In recent years, the share prices of some of the most widely-held
stocks have increased substantially.\162\ As a result of higher share
prices, odd-lot orders in many securities have a high dollar, or
notional, value. Because SIP data does not currently include odd-lot
quotation information except to the extent that cumulative odd-lot
interest equals or exceeds a round lot, the best quote reflected in
proprietary data products, especially for many high-priced stocks, may
be an odd-lot order that is at a price that is better than the best bid
or best offer that is disseminated by the exclusive SIPs. Indeed, as
discussed below, an analysis of odd-lot transaction data and comments
made in connection with the Roundtable indicate that odd-lot orders are
frequently priced better than the quotation prices that are
disseminated by the exclusive SIPs, yet these orders are not seen by
investors or market participants that rely solely on SIP data.\163\
---------------------------------------------------------------------------

    \162\ For example, between 2004 and 2019, the average price of a
stock in the Dow Jones Industrial Average nearly quadrupled.
    \163\ See Roundtable Day Two Transcript at 66 (Paul O'Donnell,
Morgan Stanley) (``We all know that, for high-price stocks, there is
a market inside the NBBO''); Roundtable Day One Transcript at 116
(Michael Blaugrund, NYSE) (recommending the inclusion in core data
of odd-lots priced better than the BBO); Healthy Markets Association
Letter II; staff odd-lot analysis, infra (observing that 43% of odd-
lot transactions in September of 2019 occurred at prices better than
the NBBO).
---------------------------------------------------------------------------

    The importance of increasing the transparency of odd-lot quotation
information is supported by odd-lot quotation and transaction data.
First, odd-lot transactions make up a significant proportion of
transaction volume in NMS stocks, including exchange-traded products
(``ETPs''). Based on data from the SEC's MIDAS analytics tool,\164\ the
daily exchange odd-lot rate (i.e., the number of exchange odd-lot
trades as a proportion of the number of all exchange trades) for all
corporate stocks ranged from approximately 29% to 42% of trades and the
daily exchange odd-lot rate for all ETPs ranged from 14% to 20% of
trades in 2018. More recently, in June 2019, the daily exchange odd-lot
rate for all corporate stocks exceeded 50% several times (and exceeded
65% several times for the top decile by price) and reached almost 30%
for all ETPs in the same period.\165\ Exchange odd-lot volume as a
proportion of total exchange-traded volume also rose in June 2019,
reaching approximately 15% for all corporate stocks (and over 30% for
the top decile by price) and approximately 4% for all ETPs.\166\
---------------------------------------------------------------------------

    \164\ Staff accessed consolidated data from the Equity Data
Plans and exchange depth of book data, both of which staff receive
through the SEC's MIDAS platform. See Market Data Analytics System
(``MIDAS''), available at https://www.sec.gov/marketstructure/midas.html. This data is commercially available.
    \165\ Id. See also Alexander Osipovich, Tiny `Odd-Lot' Trades
Reach Record Share of U.S. Stock Market, Wall Street Journal (Oct.
23, 2019) (``The share of trades in odd-lot sizes hit a record 48.9%
on Oct. 7 and has stayed above 40% ever since, according to the NYSE
data, which cover all U.S. equity trades, not just those on the Big
Board.'').
    \166\ See supra note 164.
---------------------------------------------------------------------------

    Staff examined odd-lot trade and message volume, duration on the
inside,\167\ order-book distribution, and quoted spreads for the top
500 securities by dollar volume during the week of September 10-14,
2018, using the exclusive SIP trades, exclusive SIP quotes, off-
exchange data from FINRA's TRFs, and all of the exchanges' proprietary
data feeds. Staff found that a significant portion of quotation and
trading activity occurs in odd-lots, particularly for frequently
traded, high-priced securities.\168\
---------------------------------------------------------------------------

    \167\ Duration on the inside is the percent of the day the
aggregate size at the best price (bid, offer, or both) is less than
100 shares based on the exchange proprietary data feeds.
    \168\ For example, staff observed that over 86% of the trades
that occurred in the two largest securities by market capitalization
that have share prices greater than $1,000 occurred in odd-lot share
amounts.
---------------------------------------------------------------------------

    Staff compared the bid-ask spread when using exclusive SIP
quotation information (which is in round lots) vs. quotation
information in the proprietary feeds (which includes odd-lots). On
average, the measure of bid-ask spread, an important metric in
understanding market liquidity and quote competition, widens (i.e.,
degrades) significantly when calculated using only round lots relative
to the odd-lot quotations displayed on proprietary feeds. In addition,
as average stock share prices

rose, bid-ask spreads based only on round lots generally widened by a
greater amount than did spreads based on round lots and odd-lots.
During the period staff analyzed, for the 500 most frequently traded
securities by dollar volume, the average bid-ask spread of the 50
securities with the highest share prices decreased (improved or
tightened) by $.05970 when calculated using the proprietary feeds
relative to the exclusive SIP feed. Bid-ask spreads for the 50
securities with the lowest share prices showed less improvement when
using the proprietary feeds relative to the exclusive SIP feed,
decreasing (or tightening) on average by $.00017.
    Staff also evaluated the frequency of trades in odd-lot sizes for
the top 500 securities by dollar volume and found that frequently
traded, high priced securities are likely to have a substantial portion
of executions occur in odd-lot sizes. More than 25 percent of the on-
exchange share volume of the 50 securities with the highest share
prices occurred in odd-lot sizes. In comparison, less than 2% of the
on-exchange share volume of the 50 securities with the lowest share
prices occurred in odd-lot sizes.
    In addition, as noted above,\169\ statements made by Roundtable
panelists and commenters suggest that odd-lot orders can reflect prices
that are better than the quotation prices that are disseminated by the
exclusive SIPs. These observations are consistent with staff
observations of odd-lot transaction pricing reflected in recent trading
data. During the month of September 2019, a substantial proportion of
odd-lot trades occurred at prices that are better than the prevailing
NBBO. Specifically, approximately 51% of all trades executed on
exchange and approximately 14% of all volume executed on exchange in
corporate stocks (3,930 unique symbols) occurred in odd-lot sizes
(i.e., less than 100 shares), and 43% of those odd-lot transactions
(representing approximately 39% of all odd-lot volume) occurred at a
price better than the NBBO.
---------------------------------------------------------------------------

    \169\ See supra note 163.
---------------------------------------------------------------------------

(c) Roundtable Discussion, Comments, and Alternative Proposals
    In connection with the Roundtable, one commenter presented data
showing increased odd-lot trading and quoting rates over the last
several years, as well as the existence of quotes on proprietary feeds
that are at prices better than the NBBO disseminated by the exclusive
SIPs.\170\ Several panelists at the Roundtable were supportive of
adding odd-lot quotation information to SIP data.\171\ One panelist who
supported adding odd-lot orders to SIP data noted that the application
of order protection under Rule 611 to odd-lot quotes would need to be
considered and added that he would likely be in favor of applying Rule
611 to odd-lot quotes.\172\ Finally, one panelist emphasized the
importance of odd-lot quotation data to market participants, stating
that content that exists only in the proprietary feeds--such as odd-
lots--is needed to make effective decisions in trading applications and
to fill client orders effectively.\173\
---------------------------------------------------------------------------

    \170\ Letter to Brent J. Fields, Secretary, Commission, from
Tyler Gellasch, Executive Director, Healthy Markets Association, 5-
11 (Mar. 5, 2019) (``Healthy Markets Association Letter II''). See
also Letter to Brent J. Fields, Secretary, Commission, from Rich
Steiner, Head of Client Advocacy and Market Innovation, RBC Capital
Markets, LLC (Oct. 25, 2019) (``RBC Letter'') (stating that internal
research suggested exclusive SIPs should display odd-lot quotes).
    \171\ See Roundtable Day One Transcript at 98-99 (Stacey
Cunningham, NYSE); Roundtable Day One Transcript at 116-17 (Michael
Blaugrund, NYSE); Roundtable Day Two Transcript at 72 (Michael
Blaugrund, NYSE) (recommending expanding consolidated market data to
include odd-lot orders priced better than the BBO); Roundtable Day
One Transcript at 157-59 (Oliver Albers, Nasdaq) (stating that over
50% of the notional value of Nasdaq-listed names is in high priced
stocks); Roundtable Day One Transcript at 226-27 (Chris Isaacson,
Cboe); Roundtable Day Two Transcript at 73 (Prof. Robert Bartlett,
UC Berkeley) (stating that including odd-lots in the trade data has
been incredibly useful and including it in the quote data would be
also helpful).
    \172\ See Roundtable Day One Transcript at 226-27 (Chris
Isaacson, Cboe). In addition, another panelist suggested that
revisiting Rule 611 for odd-lots has merit. See Roundtable Day One
Transcript at 231-32 (Vlad Khandros, UBS). See also Robert Battalio,
et al., Unrecognized Odd Lot Liquidity Supply: A Hidden Trading Cost
for High Priced Stocks, The Journal of Trading (Winter 2017),
available at https://jot.pm-research.com/content/iijtrade/12/1/35.full.pdf (``[T]he exclusion of odd lot orders from the protected
NBBO quote produces cases in which trades fill at prices worse than
available opposite-side trading interests.'').
    \173\ See Roundtable Day One Transcript at 127-28 (Mark
Skalabrin, Redline Trading Solutions).
---------------------------------------------------------------------------

