amendments expanding the scope
of Rule 605 reporting entities to include larger broker-dealers.
    \505\ Similar information asymmetries were recognized in the
Adopting Release, which stated that ``the decision about where to
route a customer order is frequently made by the broker-dealer, and
broker-dealers may make that decision, at least in part, on the
basis of factors that are unknown to their customers.'' See Adopting
Release, 65 FR 75414 (Dec. 1, 2000) at 75433.
---------------------------------------------------------------------------

    As with market centers, most broker-dealers also do not necessarily
have incentives to produce public and standardized execution quality
reports, and in that way are subject to the same market failures
identified in the Rule 605 Adopting Release and described above.
Furthermore, as discussed above in the context of market centers, even
if broker-dealers are incentivized to produce execution quality
reports, for example for marketing purposes or to protect against
reputation loss, there are few incentives for broker-dealers to provide
execution quality information that is standardized.\506\ As a result,
individual investors and, to some extent, institutional investors,\507\
have limited access to standardized information that could be used to
compare how execution quality varies across broker-dealers.\508\
Therefore, it may be appropriate to engage in rulemaking to expand Rule
605 reporting requirements to larger broker-dealers.
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    \506\ While the FIF Template provides a standardized template
for summary information about execution quality for retail investor
orders in exchange-listed stocks (see supra note 450), the
Commission understands that currently only one retail broker
voluntarily provides reports using the FIF Template. See also infra
notes 554-555 and accompanying text (discussing the limited number
of firms that have produced reports utilizing the FIF Template at
various points in time). There are also some broker-dealers that
disclose their own execution quality metrics on their respective
websites, but the disclosures tend to differ in ways that make them
difficult to compare, such as reporting different metrics, using
different methodologies, or different samples of stocks. See, e.g.,
Order Execution Quality, TD Ameritrade, available at https://www.tdameritrade.com/tools-and-platforms/order-execution.html;
Execution Quality, E*TRADE from Morgan Stanley, available at https://us.etrade.com/trade/execution-quality; Our Execution Quality,
Robinhood, available at https://robinhood.com/us/en/about-us/our-execution-quality/.
    \507\ While institutional investors are likely to have access to
alternative sources of execution quality information, such as Rule
606(b)(3) reports and transaction cost analysis, the information on
execution quality that is individually collected by institutional
investors is typically non-public and highly individualized, and
therefore limited to the execution quality obtained from broker-
dealers with which the institutional investors currently does
business. Since Rule 605 reports are public, institutional investors
could use these reports to assess the execution quality of the
broker-dealers and market centers with which they do not currently
do business. See infra section VII.C.1.(c)(2) for further
discussion.
    \508\ Institutional and individual investor customers of broker-
dealers may differ in their abilities to request execution quality
information from their broker-dealers. See infra sections
VII.C.1.(c)(1) and VII.C.1.(c)(2) for further discussion.
---------------------------------------------------------------------------

    While ``data available for downloading from a free website in a
consistent, usable, and machine-readable electronic format'' is
currently accessible under Rule 605,\509\ the data generated under Rule
605 is complex, and the raw data may be difficult for individual
investors to access and aggregate. Rule 605 reporting entities have
little incentive to voluntarily summarize their execution quality in a
standardized way. Instead, in summarizing their execution quality
information, reporting entities may be incentivized to select the
measures and aggregation methodologies that make them look the most
favorable. Therefore, absent regulation, there is little incentive for
Rule 605 reporting entities to coordinate on a standardized summary
report that could be used to easily and accurately compare execution
quality across reporting entities.\510\
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    \509\ See Adopting Release, 65 FR 75414 (Dec. 1, 2000) at 75436.
    \510\ See supra section V describing the proposed amendments
requiring Rule 605 reporting entities to prepare summary reports of
execution quality information.
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C. Baseline

    The baseline against which the costs, benefits, and the effects on
efficiency, competition, and capital formation of the proposed
amendments are measured consists of the regulatory baseline, which
frames investors' current access to execution quality information under
Rule 605, as well as market participants' present ability to use the
information contained in current Rule 605 reports to evaluate and
compare execution quality across reporting entities. Lastly, the
baseline consists of the extent to which Rule 605 currently promotes
competition on the basis of execution quality, both among broker-
dealers and among market centers.
1. Regulatory Baseline
(a) Current Rule 605 Disclosure Requirements
    Currently, Rule 605 requires market centers to make available, on a
monthly basis, standardized information concerning execution quality
for covered orders in NMS stocks.\511\ Under the Rule, aggregated
execution quality information on covered orders is reported for each
individual security, with the information for each security broken out
into multiple order type and size categories.\512\ This format serves
the purpose of allowing market participants to control for differences
in market centers' order flow characteristics when assessing execution
quality information, facilitating more apples-to-apples comparisons of
execution quality across market centers. This is because a particular
market center's order flow may be made up of a different mixture of
securities, order types, and order sizes, which may impact or constrain
that market center's overall execution quality level.\513\
---------------------------------------------------------------------------

    \511\ See 17 CFR 242.605.
    \512\ See supra notes 39-40 for a discussion and definitions of
these order categories.
    \513\ For example, larger order sizes are typically more
difficult to ``work'' than smaller order sizes, so the execution
quality information of a market center that tends to handle larger
order sizes would likely be more constrained than that of a market
center that tends to handle smaller order sizes.
---------------------------------------------------------------------------

    The execution quality information required to be disclosed in Rule
605 reports pertains to several different aspects of execution quality,
including execution prices, execution speeds, and fill rates.
Information on execution prices includes, for market orders and
marketable limit orders, the average effective spread,\514\ number of
shares executed at prices better than the quote, at the quote, or
outside the quote,\515\ as well as average dollar amount per share that
orders were executed better than the quote or outside the quote.\516\
Information on execution speeds includes, for all order types, the
cumulative number of shares executed within different time-to-execution
buckets \517\ and, for market and marketable limit orders, the share-
weighted average time to execution of orders executed better than the
quote, at the quote, or outside the quote.\518\ Information that can be
used to calculate fill rates includes, for all order types, the
cumulative number of shares of covered orders, the cumulative number of
shares of covered orders executed at the receiving market center, and
the cumulative number of shares of covered orders executed at any other
venue.\519\
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    \514\ See 17 CFR 242.605(a)(1)(ii)(A).
    \515\ See 17 CFR 242.605(a)(1)(ii)(B), 17 CFR
242.605(a)(1)(ii)(E) and 17 CFR 242.605(a)(1)(ii)(G), respectively.
    \516\ See 17 CFR 242.605(a)(1)(ii)(C) and 17 CFR
242.605(a)(1)(ii)(H), respectively.
    \517\ The time-to-execution categories currently defined in Rule
605 are shares executed from 0 to 9 seconds, shares executed from 10
to 29 seconds, shares executed from 30 to 59 seconds, shares
executed from 60 to 299 seconds, and shares executed from 5 to 30
minutes. See 17 CFR 242.605(a)(1)(i)(F)-(J).
    \518\ See 17 CFR 242.605(a)(1)(ii)(D), 17 CFR
242.605(a)(1)(ii)(F) and 17 CFR 242.605(a)(1)(ii)(I), respectively.
    \519\ See 17 CFR 242.605(a)(1)(i)(B), 17 CFR 242.605(a)(1)(i)(D)
and 17 CFR 242.605(a)(1)(i)(E). The fill rate can be calculated as
Fill Rate = (Cumulative Number of Shares Executed at Receiving
Market Center + Cumulative Number of Shares Executed at Other
Venues)/(Cumulative Number of Covered Shares).
---------------------------------------------------------------------------

    Market participants have access to public information about the
execution quality of market centers other than Rule 605. For example,
some

wholesalers and ATSs make additional order flow and execution quality
statistics other than those required under Rule 605 available either on
their websites or as part of their ATS-N filings.\520\ However, these
sources are either not standardized \521\ or are not available across
all market centers,\522\ such that Rule 605 is an important source of
standardized information about market center execution quality.
---------------------------------------------------------------------------

    \520\ If an ATS provides one or more of its subscribers with
aggregate platform-wide order flow and execution statistics that
were not otherwise required disclosures under Rule 605, that ATS is
required to either attach that information to its Form ATS-N, or
certify that the information is available on its website. See Item
26 of Form ATS-N, available at https://www.sec.gov//files/formats-n.pdf.
    \521\ For example, reports contain different execution quality
metrics or, if they contain the same execution quality metrics,
these metrics are calculated using different methodologies,
different samples of stocks, and/or different time horizons, making
it difficult to compare across reporting entities. For example, some
ATSs produce execution quality information on a monthly basis (see,
e.g., Unlocking Global Liquidity, UBS, available at https://www.ubs.com/global/en/investment-bank/electronic-trading/equities/unique-liquidity.html), while at least one ATS operator produces
reports on a quarterly basis (see, e.g., JPM-X & JPB-X U.S.
Quarterly Summary, J.P. Morgan, available at https://www.jpmorgan.com/solutions/cib/markets/jpm-x-jpb-x-us-quarterly-summary).
    \522\ While the FIF Template represents a standardized set of
execution quality statistics, only one wholesaler currently produces
reports using the FIF Template. See infra note 555.
---------------------------------------------------------------------------

    The Commission believes that standardized execution quality
information is relevant to many market participants, including to both
individual and institutional investors and their broker-dealers,\523\
who are subject to a principal-agent relationship in which an order
submitter (the principal) submits an order to an agent to handle on its
behalf, but information asymmetries prevent the principal from being
able to directly observe the agent's handling of the order. This can
create possible conflicts of interest, in which the agent's incentives
may not coincide with the interests of the principal.\524\ These
information asymmetries exist both between broker-dealers and their
customers, who do not directly observe their broker-dealers' handling
of their orders,\525\ and between market centers and broker-dealers,
who typically do not directly observe market centers' executions of
their routed orders. Rule 605 serves to alleviate these information
asymmetries by, first, giving broker-dealers access to information
about the execution quality of market centers, which they can use to
inform their routing decisions and, second, in conjunction with broker-
dealer routing information from Rule 606 reports,\526\ giving investors
access to information about the execution quality achieved by the
market centers to which their broker-dealers typically route.\527\
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    \523\ See infra sections VII.C.1.(c)(1) and VII.C.1.(c)(2) for
further discussions of how publicly available execution quality
information may be useful for both individual and institutional
investors.
    \524\ If there were no information asymmetries and the principal
could perfectly observe the agent's handling of its order, and if
there is competition among agents, then the principal-agent
relationship would not necessarily result in any conflicts of
interest as the principal would be able to directly observe the
agent's actions and switch to another agent.
    \525\ See supra note 505, noting that a similar principal-agent
problem was recognized in the Adopting Release.
    \526\ See infra section VII.C.2.(a)(1), which discusses issues
with the usage of Rule 606 broker-dealer routing information and
Rule 605 execution quality information to infer the execution
quality achieved by broker-dealers.
    \527\ Some market participants may have access to sources of
execution quality information that reduce these information
asymmetries and may serve as an alternative to Rule 605 data. See
infra section VII.C.1.(c) for a detailed discussion. Note that any
source of ex post execution quality information is unlikely to
eliminate this information asymmetry entirely, as it is likely
infeasible for any agent to perfectly observe ex ante or even in
real time how a principal will perform in executing their order.
---------------------------------------------------------------------------