    In addition, several comment letters submitted in connection with
the Roundtable supported adding odd-lot quotation information to SIP
data or otherwise highlighted negative consequences of its exclusion
from SIP data.\174\ One commenter stated that the Commission should
consider rulemaking to expand SIP data to include odd-lot information
during which the Commission could gather data and determine whether
odd-lots are valuable for price discovery for all securities.\175\
Commenters asserted that having to purchase ``relatively basic data
such as odd-lots'' through exchange proprietary offerings goes against
one of the main purposes of the national market system: Enabling
investors' orders to be executed without the participation of a
dealer.\176\ Another commenter provided data showing that proprietary
feeds that include odd-lot quotes reflect superior pricing compared to
the SIP data disseminated by the Equity Data Plans and indicated its
support for adding odd-lot quotes to SIP data.\177\ Similarly, another
commenter stated that as stock prices overall have risen and average
trade sizes have fallen, odd-lots are becoming more important in the
trading process, and the commenter presented data showing that stock
price has a meaningful impact on odd-lot frequency and trade size and
that high-priced stocks frequently trade in smaller quantities.\178\
---------------------------------------------------------------------------

    \174\ See Letter to Brent J. Fields, Secretary, Commission, from
NYSE Group, 6, 13 (Oct. 24, 2018) (``NYSE Group Letter'') (stating
that ``[o]dd-lot quoting, particularly in high-priced securities,
has become more prevalent in today's markets and its exclusion from
SIP feeds seems anachronistic''; recommending that core data be
expanded to include ``the best bid and offer of any quantity''; and
stating that ``Main Street would benefit if the prices disseminated
by the SIPs included odd-lot quotes''); Letter to Vanessa
Countryman, Acting Secretary, Commission, from Theodore R. Lazo,
Managing Director and Associate General Counsel, SIFMA (Sept. 18,
2019) (``SIFMA Letter II''); Letter to Brent J. Fields, Secretary,
Commission, from Richard H. Baker, President and CEO, Global Head of
Government Affairs Managed Funds Association and Jir[iacute]
Kr[oacute]l, Deputy CEO, Global Head of Government Affairs, AIMA, 3-
4 (Dec. 20, 2018) (``MFA and AIMA Letter''); Healthy Markets
Association Letter II.
    \175\ See SIFMA Letter II at 3.
    \176\ See MFA and AIMA Letter at 3-4.
    \177\ See Healthy Markets Association Letter II.
    \178\ See RBC Letter at 1-2 (highlighting that approximately 50%
of all odd-lot trades in stocks priced between $50 and $250 are in
20 shares or less).
---------------------------------------------------------------------------

    Some Roundtable panelists, however, pointed out complications that
might arise from the addition of more odd-lot information to the SIP
data. One panelist stated that an issue with adding odd-lot quotations
to the Equity Data Plans is that they are not protected quotations
under Rule 611, so, in the view of the panelist, there would be
uncertainty as to whether a broker-dealer has to access odd-lot
quotations to meet regulatory obligations. This panelist added that
there will need to be clarity as to how odd-lots are reported to the
exclusive SIPs and represented in the consolidated tapes (e.g., whether
50 shares at $10 and 100 shares at $10 will be shown separately or as
150 shares at $10).\179\ Another panelist stated that caution should be
exercised in adding odd-lots to SIP data to avoid

overwhelming market participants with information. This panelist
suggested that a ``price level metric,'' such as including odd-lot
orders with a value in excess of a specified price, might make
sense.\180\
---------------------------------------------------------------------------

    \179\ See Roundtable Day One Transcript at 159-60 (Adam
Inzirillo, BAML) (stating that the different display options could
result in a change from current practices).
    \180\ See Roundtable Day One Transcript at 160-61 (Matt
Billings, TD Ameritrade).
---------------------------------------------------------------------------

    On October 2, 2019, the Equity Data Plans published an ``initial
proposal'' for public comment regarding the addition of odd-lot quotes
to the Equity Data Plans for dissemination by the respective exclusive
SIPs.\181\ Under this proposal, the addition of odd-lot quotes would
not change how the NBBO is calculated, nor would such quotes be
``protected quotations'' \182\ under Regulation NMS. Rather, the odd-
lot quote data would be ``ancillary'' data available to exclusive SIP
customers.\183\ Each exchange would send its top of book odd-lot quotes
to the exclusive SIPs in the same form in which it currently sends its
top of book round lot quotes.\184\ An ``odd-lot best bid and offer''
would be calculated in the same manner as the round lot NBBO, but would
not be disseminated when it is worse than the NBBO.\185\
---------------------------------------------------------------------------

    \181\ See CTA Plan and UTP Plan, Odd Lots Initial Proposal
(``SIP Odd Lot Initial Proposals''), available at http://www.utpplan.com/DOC/Odd_Lots_Proposal.pdf, https://ctaplan.com/publicdocs/CTA_Odd_Lots_Proposal.pdf; CTA Plan and UTP Plan
Operating Committees, SIP Operating Committees Seek Comment on
Proposal to Add Odd Lot Quotes to SIP Data Feeds (Oct. 2, 2019)
(``SIP Odd Lots Proposal Press Release''), available at https://www.globenewswire.com/news-release/2019/10/02/1924016/0/en/SIP-Operating-Committees-Seek-Comment-on-Proposal-to-Add-Odd-Lot-Quotes-to-SIP-Data-Feeds.html; Letter from Robert Books, Chairman, UTP and
CTA Operating Committees, to industry members and investors, 1 (Jan.
6, 2020) (``CTA and UTP Annual Letter''), available at https://forefrontcomms.com/wp-content/uploads/2020/01/2020-Annual-Letter_FINAL_.pdf. The SIP Odd Lot Initial Proposals are the subject
of continuing consideration by the operating committees. Comments
are available at https://www.ctaplan.com/oddlots.
    \182\ See supra note 115.
    \183\ See SIP Odd Lot Initial Proposals, supra note 181, at 1.
    \184\ See id.
    \185\ See id.
---------------------------------------------------------------------------

    Additionally, on January 21, 2020, Cboe Global Markets, Inc.
(``Cboe'') published a report detailing its recommendations for U.S.
equity market structure.\186\ In the report, Cboe recommended that top
of book odd-lot quotations be included in the exclusive SIP feeds.\187\
Furthermore, Cboe recommended redefining round lot with lower numbers
for higher priced securities.\188\
---------------------------------------------------------------------------

    \186\ Cboe, Cboe's Vision: Equity Market Structure Reform (Jan.
21, 2020) (``Cboe Report''), available at http://www.cboe.com/aboutcboe/government-relations/pdf/cboes-vision-equity-market-structure-reform-2020.pdf.
    \187\ See id. at 3.
    \188\ See id. at 2-3.
---------------------------------------------------------------------------

(d) Commission Discussion and Proposal
(i) Proposed Definition of Round Lot
    Data on odd-lot trading and quoting activity evaluated by
staff,\189\ and the remarks and comments of market participants,
suggest that SIP data omits a substantial amount of economically
significant trading interest. Furthermore, bid-ask spreads calculated
using round lot orders do not include some odd-lot quotations that may
be at prices better than round lot orders, particularly for higher
priced securities.\190\ The Commission is concerned that information
about significant trading interest in odd-lot orders is only available
to market participants who have purchased proprietary market data
products from exchanges and remains unavailable to those that rely
solely on SIP data. This creates a potentially significant information
asymmetry between SIP data and proprietary data.\191\ Further, the
Commission is concerned about the view expressed by some market
participants that achieving best execution may be difficult for broker-
dealers that rely solely on SIP data.
---------------------------------------------------------------------------

    \189\ See supra Section III.C.1(b) (discussing staff odd-lot
analysis).
    \190\ Id.
    \191\ Specifically, larger or better resourced broker-dealers
may be more capable of paying the fees for multiple proprietary data
feeds to obtain odd-lot quotations from several markets and
consolidating these feeds to create a more complete picture of the
market. See infra Sections VI.B.2(c), VI.B.3(a), and VI.B.3(b). In
addition, the proposed definition of round lot would help ensure
that market participants, including retail investors, would receive
information on smaller-sized orders in higher-priced stocks in a
context in which a trading or order routing decision can be
implemented and would receive more informative order execution
quality information. See infra Section III.C.1(d)(i) (discussing the
effect of the proposed definition of round lot on Rules 603(c) and
605).
---------------------------------------------------------------------------

    The Commission preliminarily believes that, to address these and
other concerns, certain odd-lot quotation data should be required to be
disseminated as part of proposed core data so that it is made more
readily available to investors and market participants. The Commission
is proposing that this be accomplished by defining the term ``round
lot'' to include certain orders that currently are defined as ``odd-
lots.'' Given the prevalence of odd-lot quoting and trading,
particularly in higher-priced stocks, the absence of odd-lot quotation
data significantly reduces the comprehensiveness and usefulness of SIP
data.
    The Commission preliminarily believes that the inclusion of odd-lot
quotations in proposed core data should be reasonably calibrated. The
Commission is preliminarily concerned that including all odd-lot
quotations could, as some Roundtable commenters suggested,\192\ burden
systems, increase complexity, and degrade the usefulness of information
in a manner that may not be warranted by the relative benefits of the
additional information to investors and market participants.\193\
---------------------------------------------------------------------------

    \192\ See supra note 180 and accompanying text.
    \193\ See infra note 195. Further, attempting to access orders
of insignificant notional value--the share price multiplied by the
number of shares in the order--could result in a situation where the
benefit associated with accessing additional liquidity may be offset
by the cost associated with signaling to other market participants
the presence of a large incoming order. See Securities Exchange Act
Release No. 78309 (July 13, 2016), 81 FR 49432, 49440 (July 27,
2016) (``[S]ophisticated market participants closely monitor order
and execution activity throughout the markets, looking for patterns
that signal the existence of a large institutional order, so that
they can use that information to their trading advantage . . .
Indeed, institutional customers have expressed concern that
excessive routing of their orders may increase the risk of
information leakage without a commensurate benefit to execution
quality.''). By limiting the quotation information that is added to
the proposed core data to orders of $1,000 dollars notional value or
more, as explained below, the proposed definition of round lot will
increase transparency into smaller-sized orders while reducing the
likelihood of information leakage.
---------------------------------------------------------------------------

    Accordingly, under proposed Rule 600(b)(81) of Regulation NMS, a
``round lot'' would be defined as: (1) For any NMS stock for which the
prior calendar month's average closing price on the primary listing
exchange \194\ was $50.00 or less per share, an order for the purchase
or sale of an NMS stock of 100 shares; (2) for any NMS stock for which
the prior calendar month's average closing price on the primary listing
exchange was $50.01 to $100.00 per share, an order for the purchase or
sale of an NMS stock of 20 shares; (3) for any NMS stock for which the
prior calendar month's average closing price on the primary listing
exchange was $100.01 to $500.00 per share, an order for the purchase or
sale of an NMS stock of 10 shares; (4) for any NMS stock for which the
prior calendar month's average closing price on the primary listing
exchange was $500.01 to $1,000.00 per share, an order for the purchase
or sale of an NMS stock of 2 shares; and (5) for any NMS stock for
which the prior calendar month's average closing price on the primary
listing exchange was $1,000.01 or more per share, an order

for the purchase or sale of an NMS stock of 1 share.
---------------------------------------------------------------------------

    \194\ The IPO price would be used in lieu of the prior calendar
month's average closing price on the primary listing exchange for
newly issued stocks. See proposed Rule 600(b)(81).
---------------------------------------------------------------------------

    Table 1, below, shows the number of NMS stocks that would be in
each proposed round lot tier based on monthly average closing prices in
September of 2019, as well as the percent of overall average daily
volume (``ADV'') and notional value (``$ADV'') of each price group:

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
                                                                     Number of                      Percent of
                                                                     stocks in      Percent of       $ADV, by
                        Stock price group                           stock price    ADV, by price    price group
                                                                       group         group (%)          (%)
----------------------------------------------------------------------------------------------------------------
$0.00-$50.00....................................................           7,188           75.02           31.70
$50.01-$100.00..................................................           1,094           13.64           21.06
$100.01-$500.00.................................................             575           11.20           43.40
$500.01-$1,000.00...............................................              14            0.05            0.64
$1,000.01 +.....................................................              15            0.09            3.19
----------------------------------------------------------------------------------------------------------------

    The Commission's proposed definition of round lot attempts to
balance the benefits of adding more quotation data regarding smaller-
sized orders to proposed core data against the concerns raised by some
Roundtable panelists and commenters that adding all odd-lot quotes to
proposed core data could increase its complexity and undermine its
usefulness.\195\ The proposed definition, in effect, limits the
quotation data that would be added to proposed core data to quotations
that represent a notional value of at least $1,000, which the
Commission preliminarily believes to be meaningful order size for
today's market participants.\196\
---------------------------------------------------------------------------

    \195\ The proposed definition of round lot only includes a
subset of all odd-lot quotation data, namely, orders with a notional
value of at least $1,000. This would limit the number of data
messages that would be provided to market participants when compared
to providing all odd-lot quotation data. The Commission
preliminarily believes that the proposed definition would address
concerns regarding additional complexity and degradation of the
usefulness of the data. See infra Section VI.C.1(b)(i).
    \196\ See infra Section VI.C.1.
---------------------------------------------------------------------------

    A round lot is a standard unit of trading that traditionally has
reflected an order of meaningful size to market participants. Given the
per share price increases of certain securities, and the large number
of orders in sub-100 share sizes in today's market,\197\ the Commission
preliminarily believes that the current round lot size of 100 shares no
longer captures many orders of meaningful size. The number of shares in
an order, on its own, has become a less accurate way of distinguishing
orders of meaningful size from those of de minimis size. For example, a
100-share order for an $11 stock and a 10 share order for a $110 stock
both have a notional value of $1,100, but, under exchange rules and NMS
plans, only the former may be a round lot currently. The Commission
preliminarily believes that defining round lots based on a dollar value
would better reflect orders of meaningful size.\198\
---------------------------------------------------------------------------

    \197\ See supra notes 163-169 and accompanying text.
    \198\ Commenters to the SIP Odd Lot Initial Proposals have
suggested defining round lots based on share price. See Letter to
SIP Operating Committees from Hubert De Jesus, Managing Director,
Global Head of Market Structure and Electronic Trading, Blackrock,
and Joanne Medero, Managing Director, Global Public Policy Group,
Blackrock, regarding Odd Lots Proposal, 2 (Dec. 3, 2019), available
at https://www.theice.com/publicdocs/BlackRock_Odd_Lot_Proposal_December_3_2019.pdf (``The sizing of
round lots provides an intuitive mechanism for expanding odd lot
coverage because its designation as the normal unit of trading is
embedded in exchange rulebooks and market regulations. . . .
BlackRock believes that a data-driven redefinition of round lots to
scale lot size relative to security price would improve transparency
and promote fairer and more efficient markets.''); Letter from
Benjamin Connault, Economist, IEX Group, Inc., and Lucy Malcolm,
Associate General Counsel, IEX Group, Inc., to Operating Committees,
regarding Odd Lots Proposal and Round Lot Proposal, 2 (Nov. 18,
2019), available at https://www.theice.com/publicdocs/IEX_Letter_re-CTA-UTP_Odd-Lots_Proposal_20191118.pdf (``IEX strongly supports
reducing the round lot size for higher-priced securities.'').
---------------------------------------------------------------------------

    Furthermore, higher odd-lot trading rates are associated with
higher-priced stocks,\199\ and, according to data provided in
connection with the Roundtable, odd-lot transaction sizes go down as
share price goes up.\200\ The proposed tiered, price-based round lot
definition is intended to reflect these market dynamics. More
specifically, a significant odd-lot transaction market--measured by
odd-lot trade frequency--emerges at approximately a $50 share price,
and 50% of the odd-lots traded in stocks priced between $50 and $250
are 20 shares or less.\201\ This corresponds, approximately, with the
proposed 20 share round lot category for stocks priced between $50.01
and $100.00 per share. Moreover, according to data provided in
connection with the Roundtable, 20, 10, 2, and 1 share odd-lot trade
sizes are among the most common, with approximately 2.8%, 5.1%, 5.3%,
and 11.7%, of odd-lot executions, respectively.\202\ The proposed
definition of round lot is intended to broadly reflect these key data
points in the context of a relatively simple, intuitive framework for
establishing round lot sizes and associated price thresholds.
---------------------------------------------------------------------------

    \199\ See supra Section III.C.1(b) (stating that the daily
exchange odd-lot rate for the top decile of corporate stocks by
price exceeds the rate for all corporate stocks).
    \200\ See RBC Letter at 5.
    \201\ Id.
    \202\ Deutsche Bank, Global Equities, There's More to Odd Lots
than High-Priced Stocks (June 25, 2019).
---------------------------------------------------------------------------

    Moreover, a significant portion of the odd-lot transactions that
occur at a price better than the NBBO \203\ would be captured by the
proposed definition of round lot. Specifically, of the odd-lot
transactions executing at a price better than the NBBO during all of
the trading days in September 2019, approximately 38% of such
transactions and 61% of the odd-lot volume were in sizes that would be
round lots under proposed Rule 600(b)(81). For example, for those
stocks with an average prior calendar month's closing price on the
primary listing exchange equal to or greater than $500.01 and less than
$1,000, approximately 77% of all trades (99% of volume) in sizes less
than 100 shares that occurred at a price better than the prevailing
NBBO had a transaction size of 2 shares or more. Table 2 and Table 3,
below, show the portion of odd-lot trades and volume, respectively,
executed a price better than the prevailing NBBO that would be defined
as round lots under the proposal:
---------------------------------------------------------------------------

    \203\ See supra Section III.C.1(b).