    Information on the execution quality obtained by broker-dealers is
particularly important for investors. As broker-dealers that route
customer orders have many choices about where to route orders for
execution,\528\ their routing decisions affect the execution quality
that their customers' orders receive, leading to significant variations
in execution quality across broker-dealers. For example, a broker-
dealer may route a marketable IOC order to a market center that is not
posting any liquidity at the NBBO (in which case the order would be
cancelled), or a broker-dealer may route a NMLO to a market center that
is not attracting any trading interest (in which case the NMLO would
likely be cancelled at the end of day, if not earlier). The authors of
one recent academic working paper ran an experiment in which they
placed identical simultaneous market orders across various broker-
dealers, and found that the execution quality of these orders differed
significantly in terms of average price improvement and effective
spreads.\529\ The authors argue that these differences in execution
quality across broker-dealers are economically significant, as they
estimate that every basis point difference in execution quality is
equivalent to an annual cost to investors of $2.8 billion.\530\ Given
this evidence that there are significant differences in execution
quality across broker-dealers, without access to standardized
information about broker-dealer execution quality, it is difficult for
investors to compare these differences when choosing a broker-dealer.
---------------------------------------------------------------------------

    \528\ See infra section VII.C.3.(b)(1) for a discussion of
fragmentation in the market for trading services.
    \529\ See Christopher Schwarz, Brad M. Barber, Xing Huang,
Philippe Jorion & Terrance Odean, The `Actual Retail Price' of
Equity Trades (Aug. 28, 2022) available at https://ssrn.com/abstract=4189239 (retrieved from SSRN Elsevier database). The
authors find that this dispersion is due to off-exchange wholesalers
systematically giving different execution prices for the same trades
to different brokers.
    \530\ See id. at 24.
---------------------------------------------------------------------------

    Given that Rule 605 reports contain aggregated information, some
information asymmetries regarding the order execution quality achieved
at different market centers are not fully addressed by Rule 605 because
the principal is not able to use Rule 605 reports to observe the
execution quality that the agent achieved for the principal's
individual orders. However, the principal is able to receive a signal
of the execution quality that the agent has achieved for comparable
orders over a certain time period. This signal can be a useful proxy
that investors and their broker-dealers can use to assess and compare
the execution quality that they can expect to receive across market
centers, and there is evidence that Rule 605 reports have indeed been
used for this purpose. One academic study examining the introduction of
Rule 605 found that the routing of marketable order flow by broker-
dealers became more sensitive to changes in execution quality across
market centers after Rule 605 reports became available.\531\ The
authors attribute this effect to broker-dealers factoring in
information about the execution quality of market centers from Rule 605
reports when making their order routing decisions.
---------------------------------------------------------------------------

    \531\ See Boehmer et al.
---------------------------------------------------------------------------

(b) Current Rule 606 Disclosure Requirements
    Currently, under Rule 606, broker-dealers are required to identify
the venues, including market centers, to which they route customer
orders for execution.\532\ Specifically, with respect to held orders,
Rule 606(a)(1) requires broker-dealers to produce quarterly public
reports containing information about the venues to which the broker-
dealer regularly routed non-directed orders for execution, including
any payment relationship between the broker-dealer and the venue, such
as

any PFOF arrangements.\533\ In addition, Rule 606(b)(1) requires
broker-dealers to provide to their customers, upon request, reports
that include high-level customer-specific order routing information,
such as the identity of the venues to which the customer orders were
routed for execution in the prior six months and the time of the
transactions, if any, that resulted from such orders.\534\ For orders
submitted on a held basis, the reports required by Rule 606 do not
contain any execution quality information.
---------------------------------------------------------------------------

    \532\ See 17 CFR 242.606.
    \533\ See 17 CFR 242.606(a)(1). See also corresponding
discussion in section III.A, supra.
    \534\ See 17 CFR 242.606(a)(2). See also corresponding
discussion in section III.A, supra.
---------------------------------------------------------------------------

    When the Commission adopted the predecessor to Rule 606, it was
intended to supply investors with information on where their orders are
routed, which could be used along with information from Rule 605 about
the quality of execution from the market centers to which their orders
are routed in order to make more informed decisions with respect to
their orders.\535\ In theory, investors should be able to use Rule 606
reports to identify the market centers to which their broker-dealers
are routing orders, and then use Rule 605 to estimate the execution
quality offered by those market centers.\536\ These market centers'
aggregated execution quality metrics could then be used as a proxy for
the execution quality that broker-dealers achieved for their customers'
orders.
---------------------------------------------------------------------------

    \535\ See Adopting Release, 65 FR 75414 (Dec. 1, 2000) at 75435
(``Rule 11Ac1-6 is designed to address the complementary need for
broker-dealers to disclose to customers where their orders are
routed for execution. The primary objective of the rule is to afford
customers a greater opportunity to monitor their broker-dealer's
order routing practices. Supplied with information on where their
orders are routed, as well as information about the quality of
execution from the market centers to which their orders are routed,
investors will be able to make better informed decisions with
respect to their orders. The information also may assist investors
in selecting a broker-dealer.'').
    \536\ See infra section VII.C.2.(a)(1) for a discussion of
current issues with using information from Rule 606 reports to infer
the execution quality of broker-dealers.
---------------------------------------------------------------------------

    Following amendments to Rule 606 in 2018,\537\ broker-dealers are
subject to requirements under Rule 606 that provide information about
the execution quality achieved by their broker-dealers for not held
orders, which are typically used by institutional investors.\538\
Specifically, Rule 606(b)(3) requires broker-dealers to produce reports
pertaining to order handling upon the request of a customer that
places, directly or indirectly, one or more orders in NMS stocks that
are submitted on a not held basis, subject to a de minimis
exception.\539\ These reports include aggregated execution quality
metrics such as fill rate, percentage of shares executed at the
midpoint, and percentages of total shares executed that were priced on
the side of the spread more favorable to the order and on the side of
the spread less favorable to the order.\540\
---------------------------------------------------------------------------

    \537\ See supra note 60 and accompanying text for a discussion
of these amendments.
    \538\ An analysis included in the 2018 Rule 606 Amendments
Release looked at orders submitted from customer accounts of 120
randomly selected NMS stocks listed on NYSE during the sample period
of December 5, 2016, to December 9, 2016, consisting of 40 large-cap
stocks, 40 mid-cap stocks, and 40 small-cap stocks. The analysis
found that among the orders received from the institutional
accounts, about 69% of total shares and close to 39% of total number
of orders in the sample are not held orders, whereas among the
orders received from the individual accounts, about 19% of total
shares and about 12% of total number of orders in the sample are not
held orders. See 2018 Rule 606 Amendments Release, 83 FR 58338 (Nov.
19, 2018) at 58393. See also supra note 56 and accompanying text,
describing the Commission's understanding that held orders are
typically used by individual investors.
    \539\ See 17 CFR 242.606(b)(3). In addition, Rule 606(b)(5)'s
customer-level de minimis exception exempts broker-dealers from
providing upon request execution quality reports for customers that
traded on average each month for the prior six months less than
$1,000,000 of notional value of not held orders in NMS stocks
through the broker-dealer. See 17 CFR 242.606(b)(5).
    \540\ See 17 CFR 242.606(b)(3)(ii).
---------------------------------------------------------------------------

(c) Current Usage of Rule 605 Reports
    Rule 605 data is currently used by some market participants, such
as broker-dealers and investment advisers as part of their review of
execution quality. However, the use of this data by both individual and
institutional investors to directly evaluate and compare execution
quality across market centers is currently limited.
(1) Usage of Rule 605 Reports by Individual Investors
    It is likely that the extent to which individual investors directly
access Rule 605 reports is currently limited. Several market
participants have stated that Rule 605 reports have low usage among
individual investors, including at least one commenter to the
Commission's Concept Release on Equity Market Structure,\541\ and some
EMSAC committee members.\542\
---------------------------------------------------------------------------

    \541\ See, e.g., Letter from Daniel Keegan, Managing Director,
Citigroup Global Markets Inc. re Concept Release on Equity Market
Structure (Release No. 34-61358; File No. S7-02-10) (May 5, 2010)
(``Citigroup Letter II'') at 6.
    \542\ See supra note 112 and accompanying text.
---------------------------------------------------------------------------

    Rule 605 reports are designed to be machine-readable, rather than
human-readable. While machine-readable data is useful for facilitating
further processing and analysis,\543\ it is not readily usable by
market participants and other interested parties that may prefer to
review summary statistics, and is not easily consumable by market
participants who do not have the access to necessary software or
programming skills. This may limit the usability of Rule 605 reports
for individual investors in particular, who are less likely to have
access to these resources. In the Adopting Release, the Commission
anticipated that, rather than individual investors obtaining and
digesting Rule 605 reports themselves, independent analysts,
consultants, broker-dealers, the financial press, and market centers
would analyze the information and produce summaries that respond to the
needs of investors.\544\ Although the Commission is unable to observe
the full extent to which this has occurred, some third parties have
produced information based on Rule 605 reports that is meant for public
consumption. For example, data obtained from Rule 605 reports are used
by academics to study a variety of topics related to execution quality,
including liquidity measurement, exchange competition, zero commission
trading, and broker-dealer execution quality,\545\ and at least one
market participant used Rule 605 data in an analysis supporting its
letter to the Commission commenting on one national securities
exchange's registration application.\546\ Rule 605 data is also used in
the financial press.\547\
---------------------------------------------------------------------------

    \543\ See discussion in infra section VII.C.1.(c)(2).
    \544\ See Adopting Release, 65 FR 75414 (Dec. 1, 2000) at 75419.
    \545\ See, e.g., Ruslan Y. Goyenko, Craig W. Holden & Charles
Trzcinka, Do liquidity measures measure liquidity? 92 J. Fin. Econ.
153 (2009); Edward D. Watson & Donovan Woods, Exchange introduction
and market competition: The entrance of MEMX and MIAX, 54 Glo. Fin.
J. (2022) 100756; Pankaj K. Jain, Suchismita Mishra, Shawn
O'Donoghue & Le Zhao, Trading Volume Shares and Market Quality: Pre-
and Post-Zero Commissions (working paper Dec. 2, 2020), available at
https://ssrn.com/abstract=3741470 SSRN 3741470 (retrieved from SSRN
Elsevier database); Schwarz et al (2022).
    \546\ See, e.g., Letter from David Weisberger, Managing
Director, Markit, New York, New York Re: Investor's Exchange LLC
Form 1 Application; Release No. 34-75925; File No. 10-222 (Feb. 16,
2016), available at https://www.sec.gov/comments/10-222/10222-394.pdf.
    \547\ See, e.g., Bill Alpert ``Who Makes Money on Your Stock
Trades,'' Barron's, Feb. 28, 2015 (retrieved from Factiva database)
(stating that ``we ran each market maker's Rule 605 execution
reports through statistical-analysis scripts that we wrote in the
widely used open-source math software known as `R.' '').
---------------------------------------------------------------------------

    Unlike institutional investors,\548\ individual investors typically
have limited access to alternative sources of standardized execution
quality information that could be used to compare across broker-dealers
other than information obtained (directly or

indirectly) from Rule 605 reports.\549\ The requirement in Rule
606(b)(3) for broker-dealers to provide individualized reports of
execution quality to their customers upon request does not extend to
held orders, which are mostly used by individual investors,\550\ and
contains a customer-level de minimis exception that likely excludes
most individual investors.\551\ In addition, many individual investors
do not have access to the information or expertise required to
calculate their own execution quality metrics, which makes it difficult
for them to compare how execution quality varies across broker-
dealers.\552\
---------------------------------------------------------------------------

    \548\ See discussion in infra section VII.C.1.(c)(2).
    \549\ There are also some broker-dealers that disclose their own
execution quality metrics on their respective websites, but the
disclosures are not standardized and tend to differ in ways that
make them difficult to compare, such as reporting different metrics,
using different methodologies, or different samples of stocks. See
supra note 506.
    \550\ See supra note 538 describing an analysis showing that not
held orders made up only 19% of total shares and about 12% of total
number of orders among the sample of orders received from the
individual accounts.
    \551\ See supra note 539 describing the customer-level de
minimis exception of Rule 606(b)(5).
    \552\ See infra section VII.C.2.(a)(1) discussing several
analyses that find significant differences in execution quality
across retail brokers.
---------------------------------------------------------------------------

    One exception is the recent efforts by a few brokers-dealers and
wholesalers to make available voluntary summary disclosures of
execution quality in exchange-listed stocks for individual investors
using the FIF Template.\553\ Although the reports produced using the
FIF Template may be useful, this disclosure is voluntary, and only a
few firms are making or have made such disclosures. The Commission
understands that only three retail brokers began producing reports
using the FIF Template in 2015 on a quarterly basis, and that one of
these broker-dealers was acquired and stopped producing these reports
in 2017, and another stopped producing these reports in 2018, such that
only one retail broker currently produces reports using the FIF
Template.\554\ Likewise, the Commission understands that there is
currently only one wholesaler producing reports using the FIF
Template.\555\
---------------------------------------------------------------------------

    \553\ See supra note 450 and accompanying text for further
discussion of the FIF Template.
    \554\ See Retail Execution Quality Statistics, Financial
Information Forum, available at https://fif.com/tools/retail-execution-quality-statistics; Retail Execution Quality Statistics
Q2--2022, Fidelity, available at https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/FIF-FBS-retail-execution-quality-stats.pdf.
    \555\ See Retail Execution Quality Statistics, Financial
Information Forum, available at https://fif.com/tools/retail-execution-quality-statistics; Retail Execution Quality Statistics--
Wholesale Market Maker Perspective, Two Sigma, available at https://www.twosigma.com/businesses/securities/execution-statistics/. The
Commission is aware of at least two wholesalers that formerly
produced reports using the FIF Template, but stopped in Q3 2019.
---------------------------------------------------------------------------

(2) Usage of Rule 605 Reports by Institutional Investors
    The Commission preliminarily understands that, while the usage of
Rule 605 reports by institutional investors may be limited by several
factors, Rule 605 reports nevertheless contain information about
execution quality that is otherwise useful for institutional investors.
    First, institutional investors typically have access to alternative
sources of execution quality information. Many institutional investors
regularly conduct, directly or through a third-party vendor,
transaction costs analysis (``TCA'') of their orders to assess
execution quality against various benchmarks. Institutional investors
that perform their own in-house analyses of execution quality or obtain
analyses of execution quality from third-party vendors would be less
likely to rely on information from Rule 605 reports in order to
estimate the execution quality of their orders. Furthermore, the
requirement in Rule 606(b)(3) for broker-dealers to provide
individualized reports of execution quality of not held orders upon
request,\556\ which is most likely to be utilized by institutional
investors,\557\ provides institutional investors with another
alternative source of information about the execution quality of their
orders. While broker-dealers are currently required to provide their
customers only with execution quality information about their not held
orders under Rule 606(b)(3), which are not covered by Rule 605
reporting requirements, given the large size of most institutional
investors and their business, institutional investors may have
sufficient bargaining power such that broker-dealers have strong
incentives to provide them with this information about the execution
quality of their held orders when asked.
---------------------------------------------------------------------------

    \556\ See supra Section VIII.C.1.(b) discussing broker-dealer
reporting requirements under Rule 606.
    \557\ See supra note 538 discussing an analysis showing that
institutional investors are more likely than individual investors to
use not held orders. See also supra note 539 describing the
customer-level de minimis exception of Rule 606(b)(5).
---------------------------------------------------------------------------

    However, because Rule 605 reports are public, institutional
investors can use these reports to assess the execution quality of the
broker-dealers and market centers with which they do not currently do
business. The information on execution quality that is individually
collected by institutional investors is typically highly individualized
and non-public.\558\ Therefore, institutional investors would not be
able to use these individualized reports to compare their broker-
dealers' execution quality to that of broker-dealers with which they do
not currently have a relationship, or to examine the execution quality
of a market center to which their broker-dealers do not currently route
orders. Furthermore, any ad hoc reports that institutional investors
may receive from their broker dealers containing information about
their held orders are unlikely to be sufficiently standardized to allow
for easy comparisons across broker-dealers or market centers.
---------------------------------------------------------------------------

    \558\ In 2018, the Commission proposed but ultimately did not
adopt a requirement that broker-dealers that handle orders subject
to the customer-specific disclosures required by Rule 606(b)(3)
issue a quarterly public aggregated disclosure on order handling.
See 2018 Rule 606 Amendments Release, 83 FR 58338 (Nov. 19, 2018) at
58369.
---------------------------------------------------------------------------

    Second, Rule 605 reports only contain information about the
execution quality of investors' held orders. Not held orders, which are
excluded from the definition of ``covered order,'' \559\ are excluded
from Rule 605 metrics.\560\ As many institutional orders tend to be not
held,\561\ this may limit the extent to which Rule 605 reports contain
relevant information for institutional investors. Rule 605 reports may
contain information that is relevant for institutional investors,
however, as large institutional ``parent'' orders are often split into
multiple smaller ``child'' orders, which may be handled as held orders
and reflected in Rule 605 reports. This would allow institutional
investors to use the information in Rule 605 reports to evaluate the
performances of their broker-dealers. For example, institutional
investors may incorporate information from Rule 605 reports into their
TCA when evaluating the performance of their broker-dealers'

Smart Order Router (``SOR'') algorithms.\562\
---------------------------------------------------------------------------

    \559\ Currently there are no requirements for aggregated
information about the execution quality of not held orders to be
made public. The Commission believes that the potential ability for
customers and broker-dealers to use aggregated order handling
information for not held orders to better understand broker-dealers'
routing behavior or compare broker-dealers' order routing
performance is limited as a result of the disparate behavior of
customers when using not held orders. See, e.g., 2018 Rule 606
Amendments Release, 83 FR 58338 (Nov. 19, 2018) at 58369-70, in
which the Commission stated that, in contrast to held orders, not
held order flow is diverse and customers may provide specific order
handling instructions to their broker-dealers, limit the order
handling discretion of their broker-dealers, or have specific needs
that impact the broker-dealers' handling of these orders. See also
supra note 63 for further discussion.
    \560\ See supra note 60 and accompanying text discussing broker-
dealers requirements under Rule 606(b)(3) to provide individualized
reports of execution quality upon request for not held orders.
    \561\ See supra note 538 discussing an analysis showing that
institutional investors are more likely than individual investors to
use not held orders.
    \562\ See infra section VII.C.3.(a)(1)(b) discussing the use of
SORs by broker-dealers to split a large institutional ``parent''
order into multiple ``child'' orders in a way that achieves the best
execution for the parent order.
---------------------------------------------------------------------------

    The Commission believes that, due to their typically larger
resources, institutional investors may be more likely than individual
investors to access Rule 605 reports directly. Rule 605 reports are
machine-readable, which makes them useful for facilitating further
processing and analysis by market participants that have access to the
resources necessary for handling large amounts of raw data, such as
many institutional investors. However, the Commission understands some
institutional investors may currently use aggregated statistics or
summaries of Rule 605 reports prepared by third parties, who make these
reports available, possibly for a fee.
(3) Other Users of Rule 605 Reports
    While the direct usage of Rule 605 reports by individual and
institutional investors is likely limited, Rule 605 reports are
currently used by other market participants, including analysts and
researchers,\563\ as well as financial service providers, such as
investment advisers and broker-dealers, that are subject to best
execution obligations.
---------------------------------------------------------------------------

    \563\ See, e.g., supra notes 545-547, describing the use of Rule
605 data in academic literature, in comment letters related to
Commission and SRO rulemaking, and the financial press.
---------------------------------------------------------------------------

    In particular, the Commission understands that investment advisers
and broker-dealers typically use Rule 605 reports as part of their
internal review of execution quality. As fiduciaries, investment
advisers owe their clients a duty of care and a duty of loyalty.\564\
The duty of care includes, among other things, the duty to seek best
execution of a client's transactions where the investment adviser has
the responsibility to select broker-dealers to execute client
trades.\565\ Broker-dealers also have an obligation to seek best
execution of customer orders.\566\ The Commission understands that
these financial service providers often have Best Execution Committees
that periodically review order execution quality, and typically use
Rule 605 reports as part of their review.\567\
---------------------------------------------------------------------------

    \564\ See Investment Advisers Act Release No. 5248 (June 5,
2019), 84 FR 33669 (July 12, 2019) (Commission Interpretation
Regarding Standard of Conduct for Investment Advisers) (``IA
Fiduciary Interpretation'').
    \565\ See, e.g., Investment Advisers Act Rule 206(3)-2(c). The
Commission previously has described the contours of an investment
adviser's duty to seek best execution. IA Fiduciary Interpretation,
84 FR 33669 (Jul. 12, 2019) at 33674-75. In addition, the Commission
has brought a variety of enforcement actions against registered
investment advisers in connection with their alleged failure to
satisfy their duty to seek best execution. See, e.g., In the Matter
of Aventura Capital Management, LLC, Investment Advisers Act Release
No. 6103 (Sept. 6, 2022) (settled action); In the Matter of Madison
Avenue Securities, LLC, Investment Advisers Act Release No. 6036
(May 31, 2022) (settled action).
    \566\ See supra note 69 and accompanying text for further
discussion of broker-dealers' best execution requirements.
    \567\ See, e.g., Practical Considerations for Your `Best
Execution Compliance Program', Ernst & Young (Mar. 2017), available
at http://documents.sifma.org/uploadedFiles/Events/2017/Compliance_and_Legal_Society_Annual_Seminar/EY_CL%20Annual_Marketing%20PDF.pdf (stating the broker-dealers rely
on ``traditional 605 metrics'' for best execution review). See also
Citigroup Letter II at 7 (stating that, ``under the current market
structure, broker-dealers closely review and analyze Rule 605
statistics as part of their regular and rigorous review for best
execution'').
---------------------------------------------------------------------------

(d) Rules Addressing Consolidated Market Data
    In 2020, the Commission adopted a new rule and amended existing
rules to establish a new infrastructure for consolidated market
data,\568\ and the regulatory baseline includes these changes to the
current arrangements for consolidated market data. However, as
discussed in more detail below, the MDI Rules have not been
implemented, and so they have not yet affected market practice. As a
result, the data used to measure the baseline below reflects the
regulatory structure in place for consolidated market data prior to the
implementation of the MDI Rules. Accordingly, this section first will
briefly summarize the regulatory structure for consolidated market data
prior to the implementation of the MDI Rules. It then will discuss the
current status of the implementation of the MDI Rules and provide an
assessment of the potential effects that the implementation of the MDI
Rules could have on the baseline estimations.
---------------------------------------------------------------------------

    \568\ See supra section IV.B.5, discussing the MDI Rules.
---------------------------------------------------------------------------

(1) Regulatory Structure for Consolidated Market Data Prior to the MDI
Rules
    Consolidated market data is made widely available to investors
through the national market system, a system set forth by Congress in
section 11A of the Exchange Act \569\ and facilitated by the Commission
in Regulation NMS.\570\ Market data is collected by exclusive
SIPs,\571\ which consolidate that information and disseminate an NBBO
and last sale information. For quotation information, only the 16
national securities exchanges that currently trade NMS stocks provide
quotation information to the SIPs for dissemination in consolidated
market data.\572\ FINRA has the only SRO display-only facility (the
Alternative Display Facility, or ADF). No broker-dealer, however,
currently uses it to display quotations in NMS stocks in consolidated
market data. Disseminated quotation information includes each
exchange's current highest bid and lowest offer and the shares
available at those prices, as well as the NBBO.
---------------------------------------------------------------------------