                                                     Table 2
----------------------------------------------------------------------------------------------------------------
                                                                                Portion of all trades less than
                                                                              100 shares, at a price better than
                                                                               the prevailing NBBO, occurring in
            Stock price group                Proposed round lot definition     a quantity that would be defined
                                                                               as a round lot under the proposal
                                                                                (%)
----------------------------------------------------------------------------------------------------------------
$0.00-$50.00.............................  100 shares.......................                                   0
$50.01-$100.00...........................  20 shares........................                                  46
$100.01-$500.00..........................  10 shares........................                                  59
$500.01-$1000.00.........................  2 shares.........................                                  77
$1,000.01 or more........................  1 share..........................                                 100
----------------------------------------------------------------------------------------------------------------

                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                               Portion of all volume transacted
                                                                                in a quantity less than 100
                                                                              shares, at a price better than the
            Stock price group                Proposed round lot definition      prevailing NBBO, occurring in a
                                                                               quantity that would be defined as
                                                                                a round lot under the proposal
                                                                                (%)
----------------------------------------------------------------------------------------------------------------
$0.00-$50.00.............................  100 Shares.......................                                   0
$50.01-$100.00...........................  20 Shares........................                                  89
$100.01-$500.00..........................  10 Shares........................                                  95
$500.01-$1000.00.........................  2 Shares.........................                                  99
$1,000.01 or more........................  1 Share..........................                                 100
----------------------------------------------------------------------------------------------------------------

    The proposed definition of round lot requires the round lot size of
an NMS stock to be based on the prior calendar month's average closing
price on the primary listing exchange for that stock (or the IPO price
if the prior calendar month's average closing price on the primary
listing exchange is not available).\204\ The Commission preliminarily
believes that the prior calendar month's average closing price on the
primary listing exchange is a reasonable metric to assess an NMS
stock's share price for purposes of determining the applicable round
lot size. The daily closing price is a widely followed indicator of a
stock's value that is often used to measure performance over time.\205\
Moreover, using a monthly average (rather than, e.g., each trading
day's closing price or a weekly average), would help ensure that round
lot sizes are based on current pricing information, while preventing
short-term price fluctuations from impacting the round lot size,
thereby avoiding unnecessary complexity and cost.
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    \204\ Specifically, the prior calendar month's average closing
price on the primary listing exchange would be the mean of the daily
closing prices on the primary listing exchange for all trading days
in the prior calendar month. For each NMS stock, the prior calendar
month's average closing price on the primary listing exchange would
only need to be computed at the beginning of each calendar month and
would be in effect for the rest of the month (i.e., it would not be
a ``rolling'' average requiring computation more frequently than
once per calendar month).
    \205\ See Christopher Ting, Which Daily Price Is Less Noisy?,
Financial Management 35, no. 3 (2006): 81-95 (describing daily
closing price as a popular reference price, including for fund
managers to compute net asset values).
---------------------------------------------------------------------------

    The proposed definition of round lot would impact other terms that
are currently defined in Regulation NMS, as well as the proposed
definition of core data (and its included terms), so that quotation
information in the proposed round lot sizes would be included in the
proposed definition of core data. Specifically, the definition of ``bid
or offer'' \206\ is based on round lots, and the definition of ``bid or
offer'' is reflected in the definition of ``best bid and best offer.''
\207\ Similarly, the definition of ``best bid and best offer'' is
reflected in the definition of ``national best bid and national best
offer.'' \208\ Therefore, the addition of the proposed definition of
round lot would impact the calculation of the NBBO by requiring that it
be calculated based upon the BBOs in the new round lot sizes. In
addition, the proposed definition of depth of book data refers to
``quotation size,'' which refers to ``bid or offer,'' so the quotation
data at the price levels that are proposed to be included in depth of
book data would include quotations in the new proposed round lot
sizes.\209\
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    \206\ See 17 CFR 242.600(b)(9).
    \207\ See 17 CFR 242.600(b)(8).
    \208\ See 17 CFR 242.600(b)(43).
    \209\ Similarly, since ``transaction report'' is defined as ``a
report containing the price and volume associated with a transaction
involving the purchase or sale of one or more round lots of a
security,'' core data, as proposed, would include transaction
reports based on the new proposed round lot sizes. The Equity Data
Plans already collect and disseminate all odd-lot transaction
reports and last sale data. See supra notes 160-161 and accompanying
text. Accordingly, under proposed Rule 600(b)(19)(iv), which
incorporates data elements required by the NMS plan(s) into the
proposed consolidated market data, the SROs would continue to be
required to provide all odd-lot transaction reports and last sale
data as part of the proposed consolidated market data.
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    The proposed definition of ``round lot'' would also affect Rules
602, 603, 604, 605, 606, and 610 of Regulation NMS. Rule 602 governs
the dissemination of quotations in NMS securities. Specifically, Rule
602(a), among other things, requires SROs to have procedures to collect
and make available certain quotation information from their members and
make available their best bids and offers to vendors. As a result of
the proposed definition of ``round lot,'' the SROs would be required to
collect and make available quotations in the smaller round lot sizes
depending on the price of the NMS stock. The Commission preliminarily
believes the bids and offers collected and made available under Rule
602(a) should be in the proposed round lot sizes. As discussed above,
the Commission preliminarily believes that the proposed round lot sizes
represent orders of meaningful size to market participants and should
be collected, consolidated, and disseminated in proposed core data. To
effectively implement this, exchanges must be required to collect and
make available

quotations in these sizes under Rule 602(a).
    In addition, Rule 602(b) provides that each ``responsible broker or
dealer'' shall communicate to its SROs its best bids and offers and
quotation sizes for a ``subject security.'' \210\ Thereafter, each
responsible broker or dealer is obligated to execute an order to buy or
sell a subject security, other than an odd-lot order, that is presented
to that responsible broker or dealer at a price at least as favorable
to such buyer or seller as the responsible broker's or dealer's
``published bid or published offer.'' \211\ In other words, the
responsible broker or dealer must be firm for its ``published bid or
published offer.'' \212\ As a result of the proposed definition of
round lot, responsible brokers or dealers will be required to
communicate bids and offers in the proposed round lot sizes and be firm
for such bids and offers. The Commission preliminarily believes that
the proposed round lot definition should apply to the obligations of
responsible brokers or dealers under Rule 602(b). As explained above,
the Commission preliminarily believes that the proposed round lot sizes
better reflect orders of meaningful size in today's markets. The
Commission also preliminarily believes that the objectives of Rule
602(b) of ensuring that broker-dealers disseminate their best quotes,
and are firm for such quotes, would be furthered by applying the
proposed definition of round lots such that those obligations would
apply to quotes of meaningful size.
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    \210\ ``Subject security'' means ``(i) With respect to a
national securities exchange: (A) Any exchange-traded security other
than a security for which the executed volume of such exchange,
during the most recent calendar quarter, comprised one percent or
less of the aggregate trading volume for such security as reported
pursuant to an effective transaction reporting plan or effective
national market system plan; and (B) Any other NMS security for
which such exchange has in effect an election, pursuant to
242.602(a)(5)(i), to collect, process, and make available to a
vendor bids, offers, quotation sizes, and aggregate quotation sizes
communicated on such exchange; and (ii) With respect to a member of
a national securities association: (A) Any exchange-traded security
for which such member acts in the capacity of an OTC market maker
unless the executed volume of such member, during the most recent
calendar quarter, comprised one percent or less of the aggregate
trading volume for such security as reported pursuant to an
effective transaction reporting plan or effective national market
system plan; and (B) Any other NMS security for which such member
acts in the capacity of an OTC market maker and has in effect an
election, pursuant to 242.602(a)(5)(ii), to communicate to its
association bids, offers, and quotation sizes for the purpose of
making such bids, offers, and quotation sizes available to a
vendor.'' 17 CFR 242.600(b)(77).
    \211\ See Rule 602(b)(2), 17 CFR 242.602(b)(2); Regulation NMS
Adopting Release, supra note 10, at 37538. ``Published bid and
published offer means the bid or offer of a responsible broker or
dealer for an NMS security communicated by it to its national
securities exchange or association pursuant to Sec.  242.602 and
displayed by a vendor on a terminal or other display device at the
time an order is presented for execution to such responsible broker
or dealer.'' 17 CFR 242.600(b)(64).
    \212\ 17 CFR 242.602(b)(2). See also Rule 600(b)(64) which
defines ``published bid and published offer.'' 17 CFR
242.600(b)(64).
---------------------------------------------------------------------------