    \569\ See supra note 3 and accompanying text.
    \570\ 17 CFR 242.600 through 242.614.
    \571\ See supra note 195 and accompanying text.
    \572\ Currently, these national securities exchanges are: Cboe
BYX Exchange, Inc. (``Cboe BYX''); Cboe BZX Exchange, Inc. (``Cboe
BZX''); Cboe EDGA Exchange, Inc. (``Cboe EDGA''); Cboe EDGX
Exchange, Inc. (``Cboe EDGX''); Investors Exchange LLC (``IEX'');
Long-Term Stock Exchange, Inc. (``LTSE''); MEMX LLC (``MEMX''); MIAX
Pearl, LLC (``MIAX PEARL''); Nasdaq BX, Inc. (``Nasdaq BX''); Nasdaq
PHLX LLC (``Nasdaq Phlx''); The Nasdaq Stock Market LLC
(``Nasdaq''); NYSE; NYSE American LLC (``NYSE American''); NYSE
Arca, Inc. (``NYSE Arca''); NYSE Chicago, Inc. (``NYSE CHX''); and
NYSE National, Inc. (``NYSE National''). The Commission approved
rules proposed by BOX Exchange LLC (``BOX'') for the listing and
trading of certain equity securities that would be NMS stocks on a
facility of BOX known as BSTX LLC (``BSTX''), but BSTX is not yet
operational. See Securities Exchange Act Release Nos. 94092 (Jan.
27, 2022), 87 FR 5881 (Feb. 2, 2022) (SR-BOX-2021-06) (approving the
trading of equity securities on the exchange through a facility of
the exchange known as BSTX); 94278 (Feb. 17, 2022), 87 FR 10401
(Feb. 24, 2022) (SR-BOX-2021-14) (approving the establishment of
BSTX as a facility of BOX). BSTX cannot commence operations as a
facility of BOX until, among other things, the BSTX Third Amended
and Restated Limited Liability Company Agreement approved by the
Commission as rules of BOX is adopted. Id. at 10407.
---------------------------------------------------------------------------

    For transaction information, currently all of the national
securities exchanges that trade NMS stocks and FINRA provide real-time
transaction information to the SIPs for dissemination in consolidated
market data. Such information includes the symbol, price, size, and
exchange of the transaction, including odd-lot transactions.
(2) Unimplemented Market Data Infrastructure Rules
    Among other things, the unimplemented MDI Rules update and expand
the content of consolidated market data to include: (1) certain odd-lot
information; \573\ (2) information about certain orders that are
outside of an exchange's best bid and best offer (i.e., certain depth
of book data); \574\ and (3) information about orders that are
participating in opening, closing, and

other auctions.\575\ The Rules also introduce a four-tiered definition
of round lot that is tied to a stock's average closing price during the
previous month.\576\ For stocks with prices greater than $250, a round
lot is defined as consisting of between 1 and 40 shares, depending on
the tier.\577\ The MDI Rules also introduce a decentralized
consolidation model under which competing consolidators, rather than
the existing exclusive SIPs, will collect, consolidate, and disseminate
certain NMS information.\578\
---------------------------------------------------------------------------

    \573\ See supra note 422 and accompanying text for further
discussion of changes to the availability of odd-lot information
under the MDI Rules.
    \574\ See MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021) at
18625.
    \575\ See id. at 18630.
    \576\ See id. at 18617.
    \577\ See id. The Commission adopted a four-tiered definition of
round lot: 100 shares for stocks priced $250.00 or less per share,
40 shares for stocks priced $250.01 to $1,000.00 per share, 10
shares for stocks priced $1,000.01 to $10,000.00 per share, and 1
share for stocks priced $10,000.01 or more per share.
    \578\ See id. at 18637.
---------------------------------------------------------------------------

    In the MDI Adopting Release, the Commission established a
transition period for the implementation of the MDI Rules.\579\ The
``first key milestone'' for the transition period was to be an
``amendment of the effective national market system plan(s),'' which
``must include the fees proposed by the plan(s) for data underlying''
consolidated market data (``Proposed Fee Amendment'').\580\ The
compliance date for the Infrastructure Rules was set with reference to
the date that the Commission approved the Proposed Fee Amendment.\581\
The end of the transition period was to be at least two years after the
date the Commission approved the Proposed Fee Amendment.\582\
---------------------------------------------------------------------------

    \579\ See id. at 18698-18701.
    \580\ See id. at 18699.
    \581\ See, e.g., id. at 18700 n. 355 (compliance date for
amendment to Rule 603(b) to be ``180 calendar days from the date of
the Commission's approval of the amendments to the effective
national market system plan(s)'').
    \582\ See id. at 18700-18701 (specifying consecutive periods of
90 days, 90 days, 90 days, 180 days, 90 days, a period for filing
and approval of another national market system plan amendment to
effectuate the cessation of the operations of the SIPS (with a 300-
day maximum time for Commission action after filing to approve or
disapprove the filing), and a 90-day period).
---------------------------------------------------------------------------

    The MDI Adopting Release did not specify a process for continuing
the transition period if the Commission disapproved the Proposed Fee
Amendment. On September 21, 2022, the Commission disapproved the
Proposed Fee Amendment, because the Participants had not demonstrated
that the proposed fees were fair, reasonable and not unreasonably
discriminatory.\583\ Accordingly, there currently is no date to begin
the at-least-two-year period for implementation of the MDI Rules, and
there is no date that can be reasonably estimated for the
implementation of the MDI Rules to be completed.
---------------------------------------------------------------------------

    \583\ Securities Exchange Act Release No. 95851 (Sept. 21, 2022)
(Order Disapproving the Twenty-Fifth Charges Amendment to the Second
Restatement of the CTA Plan and Sixteenth Charges Amendment to the
Restated CQ Plan).
---------------------------------------------------------------------------

    Given that the MDI Rules have not yet been implemented, they have
not affected market practice and therefore data that would be required
for a comprehensive quantitative analysis of a baseline that includes
the effects of the MDI Rules is not available. It is possible that the
baseline (and therefore the economic effects relative to the baseline)
could be different once the MDI Rules are implemented. The following
discussion reflects the Commission's assessment of the anticipated
economic effects of the MDI Rules described in the MDI Adopting Release
as they relate to the baseline for this proposal.\584\
---------------------------------------------------------------------------

    \584\ See MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021) at
18741-18799.
---------------------------------------------------------------------------

    The Commission anticipated that the new round lot definition will
result in narrower NBBO spreads for most stocks with prices greater
than $250 because, for these stocks, fewer odd-lot shares will need to
be aggregated together (possibly across multiple price levels \585\) to
form a round lot and qualify for the NBBO.\586\ The reduction in
spreads will be greater in higher-priced stocks because the definition
of a round lot for these stocks will include fewer shares, such that
even fewer odd-lot shares will need to be aggregated together.\587\
This could cause statistics that are measured against the NBBO to
change because they will be measured against the new, narrower NBBO.
For example, execution quality statistics on price improvement for
higher-priced stocks may show a reduction in the number of shares of
marketable orders that received price improvement because price
improvement will be measured against a narrower NBBO. In addition, the
Commission anticipated that the NBBO midpoint in stocks priced higher
than $250 could be different under the MDI Rules than it otherwise
would be, resulting in changes in the estimates for statistics
calculated using the NBBO midpoint, such as effective spreads. In
particular, at times when bid odd-lot quotations exist within the
current NBBO but no odd-lot offer quotations exist (and vice versa),
the midpoint of the NBBO resulting from the rule will be higher than
the current NBBO midpoint.\588\ More broadly, the Commission
anticipated that the adopted rules will have these effects whenever the
new round lot bids do not exactly balance the new round lot offers.
However, the Commission stated that it does not know to what extent or
direction such odd-lot imbalances in higher priced stocks currently
exist, so it is uncertain of the extent or direction of the
change.\589\
---------------------------------------------------------------------------

    \585\ The calculation of the NBBO includes odd-lots that, when
aggregated, are equal to or greater than a round lot. Under CFR
242.600(b)(21)(ii), ``such aggregation shall occur across multiple
prices and shall be disseminated at the least aggressive price of
all such aggregated odd-lots.'' For example, if there is one 50-
share bid at $25.10, one 50-share bid at $25.09, and two 50-share
bids at $25.08, the odd-lot aggregation method would show a
protected 100-share bid at $25.09.
    \586\ For example, if there is one 20-share bid at $250.10, one
20-share bid at $250.09, and two 50-share bids at $250.08, prior to
MDI the NBB would be $250.08, as even aggregated together the odd
lot volume would not add up to at least a round lot. After MDI, the
NBB would be $25.09, as the odd-lot aggregation method would show a
protected 40-share round lot bid at $25.09.
    \587\ See supra note 577. An analysis in the MDI Adopting
Release showed that the new round lot definition caused a quote to
be displayed that improved on the current round lot quote 26.6% of
the time for stocks with prices between $250.01 and $1,000, and
47.7% of the time for stocks with prices between $1,000.01 and
$10,000. See MDI Adopting Release, 86 FR at 18743.
    \588\ For example, if the NBB is $260 and the NBO is $260.10,
the NBBO midpoint is $260.05. Under the adopted rules a 40 share buy
quotation at $260.02 will increase the NBBO midpoint to $260.06.
Using this new midpoint, calculations of effective spread will be
lower for buy orders, but will be higher for sell orders.
    \589\ See MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021) at
18750.
---------------------------------------------------------------------------

    The Commission also anticipated that the MDI Rules could result in
a smaller number of shares at the NBBO for most stocks in higher-priced
round lot tiers.\590\ To the extent that this occurs, there could be an
increase in the frequency with which marketable orders must walk the
book to execute. This would affect statistics that are calculated using
consolidated depth information, such as measures meant to capture
information about whether orders received an execution of more than the
displayed size at the quote, i.e., ``size improvement.''
---------------------------------------------------------------------------

    \590\ However, this effect will depend on how market
participants adjust their order submissions. See id. at 18746 for
further discussion.
---------------------------------------------------------------------------

    The MDI Rules may also result in a higher number of odd-lot trades,
as the inclusion of odd-lot quotes that may be priced better than the
current NBBO in consolidated market data may attract more trading
interest from market participants that previously did not have access
to this information.\591\ However, the magnitude of this effect depends
on the extent to which market participants who rely solely on SIP data
and lack information on odd-lot quotes choose to receive the odd-lot
information and trade on it. The Commission states in the MDI Adopting

Release that it believes it is not possible to observe this willingness
to trade with existing market data.\592\
---------------------------------------------------------------------------

    \591\ See id. at 18754.
    \592\ See id.
---------------------------------------------------------------------------

    The MDI Rules may have implications for broker-dealers' order
routing practices. For those market participants that rely solely on
SIP data for their routing decisions and that choose to receive the
expanded set of consolidated market data, the Commission anticipated
that the additional information contained in consolidated market data
will allow them to make more informed order routing decisions. This in
turn would help facilitate best execution, which would reduce
transaction costs and increase execution quality.\593\
---------------------------------------------------------------------------

    \593\ See id. at 18725.
---------------------------------------------------------------------------

    The MDI Rules may also result in differences in the baseline
competitive standing among different trading venues, for several
reasons. First, for stocks with prices greater than $250, the
Commission anticipated that the new definition of round lots may affect
order flows as market participants who rely on consolidated data will
be aware of quotes at better prices that are currently in odd-lot
sizes, and these may not be on the same trading venues as the one that
has the best 100 share quote.\594\ Similarly, it anticipated that
adding information on odd-lot quotes priced at or better than the NBBO
to expanded core data may cause changes to order flow as market
participants take advantage of newly visible quotes.\595\ However, the
Commission stated that it was uncertain about the magnitude of both of
these effects.\596\ To the extent that it occurs, a change in the flow
of orders across trading venues may result in differences in the
competitive baseline in the market for trading services.
---------------------------------------------------------------------------