    Rule 603(c) governs the display of information with respect to
quotations for and transactions in NMS stocks. Specifically, Rule
603(c)(1) states that no securities information processor, broker, or
dealer shall provide, in a context in which a trading or order routing
decision can be implemented, a display of any information with respect
to quotations for or transactions in an NMS stock without also
providing, in an equivalent manner, a consolidated display--i.e., the
NBBO and consolidated last sale information \213\--for such stock.\214\
As a result of the proposed definition of ``round lot,'' a securities
information processor, broker, or dealer would be required to provide a
consolidated display that reflects smaller-sized orders in higher-
priced stocks. As discussed above, the Commission preliminarily
believes that the proposed round lot sizes represent orders of
meaningful size to market participants. The Commission also
preliminarily believes that the objective of Rule 603(c) of ensuring
that market participants receive basic quotation and transaction
information in a context in which a trading or order routing decision
can be implemented would be furthered to the extent that such
information is based on orders of meaningful size such as round lots as
proposed to be defined in this proposal.
---------------------------------------------------------------------------

    \213\ Rule 600(b)(14) defines ``consolidated display'' as ``(i)
The prices, sizes, and market identifications of the national best
bid and national best offer for a security; and (ii) Consolidated
last sale information for a security.'' 17 CFR 242.600(b)(14).
    \214\ Rule 603(c)(2) further states that this provision does not
apply to a display of information on the trading floor or through
the facilities of a national securities exchange or to a display in
connection with the operation of a market linkage system implemented
in accordance with an effective national market system plan. 17 CFR
242.603(c)(2).
---------------------------------------------------------------------------

    Rule 604, which governs the display of customer limit orders for
NMS stocks, would also be affected by the proposed definition of round
lot. Rule 604(a)(1) requires each member of a national securities
exchange that is registered with that exchange as a specialist, or is
authorized by that exchange to perform functions substantially similar
to those of a specialist, to publish immediately a bid or offer that
reflects: (i) The price and the full size of each customer limit order
held by the specialist that is at a price that would improve the bid or
offer of such specialist in such security; and (ii) the full size of
each customer limit order held by the specialist that is priced equal
to the bid or offer of such specialist for such security, is priced
equal to the national best bid or national best offer, and represents
more than a de minimis change in relation to the size associated with
the specialist's bid or offer. Rule 604(a)(2) imposes similar
requirements on OTC market makers with respect to their customer limit
orders. The requirements of Rule 604 do not apply to customer limit
orders that, among other things, are odd-lots.\215\
---------------------------------------------------------------------------

    \215\ See 17 CFR 242.604(b)(3).
---------------------------------------------------------------------------

    Under the proposed definition of round lot, a specialist or OTC
market maker would have to include customer limit orders in the new
round lot sizes within its published bids and offers. Rule 604
currently applies to round lots and the Commission preliminarily
believes that Rule 604 should continue to use round lots, as proposed
to be defined, as the measure for customer limit orders that must be
reflected in a specialist or OTC market maker's published bid or offer.
The Commission preliminarily believes that the objectives of Rule 604
of ensuring that customers have the ability to effectively seek price
improvement through the dissemination of their limit orders by
specialists or OTC market makers would be furthered by applying the
proposed definition of round lot such that those obligations would
apply to customer limit orders of meaningful size. Therefore, the
Commission preliminarily believes that the customer limit order display
requirements of Rule 604 should apply to orders in the new proposed
round lot sizes.
    Rule 605, which governs the disclosure of order execution quality
information, would also be affected by the proposed definition of round
lot because of the effect on the definition of NBBO. Rule 605 requires
market centers to publish monthly reports containing execution
statistics \216\ for certain NMS stock orders, including, but not
limited to, the ``average realized spread,'' \217\

``average effective spread,'' \218\ data on shares ``executed with
price improvement,'' \219\ and data on shares ``executed outside the
quote.'' \220\ The calculations of average realized spread and average
effective spread rely on the mid-point of the NBBO. Similarly, the
benchmark for price improvement statistics, as reflected in the
definitions of ``executed at the quote,'' \221\ ``executed with price
improvement,'' \222\ and ``executed outside the quote,'' \223\ is the
NBBO. As discussed above, since the NBBO will be based on the proposed
round lot sizes, any Rule 605 execution quality statistics that rely on
the NBBO as a benchmark would be affected by the proposed definition of
round lot on the NBBO.\224\ The Commission preliminarily believes that
order execution disclosures required under Rule 605 should be based on
the NBBO that reflects the new proposed round lot sizes. The NBBO is
currently based on round lots, and the proposed definition of round lot
would allow additional orders of meaningful size to determine the NBBO.
As a result, the execution quality and price improvement statistics
required under Rule 605 would be based upon an updated NBBO that the
Commission preliminarily believes is a more meaningful benchmark for
these statistics. Therefore, the Commission preliminarily believes that
the NBBO, as modified by the proposed definition of round lot, should
continue to be used as a basis for the statistics required under Rule
605.\225\
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    \216\ Among other things, these reports must be ``categorized by
order size,'' which means ``dividing orders into separate categories
for sizes from 100 to 499 shares, from 500 to 1999 shares, from 2000
to 4999 shares, and 5000 or greater shares.'' 17 CFR 242.600(b)(11).
    \217\ Rule 600(b)(7) defines ``average realized spread'' as
``the share-weighted average of realized spreads for order
executions calculated, for buy orders, as double the amount of
difference between the execution price and the midpoint of the
national best bid and national best offer five minutes after the
time of order execution and, for sell orders, as double the amount
of difference between the midpoint of the national best bid and
national best offer five minutes after the time of order execution
and the execution price; provided, however, that the midpoint of the
final national best bid and national best offer disseminated for
regular trading hours shall be used to calculate a realized spread
if it is disseminated less than five minutes after the time of order
execution.'' 17 CFR 242.600(b)(7).
    \218\ Rule 600(b)(6) defines ``average effective spread'' as
``the share-weighted average of effective spreads for order
executions calculated, for buy orders, as double the amount of
difference between the execution price and the midpoint of the
national best bid and national best offer at the time of order
receipt and, for sell orders, as double the amount of difference
between the midpoint of the national best bid and national best
offer at the time of order receipt and the execution price.'' 17 CFR
242.600(b)(6).
    \219\ Rule 600(b)(29) defines ``executed with price
improvement'' as ``for buy orders, execution at a price lower than
the national best offer at the time of order receipt and, for sell
orders, execution at a price higher than the national best bid at
the time of order receipt.'' 17 CFR 242.600(b)(29).
    \220\ Rule 600(b)(28) defines ``executed outside the quote'' as
``for buy orders, execution at a price higher than the national best
offer at the time of order receipt and, for sell orders, execution
at a price lower than the national best bid at the time of order
receipt.'' 17 CFR 242.600(b)(28).
    \221\ Rule 600(b)(27) defines ``executed at the quote'' as ``for
buy orders, execution at a price equal to the national best offer at
the time of order receipt and, for sell orders, execution at a price
equal to the national best bid at the time of order receipt.'' 17
CFR 242.600(b)(27).
    \222\ Supra note 219.
    \223\ Supra note 220.
    \224\ See supra Section III.C.1(d)(i) (discussing the impact of
the proposed definition of round lot on other Regulation NMS defined
terms, such as the NBBO). As discussed above, the Commission
preliminarily believes that actual execution quality for retail
investors will be improved as a result of the inclusion of odd-lot
quotes in core data as a result of the better pricing that is often
reflected in odd-lots.
    \225\ The NBBO used for purposes of Rule 605 would be calculated
by competing consolidators and self-aggregators using the proposed
round lot sizes. See supra Section III.C.1(d)(i). Under the
proposal, each competing consolidator and self-aggregator would be
required to calculate an NBBO consistent with the requirements set
forth in the NBBO definition found in Rule 600(b)(50). See proposed
Rule 614(d)(2). Accordingly, even though each competing consolidator
and self-aggregator would be calculating its own NBBO, the
calculation methodology for the NBBO would be consistent. Because
the NBBO would be calculated in a consistent manner, Rule 605
reports should still provide uniform comparisons of execution
quality.
---------------------------------------------------------------------------