    \594\ See id. at 18744.
    \595\ See MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021) at
18754.
    \596\ See id. at 18745, 18754.
---------------------------------------------------------------------------

    Second, national securities exchanges and ATSs have a number of
order types that are based on the NBBO, and so the Commission
anticipated that the changes in the NBBO caused by the new round lot
definitions may affect how these order types perform and could also
affect other orders with which they interact.\597\ The Commission
stated that these interactions may affect relative order execution
quality among different trading platforms, which may in turn affect the
competitive standing among different trading venues, with trading
venues that experience an improvement/decline in execution quality
attracting/losing order flow.\598\ However, the Commission stated that
it was uncertain of the magnitude of these effects.\599\
---------------------------------------------------------------------------

    \597\ See id. at 18748.
    \598\ See id.
    \599\ See id.
---------------------------------------------------------------------------

    Third, the Commission anticipated that, as the NBBO narrows for
securities in the smaller round lot tiers, it may become more difficult
for the retail execution business of wholesalers to provide price
improvement and other execution quality metrics at levels similar to
those provided under a 100 share round lot definition.\600\ To the
extent that wholesalers are held to the same price improvement
standards by retail brokers in a narrower spread environment, the
wholesalers' profits from executing individual investor orders might
decline,\601\ and to make up for lower revenue per order filled in a
narrower spread environment, wholesalers may respond by changing how
they conduct their business in a way that may affect retail brokers.
However, the Commission stated that it was uncertain as to how
wholesalers may respond to the change in the round lot definition, and,
in turn, how retail brokers may respond to those changes, and so was
uncertain as to the extent of these effects.\602\ If wholesalers do
change how they conduct business, it may impact wholesalers'
competitive standing in terms of the execution quality offered,
particularly to individual investor orders.
---------------------------------------------------------------------------

    \600\ See id. at 18747.
    \601\ Individual investor orders typically feature lower adverse
selection than other types of orders, such as institutional orders.
See infra note 608 and accompanying text, describing how it is
generally more profitable for any liquidity provider, including
wholesalers, to execute against orders with lower adverse selection
risk.
    \602\ See MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021) at
18748.
---------------------------------------------------------------------------

    Where implementation of the above-described MDI Rules may affect
certain numbers in the baseline, the description of the baseline below
notes those effects.
2. Current Rule 605 Disclosure Requirements
    The Commission believes that there are several areas where market
participants' current access to information about execution quality
under Rule 605 could be improved. Specifically, currently broker-
dealers that are not market centers are not required to report under
Rule 605, which limits market participants' ability to assess and
compare the execution quality that broker-dealers obtain for their
customers. Furthermore, changes in equity market conditions and
technological advancements since the Rule was adopted in 2000, such as
an increase in the speed of trading, have decreased the relevance of
some of the information contained in Rule 605 reports.\603\
---------------------------------------------------------------------------

    \603\ See supra notes 12-16 and accompanying text for further
discussion.
---------------------------------------------------------------------------

(a) Scope of Reporting Entities Under Current Rule 605 Reporting
Requirements
    The current scope of entities that are required to report under
Rule 605 does not include broker-dealers that only route customer
orders externally, rather than executing customer orders internally,
because they do not meet the definition of market center. As a result,
it is difficult for market participants to use the execution quality
statistics that are currently available to compare execution quality
across these broker-dealers. Furthermore, to the extent that firms that
operate two separate market centers co-mingle execution quality
information about multiple market centers in Rule 605 reports, this
would make it difficult for market participants to assess the execution
quality of each market individually.
(1) Broker-Dealers
    Currently, broker-dealers that are not market centers are not
required to prepare Rule 605 reports,\604\ which the Commission
believes limits market participants' ability to assess and compare the
execution quality that broker-dealers obtain for their customers.
---------------------------------------------------------------------------

    \604\ A broker-dealer may currently be subject to Rule 605
reporting requirements to the extent that the broker-dealer is
acting as or operates a market center. However, such reports are
required to cover only the orders that the broker-dealer handled
within its capacity as a market center. See supra notes 179-180 and
accompanying text.
---------------------------------------------------------------------------

    Rule 605 and Rule 606 operate together to allow investors to
evaluate what happens to their orders after the investors submit their
orders to a broker-dealer for execution.\605\ If a market center's Rule
605 reports are representative of the aggregate execution quality that
any given broker-dealer receives from that market center, then a
customer of a broker-dealer can use that broker-dealer's Rule 606
reports to identify the venues to which the broker-dealer regularly
routes orders for execution and use Rule 605 reports to get information
on aggregate order
---------------------------------------------------------------------------

    \605\ See supra note 141 and accompanying text.

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

execution quality at those market centers.\606\ However, if broker-
dealers receive different execution quality from a given market center,
combining Rule 606 and Rule 605 data would not be informative about the
execution quality of individual broker-dealers' average execution
quality. This is because, since a market center's Rule 605 report is
aggregated across all of its broker-dealer customers, it is not
possible to determine how execution quality varies across broker-
dealers at a particular market center.\607\
---------------------------------------------------------------------------

    \606\ See supra section VII.C.1.(b) for a discussion of broker-
dealers' current reporting requirements under Rule 606.
    \607\ For example, consider two broker-dealers, Broker-Dealer 1
and Broker-Dealer 2, which both route orders to a market center
(``Market Center A'') according to these broker-dealers' Rule 606
reports. Assume that the orders routed by Broker-Dealer 1 receive
consistently below-average execution quality from the wholesaler,
while the orders routed by Broker-Dealer 2 receive consistently
above-average execution quality. If a customer of Broker-Dealer 1
were to examine Market Center A's Rule 605 report to get a sense of
the average execution quality that their Broker-Dealer achieves for
their orders, the customer would see only the execution quality
statistics aggregated across Broker-Dealers 1 and 2, which would
likely reveal that Market Center A offers about average levels of
execution quality. However, this would not reveal the worse
execution quality that Broker-Dealer 1, and therefore the customer
of Broker-Dealer 1, is receiving from the market center.
---------------------------------------------------------------------------

    To explore this idea, an analysis was performed examining whether
wholesalers, which know the identities of the broker-dealers who route
orders to them, provide different execution quality to different
broker-dealers because of differences in characteristics of their order
flows: specifically, adverse selection risk. All else equal, it is
generally more profitable for any liquidity provider, including
wholesalers, to execute against orders with lower adverse selection
risk, due to the reduced risk that prices will move against the
liquidity provider.\608\ Therefore, wholesalers may provide better
execution quality to retail brokers whose order flow exhibits lower
adverse selection risk, e.g., in order to attract further order flow
from that retail broker. Accordingly, a sample of CAT data \609\
between January 1, 2022 and March 31, 2022 in NMS common stocks and
ETFs was evaluated to see if execution quality \610\ that retail
brokers received from wholesalers differed based on the adverse
selection risk of the broker-dealers' order flow,\611\ as measured
using price impact.\612\ Retail brokers were grouped into quintiles
based on the weighted average percentage price impact of their order
flow.
---------------------------------------------------------------------------

    \608\ See, e.g., David Easley, Nicholas M. Kiefer & Maureen
O'Hara, Cream-skimming or profit-sharing? The curious role of
purchased order flow, 51 J. Fin. 811 (1996).
    \609\ This Commission analysis uses CAT data to examine the
execution quality of marketable orders in NMS Common stocks and ETFs
that belonged to accounts with a CAT account type of ``Individual
Customer'' and that originated from a broker-dealer MPID that
originating orders from 10,000 or more unique ``Individual
Customer'' accounts during January 2022. The number of unique
``Individual Customer'' accounts associated with each MPID was
calculated as the number for unique customer account identifiers
with an account customer type of ``Individual Customer'' that
originated at least one order during the month of January 2022.
Fifty-eight (58) broker-dealer MPIDs were associated with retail
brokers originated orders from 10,000 or more unique Individual
Customer accounts in January 2022. Account type definitions are
available in Appendix G to the CAT Reporting Technical
Specifications for Industry Members (https://catnmsplan.com/), under
the field name ``accountHolderType.'' Account types represent the
beneficial owner of the account for which an order was received or
originated, or to which the shares or contracts are allocated.
Possible types are: Institutional Customer, Employee, Foreign,
Individual Customer, Market Making, Firm Agency Average Price, Other
Proprietary, and Error. An Institutional Customer account is defined
by FINRA Rule 4512(c) as a bank, investment adviser, or any other
person with total assets of at least $50 million. An Individual
Customer account means an account that does not meet the definition
of an ``institution'' and is also not a proprietary account.
Therefore, the CAT account type ``Individual Customer'' may not be
limited to individual investors because it includes natural persons
as well as corporate entities that do not meet the definitions for
other account types. The Commission restricted that analysis to
MPIDs that originated orders from 10,000 or more ``Individual
Customer'' accounts in order to ensure that these MPIDs are likely
to be associated with retail brokers to help ensure that the sample
is more likely to contain marketable orders originating from
individual investors.
    \610\ Measures of execution quality in this analysis include the
percentage effective half-spread and the average E/Q ratio.
Percentage effective half-spread is the weighted average of the
percentage effective half spread (measured as (execution price--NBBO
midpoint at time of order receipt)/NBBO midpoint at time of order
receipt). E/Q ratio is the weighted average of the ratio of each
transaction's effective spread divided by its quoted spread at the
time of order receipt. Time of order receipt is defined as the time
the wholesaler first receives the order. The NBBO is based on
consolidated market data feed. Weighted averages are calculated by
calculating the share weighted value at the individual stock level
over the sample (i.e., weighting at the stock level based on the
number of shares executed for transactions in the individual stock)
and then weighting across stocks based on their total dollar
transaction volume during the sample period (i.e., using the stock's
total dollar trading volume as the weight when averaging the share
weighted average stock values).
    \611\ The analysis employed filters to clean the data and
account for potential data errors. Retail brokers' fractional share
orders with share quantity less than one share were excluded from
the analysis. The analysis included market and marketable limit
orders that were under $200,000 in value and that originated from
one the 58 retail broker MPIDs and were received by a market center
that was associated with one of the six wholesalers CRD numbers
(FINRA's Central Registration Depository number) during some point
in the order's lifecycle. Orders that were received by the
wholesaler or executed outside of normal market hours were excluded.
Orders were also excluded if they had certain special handling codes
so that execution quality statistics would not be skewed by orders
being limited in handling by special instructions (e.g., pegged
orders, stop orders, post only orders, etc.) Orders identified in
CAT as Market and Limit orders with no special handling codes or one
of the following special handling codes were included in the
analysis: NH (not held), CASH (cash), DISQ (display quantity), RLO
(retail liquidity order), and DNR (do not reduce). These special
handling codes were identified based on their common use by retail
brokers and descriptions of their special handling codes. The
marketability of a limit order was determined based on the
consolidated market data feed NBBO at the time a wholesaler first
receives the order. Limit orders that were not marketable were
excluded. The dollar value of an order was determined by multiplying
the order's number of shares by either its limit price, in the case
of a limit order, or by the midpoint of the consolidated market data
feed NBBO at the time the order was first received by a wholesaler,
in the case of a market order. The analysis includes NMS Common
Stocks and ETFs (identified by security type codes of `A' and `ETF'
in NYSE TAQ data) that are also present in CRSP data from CRSP 1925
US Indices Database and CRSP 1925 US Stock Database, Ctr. Rsch. Sec.
Prices, U. Chi. Booth Sch. Bus. (2022). Price improvement, effective
spreads, realized spreads, quoted spreads, and price impacts were
winsorized if they were greater than 20% of a stock's VWAP during a
stock-week.
    \612\ By measuring the difference between the transaction price
and the prevailing market price some fixed period of time after the
transaction (e.g., one minute), price impact measures the extent of
adverse selection costs faced by a liquidity provider. For example,
if a liquidity provider provides liquidity by buying shares from a
trader who wants to sell, thereby accumulating a positive inventory
position, if the liquidity provider wants to unwind this inventory
position by selling shares in the market, they will incur a loss if
the price has fallen in the meantime. In this case, the price impact
measure will be positive, reflecting the liquidity provider's
exposure to adverse selection costs. In this analysis, percentage
price impact is the weighted average of the percentage one minute
price impact half spread (measured as (NBBO midpoint one minute
after execution--NBBO midpoint at time of order receipt)/NBBO
midpoint at time of order receipt). See supra note 610 for a
definition of the time of order receipt and information about how
weighted averaged were calculated in this analysis.
---------------------------------------------------------------------------

    Table 3 shows that the execution quality that retail brokers
received from wholesalers systematically decreases as the adverse
selection risk of their order flow increases, such that retail brokers
with orders with higher average adverse selection risk systematically
receive worse execution quality in the form of higher average
percentage effective half-spreads and higher average E/Q ratios (i.e.,
lower price improvement) as

compared to broker-dealers with orders with lower average adverse
selection risk.\613\ This highlights that wholesalers provide different
execution quality to different retail brokers, in this case depending
on the adverse selection risk of their orders. This is likely to have a
large effect on the execution quality received by retail brokers, as an
analysis of Rule 606 data found that retail brokers route more than 87%
of the individual investor orders that they handle to wholesalers.\614\
However, since a wholesaler's Rule 605 report is aggregated across all
of its broker-dealer customers, this variation in execution quality
across retail brokers cannot be determined by matching its Rule 605
report to broker-dealers' routing information from their Rule 606
reports.
---------------------------------------------------------------------------

    \613\ This analysis uses data from prior to the implementation
of the MDI Rules and specific numbers may differ following the
implementation of the MDI Rules. In particular, for stocks with
prices over $250, quoted spreads and price improvement statistics
are expected to narrow because they will be measured against a
narrower NBBO. The effects on effective spread, price impact, and
realized spread statistics in these stocks is uncertain, because
they are measured against the NBBO midpoint, and the Commission is
uncertain how this will be affected. See supra section
VII.C.1.(d)(2). However, the Commission does not anticipate that the
existence of a negative relation between the retail brokers' adverse
selection risk and the execution quality that they receive from
wholesalers described here would be affected by the implementation
of the MDI Rules.
    \614\ These numbers are based on an analysis of the percentage
of market orders, marketable limit orders, non-marketable limit
orders, and other orders that 46 retail brokers route to different
types of venues in Q1 2022 based on their Rule 606 reports.
Consistent with Rule 606, routing statistics are aggregated together
in Rule 606 reports based on whether the stock is listed in the S&P
500 index. The 46 broker-dealers were identified from the 58 retail
brokers identified according to the procedure described in supra
note 609. This analysis uses the retail broker's 606 report if they
publish one, or the Rule 606 report of their clearing broker if they
did not produce a Rule 606 report themselves (the sample of 46
broker-dealer Rule 606 reports include some broker-dealers that were
not included in the CAT retail analysis because some clearing broker
Rule 606 reports are included). Some broker-dealers reported
handling orders only on a not held basis and did not have any Rule
606 reports. Because Rule 606 only include percentages of where
their order flow is routed and not statistics on the number of
orders, the reports are aggregated together using a weighting factor
based on an estimate of the number of non-directed orders each
broker-dealer routes in each security type each month. The number of
non-directed orders is estimated separately for S&P 500 and non-S&P
500 stocks by dividing the number of non-directed market orders
originating from a retail broker in each stock type in a given
month, which is estimated from CAT data, by the percentage of market
orders as a percent of non-directed orders in the retail broker's
Rule 606 report for that stock type in the same month (the weight
for a clearing broker consists of the aggregated orders from the
introducing brokers in the CAT analysis that utilize that clearing
broker). The resulting statistics show that broker-dealers routed
87.3% of orders in S&P 500 stocks and 87.9% of orders in non-S&P 500
stocks to wholesalers, as compared to 9.1% and 8.5%, respectively,
to national securities exchanges.

      Table 3--Average Wholesaler Execution Quality Received by Retail Broker Quintiles, January-March 2022
----------------------------------------------------------------------------------------------------------------
                                                                    Percentage      Percentage
                     Broker-dealer quintile                        price impact   effective half-    E/Q ratio
                                                                      (bps)        spread (bps)
----------------------------------------------------------------------------------------------------------------
1..............................................................            -1.04            2.86            0.43
2..............................................................             0.48            1.87            0.46
3..............................................................             0.79            2.15            0.48
4..............................................................             1.32            3.48            0.61
5..............................................................             3.85            7.24            0.88
----------------------------------------------------------------------------------------------------------------
Table 3: Average Wholesaler Execution Quality Received by Retail Broker Quintiles, January-March 2022. This
  table summarizes how execution quality varies in NMS Common Stocks and ETFs based on a retail broker MPID's
  price impact by grouping 58 retail broker MPIDs identified according to the procedure described in supra note
  609 in NMS Common Stocks and ETFs into quintiles based on their average price impact. Each retail broker
  MPID's price impact is determined by share weighting its average percentage price impact half spread within an
  individual NMS common stock or ETF and then averaging across stocks using the weighting of the dollar volume
  the retail broker executed in each security (dollar volume weighted); this measure of price impact is then
  used to sort retail broker MPIDs into quintiles. Within each quintile, average percentage price impacts,
  percentage effective half-spreads, and E/Q ratios are calculated as described in supra notes 610 and 612. See
  supra note 609 for dataset description and supra note 611 for details on the sample and filters used in this
  analysis. This analysis uses data from prior to the implementation of the MDI Rules and specific numbers may
  differ following the implementation of the MDI Rules. See supra note 613 and section VII.C.1.(d).

(2) Reporting Entities That Operate SDPs
    When a market center also operates a SDP, co-mingling SDP activity
with other market center activity may obscure or distort information
about the market center's execution quality in their Rule 605 reports,
making it more difficult for market participants to observe the
execution quality of each separate trading venue. SDPs are sometimes
called ``ping pools,'' \615\ reflecting that institutional investors
use these venues to ``ping'' (i.e., submit a small order in search of
hidden liquidity) SDPs, often using Immediate or Cancel (IOC) orders.
IOC orders typically have different execution profiles than other types
of orders, including lower fill rates.\616\ Combining information on
orders submitted to a market center's SDP along with its other orders
will therefore effect a downwards skew on the market center's fill
rates, and analogously an upward skew on the SDP's fill rates. This may
particularly be the case for wholesalers who combine the orders
submitted to their SDP with orders that are internalized or executed on
a riskless principal basis,\617\ since SDP activity represents a
significant portion of their trading volume.\618\ Also, since the
information on executions in SDPs largely reflects institutional
orders, combining information on SDP orders along with other orders
would tend to obscure information that is particularly relevant for
institutional investors or broker-dealers handling institutional
investors' orders in assessing differences across these market centers.
To the extent that institutional investors are less able to observe and
compare differences in execution quality across market centers as a
result, this may reduce incentives for these market centers to compete
for institutional investor orders on the basis of execution quality.
---------------------------------------------------------------------------

    \615\ See, e.g., Annie Massa, Trader VIP Clubs, `Ping Pools'
Take Dark Trades to New Level, Bloomberg, (Jan. 16, 2018, 5:00
a.m.), available at https://www.bloomberg.com/news/articles/2018-01-16/trader-vip-clubs-ping-pools-take-dark-trades-to-new-level#xj4y7vzkg.
    \616\ See infra section VII.C.2.(c)(7) for discussion of
differences between marketable IOC order executions and the
executions of other marketable order types.
    \617\ See infra section VII.C.2.(c)(8) for a discussion on how
the treatment of wholesalers' riskless principal trades in Rule 605
reports may also obscure information on execution quality.
    \618\ See infra note 769 and accompanying text, describing that
the combined trading volume of the affiliated SDPs of the two most
active wholesalers accounted for over 4% of total U.S. consolidated
trading volume in 2021.
---------------------------------------------------------------------------

(b) Coverage of Orders Under Current Rule 605 Reporting Requirements
    The Commission believes that current Rule 605 reporting
requirements exclude execution quality information about some order
sizes and types that are relevant to market participants.
    To estimate the percentage of shares that are currently excluded
from Rule 605 reporting requirements and the driving factor behind
their exclusions (i.e., whether they are excluded based on their
submission time, type, or size), data from the Tick Size Pilot B.I
Market

Quality dataset,\619\ which had much broader reporting requirements
than Rule 605,\620\ was analyzed for a period from April 2016 to March
2019. As a first step, approximately 25% of orders are estimated to be
excluded from Rule 605 requirements as they are flagged as having
special handling requests. A breakdown of the remaining submitted share
volume (i.e., after excluded special handling orders) is presented in
Figure 2, and shows that around 2.2% of shares are currently excluded
from Rule 605 reporting requirements due to having effective times
outside of regular trading hours. A further 51.6% of shares are
excluded because they were of an order type that is currently excluded
from Rule 605 reporting requirements.\621\ An additional 11.3% of the
remaining order volume are excluded from Rule 605 coverage because of
the exclusion of orders less than 100 shares and larger-sized orders.
This leaves only around a third of share volume that is currently
eligible to be included in Rule 605.\622\
---------------------------------------------------------------------------

    \619\ See Securities Exchange Act Release No. 72460 (June 24,
2014), 79 FR 36840 (June 30, 2014) (Order Directing the Exchanges
and the Financial Industry Regulatory Authority To Submit a Tick
Size Pilot Plan) (``Tick Size Pilot Plan''). The Tick Size Pilot B.I
Market Quality dataset contains information for approximately 2,400
small cap stocks for a period from April 2016 to March 2019. As the
Tick Size Pilot data only collected data for small cap stocks,
results using this dataset are not necessarily representative of all
stocks.
    \620\ See Appendix B and C Requirements and Technical
Specifications, available at https://www.finra.org/sites/default/files/Appendix_B_C_Reporting_Requirements_version2.pdf. Order types
that are included in the Tick Size Pilot dataset that are not
covered by Rule 605 include Resting Intermarket Sweep orders, Retail
Liquidity Providing orders, Midpoint Passive Liquidity orders, Not
Held orders, Clean Cross orders, Auction orders, and orders that
became effective when an invalid NBBO was in effect. Order sizes
included in the Tick Size Pilot dataset that are not covered by Rule
605 include orders for between 1-99 shares and orders for 10,000+
shares. See also Tick Size Pilot Program, Appendix B and C
Statistics Frequently Asked Questions, available at https://www.finra.org/sites/default/files/Tick-Size-Pilot-Appendix-B-and-C-FAQ.pdf (``Tick Size Pilot FAQs''), answer to Question 2.1.
Furthermore, the Tick Size Pilot dataset includes separate
statistics for orders submitted outside of regular trading hours
(trading sessions E and BE). See Tick Size Pilot FAQs, answer to
Question 4.11.
    \621\ Of the shares excluded on the basis of order type, the
largest percentage (73.6%) are excluded because they are not-held
orders.
    \622\ An additional percentage of this order flow is also
excluded from coverage due to the exclusion of stop-loss orders and
non-exempt short sales, but these are not one of the listed order
types in the Tick Size Pilot dataset and therefore it is not
possible to exclude them. See Appendix B and C Requirements and
Technical Specifications, available at https://www.finra.org/sites/default/files/Appendix_B_C_Reporting_Requirements_version2.pdf.
---------------------------------------------------------------------------