    Rule 606, which requires broker-dealers to provide disclosure of
information regarding the handling of the broker-dealers' customers'
orders,\226\ would also be affected by the proposed definition of round
lot because of the effect on the definition of actionable indication of
interest.\227\ Specifically, Rule 606(b)(3) requires every broker-
dealer, upon a request of a customer who places a not held order, to
provide the customer with a standardized set of individualized
disclosures concerning the broker-dealer's handling of the orders. The
disclosures include, among other things, not held orders exposed by the
broker-dealer through actionable indications of interest, and the
venue(s) to which the actionable indications of interest were exposed,
provided that the identity of such venue(s) may be anonymized if the
venue is a customer of the broker-dealer. Rule 600(b)(1) defines an
actionable indication of interest as any indication of interest that
explicitly or implicitly conveys all of the following information with
respect to any order available at the venue sending the indication of
interest: (i) Symbol; (ii) side (buy or sell); (iii) a price that is
equal to or better than the national best bid for buy orders and the
national best offer for sell orders; and (iv) a size that is at least
equal to one round lot.\228\ As a result of the proposed definition of
round lot, there could be more actionable indications of interest in
higher priced securities. The Commission preliminarily believes that
applying the proposed round lot definition to actionable indications of
interest would further the objectives of Rule 606 regarding the
disclosure of order handling information--to make it easier for
investors to evaluate how their brokers handle orders and make more
informed decisions about brokers, and help investors to better
understand how broker-dealers route and handle orders and assess the
impact of broker-dealer routing decisions on order execution quality.
---------------------------------------------------------------------------

    \226\ Broker-dealers who engage in outsourced routing activity
are exempt from the requirement to comply with Rule 606(b)(3) until
April 1, 2020. See Securities Exchange Act Release No. 86874 (Sept.
4, 2019), 84 FR 47625 (Sept. 10, 2019).
    \227\ See 17 CFR 242.600(b)(1). See also Securities Exchange Act
Release No. 84528 (Nov. 2, 2018), 83 FR 58338 (Nov. 19, 2018)
(``Rule 606 Adopting Release'').
    \228\ See id.
---------------------------------------------------------------------------

    In addition, Rule 610, which governs access to quotations, would be
affected by the proposed definition of round lot. Specifically, Rule
610(c) prohibits trading centers from imposing fees for the execution
of an order against a protected quotation or any other quotation that
is the best bid or offer of an SRO if the fees exceed certain limits
($0.003 per share for quotes of $1.00 or more and 0.3% of the quotation
price per share for quotes less than $1.00). As the Commission
explained in adopting Regulation NMS, ``the purpose of the fee
limitation is to ensure the fairness and accuracy of displayed
quotations by establishing an outer limit on the cost of accessing such
quotations,'' and Rule 610 ``thereby assures order routers that
displayed prices are, within a limited range, true prices.'' \229\ As a
result of the proposed definition of round lot, these fee limitations
would apply to quotes in the smaller round lot sizes because they would
apply to quotations that are the ``best bid or offer'' of an SRO. Rule
610(c) currently applies to quotations in round lots and the Commission
preliminarily believes that Rule 610(c) should apply to quotations in
the new proposed round lot sizes. The Commission preliminarily believes
that applying the fee limitations of Rule 610(c) to orders of
meaningful size, as reflected in the proposed definition of round lot,
would further that rule's objectives of ensuring the accuracy of
displayed quotations by establishing an outer limit on the cost of
accessing them.
---------------------------------------------------------------------------

    \229\ See Regulation NMS Adopting Release, supra note 10, at
37502.
---------------------------------------------------------------------------

    Finally, Rule 201 of Regulation SHO requires, among other things,
that trading centers have written policies and procedures reasonably
designed to prevent the execution or display of a short sale order of a
covered security at a price that is less than or equal to the current
national best bid if the price of that covered security decreases by
10% or more from the covered security's closing price as determined by
the listing market for the covered security as of the end of regular
trading hours on

the prior day.\230\ As a result of the proposed definition of round
lot, the national best bid would include orders in the proposed round
lot sizes. The Commission preliminarily believes that the objectives of
Rule 201 of restricting destabilizing short sale orders in rapidly
declining markets would be furthered by applying the proposed
definition of round lot such that bids of meaningful size would be
included within this restriction.\231\
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    \230\ 17 CFR 242.201(b)(1)(i).
    \231\ Securities Exchange Act Release No. 61595, supra note 75.
The Commission also preliminarily believes that instituting a
different round lot size for purposes of Rule 201 would introduce
unnecessary complexity into the markets. In particular, excessive
order routing complexity may be introduced if order routers are
allowed to execute a short sale order against certain bids (i.e.,
smaller round lots that are priced better than the 100-share
national best bid) but not allowed to execute a short sale order
against other bids (i.e., a 100-share bid).
---------------------------------------------------------------------------

    The Commission requests comment on the proposed definition of round
lot in proposed Rule 600(b)(81) and the inclusion of additional
quotation information for higher priced shares in proposed core data
that would result from this proposed definition. In particular, the
Commission solicits comment on the following:
    8. Should odd-lot quotation data that is not currently reflected in
SIP data be incorporated into core data, as proposed, and, if so, what
is the best way to do so?
    9. Should core data, as proposed, include quotation information for
smaller sized orders in higher priced stocks? Why or why not? Does
adding this quotation information enhance the usefulness of core data,
as proposed? Please explain. What kinds of market participants would
use this information? For what purposes? Would the inclusion of this
information have any negative or unintended consequences, such as
``information overload'' effects? Please explain.
    10. Do commenters believe the Commission's proposed definition of
round lot is an effective way to incorporate this additional quotation
information into core data, as proposed? Why or why not? What effect
would the proposed definition have on systems capacity? Please explain
and provide data. Would the proposed definition affect market
complexity? Please explain. Do commenters believe that the proposed
definition of round lot appropriately balances the benefits of
providing additional quotation data to investors and other market
participants against potential costs such as additional system burdens
or increased data complexity? If not, please explain how this balance
could be more appropriately achieved. Specifically, please provide
details on the quantity of additional data or the increase in message
traffic that would be represented by the Commission's proposal and any
alternative proposals.
    11. Are there alternative approaches, such as requiring all or a
subset of odd-lot quotations to be included in the proposed definition
of core data, or directly requiring all quotes over a certain notional
value to be included in the proposed definition of core data (rather
than indirectly as in the proposed definition of ``round lot'')? Please
describe any alternative approaches. What would be the advantages and
disadvantages of any alternative approaches?
    12. Would the Commission's proposed definition of round lot capture
a significant portion of the odd-lot quotation activity that is
currently not included in SIP data? Is the definition appropriately
tailored to capture the odd-lot quotation information that would be
useful to market participants? If not, please identify and discuss
alternative approaches that might be more appropriate. For example, do
commenters believe round lot sizes and price intervals different from
those in the proposed definition would capture more useful odd-lot
quotation data? Please include data to support any suggested
alternative sizes or price intervals. Please also discuss any issues
related to increased order routing complexity or compliance with
Commission rules that might result from the proposed definition of
``round lot.''
    13. Do commenters believe that odd-lot quotes should be aggregated
into the new round lot sizes at multiple price levels for the purposes
of calculating and disseminating the NBBO in the proposed definition of
core data? Why or why not? What are commenters' views on the specific
odd-lot aggregation methodology set forth in the proposed definition of
core data?
    14. Do commenters agree with the Commission's proposal to require
odd-lot aggregation for purposes of protected quotations only at a
single price level? Please explain. Should odd-lots be aggregated only
at a single price level for purposes of determining the protected bid
and offer for stocks valued at $50.00 or less based on the prior
calendar month's average closing price on the primary listing exchange
even though the round lot for this price tier remains 100 shares (i.e.,
both the best bid and offer and protected bid and offer must be 100-
shares in this price tier)? Should a multiple price level aggregation
methodology for determining protected quotations apply to stocks valued
at $50.00 or less? Would there be any costs or negative effects of
having different odd-lot aggregation methodologies for stocks at
different price levels?
    15. Is a price-based metric for determining round lot size an
appropriate metric for determining the proposed round lot tiers? Are
the proposed tiered round lot sizes appropriate? Why or why not? Should
the tiers be set at different intervals? Should there be more or fewer
tiers? For example, should the round lot size be one share for any NMS
stock for which the prior calendar month's average closing price on the
primary listing exchange was $500.01 or greater? Why or why not? Are
the round lot sizes appropriate for the share prices? If not, what is
the appropriate round lot size? Please provide empirical support for
any suggested alternatives.
    16. Do commenters believe that a significant number of broker-
dealers do not currently subscribe to proprietary market data products,
including proprietary market data products that include odd-lot
quotations? If so, how many and what type of broker-dealers (e.g.,
executing broker-dealers, introducing broker-dealers, small broker-
dealers, large broker-dealers)? Are there specific types of proprietary
market data products to which any such broker-dealers do not subscribe?
If so, which types of proprietary market data products? Do any such
broker-dealers subscribe to proprietary data products from some
exchanges but not others?
    17. Do commenters have views on the odd-lot proposal released by
the operating committees of the Equity Data Plans? \232\ What are the
advantages and disadvantages of the proposal by the Equity Data Plans
as compared to the Commission's proposed definition of round lot?
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    \232\ See supra notes 181-185.
---------------------------------------------------------------------------

    18. Each of the proposed tiers represent a notional value of over
$1,000. Is this an appropriate threshold? Should it be higher or lower?
Please explain and submit data to support your analysis.
    19. Do commenters believe that the prior calendar month's average
closing price on the primary listing exchange (or IPO price if the
prior calendar month's average closing price is not available) is an
effective way to assess the price of a stock for purposes of
determining its round lot size? Why or why not? Do commenters believe
it would be costly, difficult, or problematic for market participants
to adjust procedures and systems to take into account new round lot
sizes based

on the prior calendar monthly average closing price on the primary
listing exchange, or to account for a particular stock's potentially
different round lot size every month? Are there alternative time
periods over which a stock's price for purposes of assigning a round
lot size should be measured or alternative methods for measuring a
stock's price that the Commission should consider? When should a stock
whose price changes from one tier to another be assigned to a new round
lot size and for how long should it remain in that round lot size?
Would stocks priced near the thresholds that differentiate the round
lot tiers be affected by frequent shifts between round lot sizes?
Please explain.
    20. During the month following the IPO of a newly listed stock,
should a minimum number of trading days be required to elapse before
the stock's round lot size is determined? If so, should the average
daily closing price on the primary listing exchange (or some other
metric) over the course of that number of trading days be used to
calculate the stock's price for purposes of determining its round lot
size? If so, how would the stock's round lot size be determined in the
interim?
    21. Do commenters have views on how monthly average closing price
should be determined for stocks that are not traded every day? Should
the closing price of the most recent trading day on which there was a
trade be used each intervening day until the stock is traded again?
    22. Do commenters believe that the impacts of the proposed
definition of round lot on the Commission rules described above are
appropriate? Why or why not? Will any SRO rules be affected? Please
explain. Specifically, please describe any effect of the proposed
definition of round lot on market maker quoting obligations under SRO
rules.
    23. Should the proposed definition of round lot apply to Rules 602
and 604? Do commenters believe the applicability of the proposed
smaller round lot sizes to these rules will help foster more displayed
quotations of small orders? Do commenters believe this will result in a
significant tightening of quoted spreads?
    24. Should the Commission amend Rule 605 in light of the proposed
round lot definition? Specifically, since the disclosures required by
Rule 605 must be ``categorized by order size,'' \233\ which currently
begins at 100 shares, should the definition of ``categorized by order
size'' be amended to require the relevant execution information to be
provided for sub-100 share orders, such as orders in the proposed round
lot sizes? Do commenters believe this would negatively or positively
affect the execution quality statistics provided pursuant to Rule 605?
More broadly, do commenters believe the proposed definition of round
lot would improve the actual prices provided to retail investors (as
distinct from the Rule 605 execution quality statistics)?
---------------------------------------------------------------------------

    \233\ See supra note 216.
---------------------------------------------------------------------------

    25. Should the proposed definition of round lot apply to Rule
610(c)? Specifically, should the fee limits under Rule 610(c) apply to
quotations in the proposed new round lot sizes? Would exchanges or
other trading centers increase access fees for the smaller round lots
if Rule 610(c) were limited to 100-share protected quotations? Why or
why not? Do commenters believe that market forces would provide
sufficient control over access fees for quotations in the smaller round
lots? Why or why not? Should Rule 610(c) be limited to the Commission's
definition of protected bid or protected offer, as amended? What would
be the benefits and costs of each approach?
    26. Should the proposed definition of round lot apply to Rule 201
of Regulation SHO? Would the scope of Rule 201 be expanded as a result
of the proposed definition of round lot in a way that would
unnecessarily restrict the ability of market participants to sell
short? Will additional or excessive order routing complexity result
from the application of Rule 201 to quotations in the proposed smaller
round lot sizes? Should ``protected bid,'' as proposed to be amended,
rather than the national best bid be used as the reference price for
determining which short sales are required to be prevented under Rule
201? What would be the benefits and costs of each approach?
    27. Do commenters believe that the proposed definition of round lot
would have any effect on an exchange's official closing prices? Would
the proposed definition of round lot have any effect on the pricing
practices of mutual funds and other investment companies, including the
calculation of net asset value or trading in portfolio securities?
Please explain the potential costs and benefits of any such effects.
    28. Do commenters believe that the proposed definition of round lot
would affect the proportion of on-exchange or off-exchange liquidity?
Please explain.
    (ii) Proposed Amendments to the Definition of Protected Bid or
Protected Offer
    Rule 611 requires trading centers to have policies and procedures
that are reasonably designed to prevent trade-throughs on that trading
center of protected bids or protected offers in NMS stocks, subject to
specified exceptions.\234\ Rule 611 currently applies only to round
lots.\235\ If the definition of protected bid or protected offer were
left unmodified, the Commission's proposed definition of round lot
would result in an expansion of Rule 611 by requiring the protection of
quotations in the new smaller round lot sizes.
---------------------------------------------------------------------------

    \234\ Rule 611(a)(1). See also supra notes 115, 182. Rule
600(b)(81) defines ``trade-through'' as ``the purchase or sale of an
NMS stock during regular trading hours, either as principal or
agent, at a price that is lower than a protected bid or higher than
a protected offer.'' 17 CFR 242.600(b)(81).
    \235\ Specifically, Rule 611 applies to ``protected quotations''
which means ``protected bid[s] or []protected offer[s].'' 17 CFR
242.600(b)(62). ``Protected bid or protected offer,'' as defined in
Rule 600(b)(61), refers to ``a quotation,'' defined in Rule
600(b)(66), which in turn refers to ``a bid or an offer,'' defined
in Rule 600(b)(9), which, as noted above, applies to round lots.
---------------------------------------------------------------------------

    Whether Rule 611 should be modified or repealed has been the
subject of much debate in recent years.\236\ Rule

611 was controversial when adopted,\237\ with many commenters either
opposing the rule entirely or advocating for exceptions, such as for
block trades or for those wishing to opt out of the Rule's
protections.\238\ In the years since, Rule 611 has continued to be the
subject of much debate, with some arguing that the rule has negatively
impacted equity market structure, others taking the position that any
benefits were achieved early on when the Rule induced widespread
automated quotations and connectivity, and yet others expressing the
view that the Rule continues to play an important role in supporting
best execution and retail investor confidence.\239\ Recently, a
Subcommittee of the Commission's Equity Market Structure Advisory
Committee advocated that the EMSAC recommend that the Commission
consider repealing Rule 611 on a pilot basis to test its impact.\240\
---------------------------------------------------------------------------