BILLING CODE 8011-01-P

Figure 2: Rule 605 Coverage, by Submission Time, Order Type, and Order
Size, April 2016-March 2019
[GRAPHIC] [TIFF OMITTED] TP20JA23.002

    In order to examine changes in Rule 605 coverage, the Commission
compared the number of executed shares in one market center's Rule 605
reports between October 2003 and February 2021 to data on that market
center's execution volume retrieved from TAQ.\623\ Figure 3 shows that
an estimated 50% of shares executed during regular market hours were
included in Rule 605 reports as of February 2021,\624\ and shows that
this number has been on a slightly downward trend since around mid-
2012.\625\
---------------------------------------------------------------------------

    \623\ The number of shares traded on NYSE was collected from the
intraday TAQ Consolidated Trade files for the period from October
2003 to February 2021 for the entire universe of TAQ securities.
Trades outside of regular trading hours were excluded. This dataset
includes trades at the opening and closing auction. Due to that fact
that odd-lot trades are only included in TAQ from December 2013
onwards, the Commission excluded odd-lot trades from the dataset to
avoid a mechanical decrease in coverage following their inclusion
into the dataset. Rule 605 data for the same period was provided by
IHS Markit.
    \624\ The Commission focused on the data from one market center
(NYSE) because of the availability of a long time series for NYSE
Rule 605 data. The Commission selected NYSE due to its large market
share and ease of identifying this market center in both Rule 605
and TAQ data. Note that these results are not necessarily
representative of all market centers and the results for other
market centers may be different.
    \625\ The implementation of the MDI Rules may result in a change
in the flow of orders across trading venues, which may result in
numbers that are different from those reported here. See supra
section VII.C.1.(d)(2) for further discussion. However, the
Commission does not believe that the MDI Rules would significantly
affect the proportion of exchange volume that is covered by Rule 605
reporting requirements.

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

Figure 3: Rule 605 Coverage Compared to TAQ, for the NYSE, October
2003-February 2021
[GRAPHIC] [TIFF OMITTED] TP20JA23.003

    Figure 3 shows that Rule 605 coverage has varied significantly over
time, likely the result of market and regulatory events that may have
affected the usage of orders types that are excluded from or included
in the definition of a covered order. For example, equity markets have
seen an increase in the usage of ISOs after Regulation NMS \626\ and an
increase in participation in national securities exchanges' closing
auctions,\627\ both of which likely have decreased Rule 605 coverage
over time.\628\
---------------------------------------------------------------------------

    \626\ See infra note 1021 and corresponding text. Marketable
ISOs submitted at prices worse than the NBBO are excluded from Rule
605 reporting requirements.
    \627\ See, e.g., Vincent Bogousslavsky & Dmitriy Muravyev, Who
trades at the Close? Implications for Price Discovery and Liquidity
(working paper Dec. 16, 2021), available at https://ssrn.com/abstract=3485840 (retrieved from SSRN Elsevier database), showing
that closing auctions accounted for 7.5% of daily volume in 2018, up
from 3.1% in 2010. The definition of ``covered orders'' that are
subject to Rule 605 reporting requirements excludes orders for which
customers requested special handling, including orders to be
executed at a market opening price or a market closing price. See 17
CFR 242.600(b)(22).
    \628\ Other market and regulatory changes that may have impacted
Rule 605 coverage over time include the increased use of automated
orders (e.g., NYSE switching from a floor-based trading model to a
hybrid model), which may have increased coverage during the period
of 2003-2007 due to an increase in the number of ``held'' orders
(see 2018 Rule 606 Amendments Release, 83 FR 58338), and changes in
the use of block orders. Note that the use of odd-lots and orders
for less than one share have also changed substantially over time,
but these orders types are excluded from our analysis of TAQ data.
---------------------------------------------------------------------------

    The following sections will discuss the various facets of Rule 605
reporting requirements that lead to the exclusion of orders from
reporting requirements and the extent to which these orders may be
relevant for an assessment of execution quality, including excluded
order sizes, ISOs, stop orders, non-exempt short sale orders, away-
from-the-quote limit orders, and orders submitted outside of regular
trading hours.
(1) Orders Less Than 100 Shares and Larger-Sized Orders
    Currently, orders of certain sizes are excluded from Rule 605
reporting requirements, including orders for less than 100 shares and
larger-sized orders.\629\ Taken together, data on the usage of orders
of these sizes implies that a large percentage of orders and trades is
currently excluded from Rule 605 reporting requirements on the basis on
order size, thus limiting the extent to which reporting entities
compete for customers on the basis of execution quality.
---------------------------------------------------------------------------

    \629\ See 17 CFR 242.605(a)(1). See also supra note 40 and
corresponding text for a definition of the current order size
categories included in Rule 605 reporting requirements.
---------------------------------------------------------------------------

(a) Orders Less Than 100 Shares
    Due to the Rule's current exclusion of orders that are sized
smaller than 100 shares, which excludes all odd-lot orders and, in some
cases, round lot orders where a round lot is less than 100 shares, the
Commission believes that Rule 605 reports are missing information about
an important segment of order flow.
    The rise in the use of odd-lot orders is a phenomenon that has been
well-

documented in modern markets.\630\ An analysis of data from the SEC's
MIDAS analytics tool \631\ confirms that the use of odd-lots has
increased substantially as a percentage of total on-exchange trades
within the past decade. Figure 4 plots monthly averages of the odd-lot
rate (the number of odd-lot trades as a percentage of the total on-
exchange trades) across stock price deciles, showing that the relative
number of odd-lot trades has increased dramatically between 2012 and
2022, for high-priced stocks in particular.\632\ Specifically, the
figure shows that the odd-lot rate increased from around 0.6% to 2.32%
for the lowest-price stocks (Decile 1), and from 10.6% to 40.9% for the
highest-priced stocks (Decile 10).
---------------------------------------------------------------------------

    \630\ See, e.g., supra note 273 and accompanying text,
describing how market participants have stated that odd-lots make up
a majority of all trades. Until the round lot definition adopted
pursuant to the MDI Rules is implemented, round lots continue to be
defined in exchange rules. For most NMS stocks, a round lot is
defined as 100 shares. Following the implementation of the MDI
Rules, for stocks with prices greater than $250, a round lot will be
defined as consisting of between 1 and 40 shares, depending on the
tier. See supra note 577 for a definition of these tiers.
    \631\ See dataset Summary Metrics by Decile and Quartile, SEC,
available at https://www.sec.gov/marketstructure/downloads.html. The
data is available between January 2012 and March 2022.
    \632\ The number of odd-lot trades may be higher following the
implementation of the MDI Rules due to the availability of odd-lot
quotes in consolidated market data, which may result in numbers that
are different from those reported here. For stocks priced above
$250, the change in the definition of round lots may in result in
fewer odd-lot trades, as more trades will be incorporated into the
definition of round lots. See supra section VII.C.1.(d)(2) for
further discussion.
---------------------------------------------------------------------------

Figure 4: Odd-Lot Rates by Stock Price Deciles, January 2012-March 2022
[GRAPHIC] [TIFF OMITTED] TP20JA23.004

    There is evidence that these high percentages are not only the case
for odd-lot trades, but for odd-lot orders as well. Using data from
January to March 2021, a recent academic working paper found that the
rate of orders sized between 1 and 100 shares ranges from 5.6% of all
submitted orders for less than 500 shares in the lowest-priced stocks,
to 46.9% of all such orders in the highest-priced stocks.\633\ This is
supported by an analysis of the distribution of order sizes using order
submission data from MIDAS for a sample of 80 stocks during the month
of March 2022.\634\ Confirming results from Figure 4 examining the time
series of odd-lot order rates, Figure 5 shows that odd-lot orders make
up a significant percentage of orders (18.2%), although these orders
are only a small percentage of total submitted share volume
(2.8%).\635\
---------------------------------------------------------------------------

    \633\ See Bartlett, et al. The authors divide their sample of
stocks into five price-based buckets, with stocks in the lowest-
priced group defined as those priced at $20.00 or less, and stocks
in the highest-priced group priced at $250.00 or more.
    \634\ This dataset consists of NMLO submission data collected
from MIDAS and includes the posted orders and quotes on 11 national
securities exchanges, for a sample of 80 stocks, across all trading
days in March 2022. For more details on this dataset, see https://www.sec.gov/marketstructure/midas-system. The sample of stocks is
chosen to be a representative sample in terms of market
capitalization and price (calculated using price and shares
outstanding data from CRSP on the last trading day in February 2021,
from CRSP 1925 US Stock Database, Ctr. Rsch. Sec. Prices, U. Chi.
Booth Sch. Bus. (2022)). Note that the MIDAS dataset only includes
displayed orders, and includes some order types that are currently
excluded from Rule 605 reports, such as short sale orders and orders
with special handling requests, as it is not possible to distinguish
these orders in MIDAS.
    \635\ This data only includes information about NMLOs, and
therefore information about the sizes of market orders and
marketable limit orders is not available.
---------------------------------------------------------------------------

Figure 5: Distribution of NMLOs Across Order Size Buckets, March 2022

[GRAPHIC] [TIFF OMITTED] TP20JA23.005

    Market commentators have attributed this rise in odd-lot trading to
a variety of factors. For example, an increase in the number of high-
priced stocks caused order sizes to decrease in these stocks, where
trading in larger order sizes is more expensive.\636\ Another factor is
a rise in algorithmic trading, which chops orders into many smaller
orders. Broker-dealers that handle institutional orders often make use
of odd-lot orders as a result of trading algorithms that split larger
parent orders into smaller child orders to reduce the market impact of
their trades.\637\ High frequency traders also use inside the spread
odd-lot orders as a means of probing for hidden liquidity or detecting
forthcoming order flow. Academic papers have found evidence that high
frequency traders and other institutional investors make up a
substantial fraction of odd-lot trades.\638\ Another potential reason
for the increase in odd-lot trading is the increasing presence of
trading by individual investors, who tend to use smaller order
sizes.\639\ Therefore, by not capturing information related to these
orders, Rule 605 reports are missing information about potentially
important segments of order flow from both individual and institutional
investors.
---------------------------------------------------------------------------

    \636\ See, e.g., Phil Mackintosh, ``Odd Facts About Odd-Lots,''
(Apr. 2021), available at https://www.nasdaq.com/articles/odd-facts-about-odd-lots-2021-04-22.
    \637\ See infra section VII.C.3.(a)(1)(b), discussing the
practice of broker-dealers handling institutional parent orders as
not held orders and splitting them up into child orders.
    \638\ See, e.g., Hardy Johnson, Bonnie F. Van Ness & Robert A.
Van Ness, Are all odd-lots the same? Odd-lot transactions by order
submission and trader type, 79 J. Banking & Fin. 1(2017); Maureen
O'Hara, Chen Yao & Mao Ye, What's not there: Odd lots and market
data, 69 J. Fin. 2199 (2014).
    \639\ See, e.g., Bartlett et al. (2022); Matthew Healey, An In-
Depth View Into Odd Lots, Chi. Bd. Options Exch. (Oct. 2021),
available at https://www.cboe.com/insights/posts/an-in-depth-view-into-odd-lots/.
---------------------------------------------------------------------------