    \236\ For example, in its April 2017 memorandum discussing Rules
610 and 611 under the Exchange Act, the Equity Market Structure
Advisory Committee (``EMSAC'') Regulation NMS Subcommittee
(``Subcommittee'') stated that the industry largely remained divided
in its view on both the success and the continued need for the
trade-through and the locked and crossed markets provisions of
Regulation NMS. See Memorandum to EMSAC from the Subcommittee (Apr.
3, 2017), available at https://www.sec.gov/spotlight/emsac/emaac-regulation-nms-subcommittee-discussion-framework-040317.pdf. In the
memorandum, the Subcommittee recommended, among other things, that
the Commission consider repealing Rule 611 on a pilot basis, with
the goals of reducing excess complexity in the marketplace (as
demonstrated by venue fragmentation, order types, and routing
complexity); testing the hypothesis that Rule 611 has not created an
incentive for posting visible liquidity; and opening the markets to
competition and innovation over a longer time horizon, which the
Subcommittee believed is currently constrained due to the
proscriptive nature of Regulation NMS. The Subcommittee noted
several arguments supporting the removal of Rule 611, including the
apparent failure of Regulation NMS to increase the display of limit
orders in the marketplace and the increase in dark liquidity,
smaller trade sizes, and ``small'' venues; the de minimis benefit
from decreased trade-through rates, coupled with a relatively high
cost of trade-through compliance and the creation of new venues,
complex order types, and a need to focus on speed and other market
complexities as a requirement to manage queue priority; the fact
that competition among market centers is largely based on price and
speed; and the difficulty of setting the NBBO in active stocks
without the use of sophisticated price-sliding order types and
intermarket sweep orders. The Subcommittee also identified several
arguments in support of retaining Rule 611, including concerns,
especially among individual investors, of losing the best execution
backstop of the trade-through rule; the concern that individual
investors' non-marketable orders would lose trade-through
protection; and a concern regarding the amount of effort that could
be required to further monitor order routing behavior by agents in
the absence of a trade-through rule. The Subcommittee also expressed
the view that Rule 611 is too prescriptive as a best execution rule
and that concerns about best execution could be addressed more
effectively through enhanced guidance and procedures.
    \237\ See Regulation NMS Adopting Release, supra note 10,
dissenting opinion.
    \238\ See Regulation NMS Adopting Release, supra note 10, at
37505-37506, 37516, 37524-37526.
    \239\ See Memorandum to EMSAC from the Subcommittee, supra note
236; Letter from Theodore R. Lazo, Managing Director and Associate
General Counsel, SIFMA to Brent J. Fields, Secretary, SEC, 5-7 (Mar.
29, 2017), available at https://www.sec.gov/comments/s7-21-16/s72116-1674693-149275.pdf (recommending that the SEC consider (1)
eliminating Rule 611 and relying on the duty of best execution to
maintain intermarket price protection, or (2) modifications to Rule
611 to add volume thresholds for protected quote status and a block
exception); Letter from William R. Harts, CEO, Modern Markets
Initiative, to Brent J. Fields, Secretary, SEC (Dec. 9, 2016),
available at https://www.sec.gov/comments/s7-21-16/s72116-9.pdf
(recommending that the SEC review Rule 611 to assess whether it
should be modified in light of the costs of compliance).
    \240\ See Memorandum to EMSAC from the Subcommittee, supra note
236.
---------------------------------------------------------------------------

    In light of the concerns about the existing scope of Rule 611, the
Commission preliminarily believes that Rule 611 should not be extended
to smaller-sized quotations reflected in the proposed definition of
round lot. Moreover, the Commission preliminarily believes that
extending Rule 611 to the proposed new round lots is not necessary in
light of market developments since the adoption of Regulation NMS in
2005. While a substantial amount of trading in 2005 was conducted on
relatively slow manual markets,\241\ and was concentrated for any given
stock on its listing exchanges,\242\ nearly all trading now occurs on
fast, electronic markets (where even small degrees of latency affect
trading strategies) and is dispersed among a wide range of competing
market centers.\243\ In a market environment characterized by fast,
electronic trading across multiple venues, order routing and execution
strategies have become highly automated and increasingly sophisticated
at obtaining the best prices throughout the national market
system.\244\ In addition, best execution obligations apply to odd-lot
orders \245\ and would apply to bids and offers in the proposed round
lot sizes. The Commission preliminarily believes that these market
developments and improvements in trading and order routing technology,
in combination with their pursuit of best execution, would provide
sufficient incentives for market participants to engage with
meaningfully sized orders \246\ even in the absence of an expanded
order protection mandate under Rule 611.\247\ Further, the additional
pre-trade transparency that would be provided to these orders by their
inclusion in proposed core data should encourage market participants to
access this liquidity, as many market participants that access similar
data through proprietary feeds are already doing today.\248\ Moreover,
as discussed above, the execution quality and price improvement
statistics required under Rule 605 would be based upon an NBBO that
reflects the new proposed round lot sizes, and would provide investors,
including retail investors, with higher-quality information about their
order executions.
---------------------------------------------------------------------------

    \241\ See Equity Market Structure Concept Release, supra note
11, 75 FR at 3594 (``NYSE-listed stocks were traded primarily on the
floor of the NYSE in a manual fashion until October 2006. At that
time, NYSE began to offer fully automated access to its displayed
quotations.''). In contrast to NYSE, stocks listed on Nasdaq traded
in a highly automated fashion at many different trading centers
following the introduction of SuperMontage in 2002. See Securities
Exchange Act Release No. 46429, supra note 15; Steven Quirk, Senior
Vice President, Trader Group, TD Ameritrade, Testimony before the
U.S. Senate Committee on Homeland Security and Governmental Affairs,
Permanent Subcommittee on Investigations, Hearing on ``Conflicts of
Interest, Investor Loss of Confidence, and High Speed Trading in
U.S. Stock Markets'' (June 17, 2014), available at https://www.hsgac.senate.gov/imo/media/doc/STMT%20-%20Quirk%20-%20TD%20Ameritrade%20(June%2017%202014).pdf%20 (citing statistics
that average execution speed has improved by 90% since 2004--from 7
seconds to 0.7 seconds in 2014). Today, trading speed is measured in
microseconds and is moving towards nanoseconds. See, e.g., Vera
Sprothen, Trading Tech Accelerates Toward Speed of Light, Wall
Street Journal (Aug. 8, 2016), available at https://www.wsj.com/articles/trading-tech-accelerates-toward-speed-of-light-1470559173;
Alexander Osipovich, NYSE Aims to Speed Up Trading With Core Tech
Upgrade, Wall Street Journal (Aug. 5, 2019), available at https://www.wsj.com/articles/nyse-aims-to-speed-up-trading-with-core-tech-upgrade-11565002800.
    \242\ See Securities Exchange Act Release No. 59039 (Dec. 2,
2008), 73 FR 74770, 74782 (Dec. 9, 2008) (File No. SR-NYSEArca-2006-
21) (NYSE's reported market share of trading in NYSE-listed stocks
declined from 79.1% in January 2005 to 30.6% in June 2008.); Equity
Market Structure Concept Release, supra note 11.
    \243\ See Equity Market Structure Concept Release, supra note
11, 75 FR at 3598 (``The registered exchanges all have adopted
highly automated trading systems that can offer extremely high-
speed, or `low-latency,' order responses and executions.'').
    \244\ See Equity Market Structure Concept Release, supra note
11, at 3594, 3598; Paul G. Mahoney and Gabriel Rauterberg, The
Regulation of Trading Markets: A Survey and Evaluation, University
of Virginia School of Law, Law and Economics Research Paper Series
2017-07, at 6 (Apr. 2017) (``Brokers overwhelmingly place orders and
trade through [NYSE's] electronic trading system . . . all markets
have come to rely more and more on using software to match buy and
sell orders automatically.'').
    \245\ See Securities Exchange Act Release No. 37619A (Sept. 6,
1996) 61 FR 48290, 48305 and 48323 (Sept. 12, 1996) (``Order
Execution Obligations Release'') (``The market maker still will have
best execution obligations with respect to the remaining odd-lot
portion of the customer limit order.'').
    \246\ See supra notes 196-198 and accompanying text (explaining
that the proposed definition of round lot is intended to reflect
orders of meaningful size for today's market participants).
    \247\ Moreover, the Commission is aware that many market
participants today already utilize proprietary data feeds that
include odd-lots and, therefore, already have visibility into odd-
lot quotations priced better than the NBBO. Accordingly, since these
market participants already see and trade with quotations that are
priced better than protected quotations and have best execution
obligations, the greater transparency into smaller-sized orders that
the Commission is proposing is not dissimilar from the trading
environment that exists today for many market participants. See also
supra note 90.
    \248\ See supra Section III.C.1(b) (stating that, during the
month of September 2019, approximately 51% of all trades executed on
exchange and approximately 14% of all volume executed on exchange in
corporate stocks occurred in odd-lot sizes and 43% of those odd-lot
transactions (representing approximately 39% of all odd-lot volume)
occurred at a price better than the NBBO); supra Tables 2 and 3
(showing the portion of all trades and volume less than 100 shares,
at a price better than the prevailing NBBO, occurring in a quantity
that would be defined as a round lot under the proposal).
---------------------------------------------------------------------------

    Thus, the Commission is proposing to amend the definition of
``protected bid or protected offer'' in Rule 600(b)(61) by requiring
automated quotations that are the best bid or offer of a national
securities exchange or national securities association to be ``of at
least 100 shares'' in order to qualify as a protected bid or protected
offer. The proposed addition of this language will preserve the
existing scope of Rule 611 for the vast majority of NMS stocks.\249\
---------------------------------------------------------------------------

    \249\ But see infra notes 250-252 and accompanying text
(discussing stocks that currently have non-100 share round lot
sizes). In addition, the proposed amendments to the definition of
protected bid or protected offer would also provide clarity to
market participants as to whether quotations in the new round lot
sizes are protected quotations for purposes of Rule 611, which is
responsive to comments made by some Roundtable panelists regarding
uncertainty as to whether additional odd-lot quotation information
would be protected under Rule 611. See supra note 179 and
accompanying text.

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

    As noted above, exchange rules generally permit the exchange to
assign a round lot size other than 100 shares.\250\ As of market close