(b) Orders Less Than a Share
    Due to the Rule's current exclusion of fractional orders that are
smaller than one share,\640\ the Commission believes that Rule 605
reports are missing information about an increasingly important segment
of individual investor order flow. Similar to the increase in odd-lots,
one reason for the increase in the use of fractional shares is the
increasing presence of trading by individual investors, who tend to use
smaller order sizes.\641\ The past few years have seen increasing
attention paid to fractional shares, as more and more retail brokers
are offering this functionality.\642\ The Commission understands that
there are at least two different ways that retail brokers handle
fractional trades: first, they can rely on their clearing firm, which
will often ``round up'' the fractional part of the order and deposit
the residual in an internal ``fractional inventory account''; and
second, they can execute fractional trades against their own
inventory.\643\
---------------------------------------------------------------------------

    \640\ Note that orders greater than one share can also be
fractional. If the fractional order is for more than just a single
share (e.g., 2.5 shares), the broker-dealer may internalize the
fractional component (0.5 shares) and reroute the whole component (2
shares) to a market center for execution.
    \641\ See, e.g., Kevin L. Matthews, What are Fractional Shares
and How do They Work?, Bus. Insider (Sept. 21, 2022), available at
https://www.businessinsider.com/personal-finance/fractional-shares.
    \642\ See, e.g., Rick Steves, Fractional Shares: Experts Weight
in Amid Exploding Retail Trading Volumes, Fin. Feeds (June 7, 2021,
8:25 a.m.), available at https://financefeeds.com/fractional-shares-experts-weigh-in-amid-exploding-retail-trading-volumes/, which shows
that trading volume increased substantially (in one case, more than
1,400%) for brokers after they introduced the use of fractional
shares.
    \643\ See, e.g., Robert P. Bartlett, Justin McCrary & Maureen
O'Hara, A Fractional Solution to a Stock Market Mystery (working
paper July 20, 2022), available at https://ssrn.com/abstract=4167890
(retrieved from SSRN Elsevier database). Note that, as fractional
shares fall below the smallest order size category in current Rule
605, a broker-dealer that currently exclusively executes fractional
shares would be a market center, but would not be required to file
Rule 605 reports.
---------------------------------------------------------------------------

    An estimation of the percentage of orders that are currently
excluded from Rule 605 reporting requirements because they are smaller
than one share is difficult, as these orders are executed off-exchange
and therefore not included in public datasets. However, an analysis
using data from CAT \644\ confirms that

levels of fractional trading are mostly the result of individual
investor trading: in March 2022, there were 31.67 million orders for
less than one share that eventually received an execution, the
overwhelming majority (92%) of which were submitted by accounts
attributed to ``Individual Customers.'' \645\ While these orders only
represented a small fraction (around 1.4%) of total executed orders,
they represented a much higher fraction (10.4%) of executions received
by individual investors.\646\ Therefore, by not capturing information
related to these orders, Rule 605 reports are missing information about
an important segment of individual investor trades.
---------------------------------------------------------------------------

    \644\ This dataset contains CAT records capturing introducing
and trading activity in March 2022, including fractional NMS orders
that were eventually executed on- and off-exchange. As individual
fractional orders are often aggregated into a single representative
order before routing and execution, staff looked at the information
specific to the originating customer orders (designated as MENO
orders events in CAT) that were eventually executed, and,
separately, examined the information specific to the executions of
the orders (designated as MEOT for off-exchange or EX and EOT for
on-exchange events in CAT) that could be linked to the fractional
MENOs either directly or via a representative order.
    \645\ See supra note 609 for a definition of account types in
CAT.
    \646\ In terms of notional volume, executed fractional orders
make up around 0.17% of total executed dollar volume and 1.4% of
individual investor executed dollar volume.
---------------------------------------------------------------------------

(c) Larger-Sized Orders
    Due to the Rule's current exclusion of orders that are larger than
10,000 shares,\647\ the Commission believes that Rule 605 reports are
missing information about another important segment of order flow. The
Commission understands that practices have evolved such that most
broker-dealers that service institutional investors use SORs to break
up these customers' large parent orders into smaller-sized child
orders.\648\ As shown in Figure 6, which plots the number of shares
associated with trades that are for 10,000 or more shares as a percent
of total executed shares,\649\ the rate of larger-sized trades declined
from more than 25% in late 2003 to 11.3% as of March 2022. This decline
is likely the result of the increased use of SORs, though other market
changes such as the overall increase in stock prices may play a part.
However, the rate of larger-sized trades has been increasing since
August 2011, when the rate of larger-sized trades was around 6.7%.
---------------------------------------------------------------------------

    \647\ See supra note 281 and corresponding discussion describing
the exemptive relief provided by the Commission in 2001 for orders
with a size of 10,000 shares or greater.
    \648\ See infra section VII.C.3.(a)(1)(b) further discussing the
practice of broker-dealers handling institutional parent orders as
not held orders and splitting them up into child orders.
    \649\ This analysis uses data from intraday TAQ Consolidated
Trade files for the period from September 2003 to March 2022 for the
entire universe of TAQ securities. Plotted is the monthly number of
shares associated with trades that are for 10,000 shares or more,
divided by the total number of executed shares. The data is limited
to trades with sales conditions indicating regular trades, including
regular trades with no associated conditions, automatic executions,
intermarket sweep orders, and odd lot trades. See NYSE Daily TAQ
Client Specification, available at https://www.nyse.com/publicdocs/nyse/data/Daily_TAQ_Client_Spec_v3.3.pdf.
---------------------------------------------------------------------------

Figure 6: Larger-Sized Trades as a Percent of Total Executed Shares,
September 2003-March 2022
[GRAPHIC] [TIFF OMITTED] TP20JA23.006

BILLING CODE 8011-01-C
    Furthermore, larger-sized orders make up a non-negligible percent
of order flow. Figure 5, which plots the distribution of NMLO sizes in
order submission data from MIDAS for the month of March 2022, shows
that, while NMLOs of 10,000 or more shares made up only 0.09% of order
flow in terms of number of orders, they made up nearly 7.8% of order
flow in terms of share volume. However, some, or possibly most, of
these larger-sized orders may be not held to the market, so would not
be required to be included in Rule 605 reports even without the
exemptive relief.\650\
---------------------------------------------------------------------------

    \650\ See supra note 60 and accompanying text discussing broker-
dealers' requirements under Rule 606(b)(3) to provide individualized
reports of execution quality upon request for not held orders.
---------------------------------------------------------------------------

(2) Orders Submitted With Stop Prices
    The Commission believes that the current exclusion of orders with
stop prices from the definition of ``covered order'' excludes orders
that are likely relevant for investors. A stop order, also referred to
as a stop-loss order, is an order to buy or sell a stock once the price
of the stock reaches the specified price, known as the stop price. When
the stop price is reached, a stop order becomes a market order, or a
limit order in the case of so-called stop limit

orders.\651\ The treatment of stop orders varies across broker-dealers
and market centers.\652\
---------------------------------------------------------------------------

    \651\ See, e.g., SEC, Types of Orders, available at https://www.investor.gov/introduction-investing/investing-basics/how-stock-markets-work/types-orders and the definitions of stop order and stop
limit order in FINRA Rule 5350(a), available at https://www.finra.org/rules-guidance/rulebooks/finra-rules/5350. The stop
price can be the last sale price, or a quotation in the case of stop
on quote or stop limit on quote orders. The stop price may also be
permitted to increase or decrease by a predetermined amount or
formula in the case of trailing stop and trailing stop limit orders.
    \652\ For example, one broker-dealer stated that some of the
market centers to which it routes orders may impose price limits to
prevent stop orders from being triggered by potentially erroneous
trades, and that these price limits vary by market center. See
Trading FAQs: Order Types, Fidelity, available at https://www.fidelity.com/trading/faqs-order-types. Another brokerage firm
states that, depending on to which market center a stop limit order
is presented, a stop limit order can be activated as a limit order
using either a transaction or quotation as the triggering event. See
Best Execution of Equity Securities, UBS (June 2021), available at
https://www.ubs.com/content/dam/static/wmamericas/bestexecution.pdf.
---------------------------------------------------------------------------

    The Commission understands that stop orders resting on national
securities exchanges have been uncommon, and the vast majority of stop
orders are handled by broker-dealers.\653\ Some national securities
exchanges have eliminated this order type from their rule book.\654\
Furthermore, the use of stop orders has typically been associated with
individual investors,\655\ who use these orders to try to protect a
gain or to limit potential losses of a currently held position.\656\
Table 4 breaks down a sample of stop loss order volume by account type
and stop loss order type using CAT data for March 2022.\657\ The data
confirms that the use of stop orders by institutional investors is very
rare (only 0.23% of market and 0.0003% of limit orders are submitted
with stop prices), while their use is relatively more common for
individual investors, particularly for market orders, around 6.44% of
which are submitted with stop prices.
---------------------------------------------------------------------------

    \653\ See, e.g., Memorandum from SEC Division of Trading and
Markets on Certain Issues Affecting Customers in the Current Equity
Market Structure (Jan. 26, 2016), available at https://www.sec.gov/spotlight/equity-market-structure/issues-affecting-customers-emsac-012616.pdf, citing NYSE Order Type Usage Chart illustrating that
stop orders, along with good-til-canceled, agency cross and manual
orders, accounted for only 0.19% of total matched volume for Q3 2015
and Q4 2015. See also How to Survive the Markets Without Stop-Loss
Orders, NASDAQ (Dec. 2, 2015), available at https://www.nasdaq.com/articles/how-survive-markets-without-stop-loss-orders-2015-12-02,
stating that stop orders represent around 2% of all orders placed on
national securities exchanges.
    \654\ See, e.g., Securities Exchange Act Release No. 76649 (Dec.
15, 2015), 80 FR 79365 (Dec. 21, 2015) (SR-NYSE-2015-60) (``NYSE
Notice''); Securities Exchange Act Release No. 76655 (Dec. 15,
2015), 80 FR 79382 (Dec. 21, 2015) (SR-NYSEMKT-2015-103).
    \655\ See, e.g., Annie Massa & Sam Mamudi, Black Rock Calls for
Halting Stock Market to Avoid Volatility, Bloomberg Bus. (Oct. 7,
2015), available at http://www.bloomberg.com/news/articles/2015-10-07/blackrock-calls-for-halting-the-stock-market-to-avoid-volatility
(citing industry concerns with ``the widespread use of stop orders
by retail investors'').
    \656\ See, e.g., Memorandum from SEC Division of Trading and
Markets on Certain Issues Affecting Customers in the Current Equity
Market Structure (Jan. 26, 2016), available at https://www.sec.gov/spotlight/equity-market-structure/issues-affecting-customers-emsac-012616.pdf. Meanwhile, professional or institutional investors are
more likely to have the resources to be able to actively monitor
their orders, and are therefore less likely to use stop orders. See,
e.g., How to Survive the Markets Without Stop-Loss Orders, NASDAQ
(Dec. 2, 2015), available at https://www.nasdaq.com/articles/how-survive-markets-without-stop-loss-orders-2015-12-02.
    \657\ See supra note 609 for dataset description. Stop orders
are identified using the reporting requirements for stop orders in
the CAT Reporting Technical Specifications for Industry Members. See
CAT Reporting Technical Specifications for Industry Members,
Consolidated Audit Trail, 64 (July 29, 2022), available at https://www.catnmsplan.com/sites/default/files/2022-07/07.29.2022_CAT_Reporting_Technical_Specifications_for_Industry_Members_v4.0.0r16_CLEAN_0.pdf.

                        Table 4--Stop Order Volume by Account and Order Types, March 2022
----------------------------------------------------------------------------------------------------------------
                                                           Types of stop orders (% of total stop orders)
                                    Orders with  ---------------------------------------------------------------
     Investor and order type      stop prices (%                  Stop on quote/  Trailing stop/
                                     of total       Stop/ stop     stop limit on   trailing stop       Total
                                      orders)          limit           quote           limit
----------------------------------------------------------------------------------------------------------------
Institutional: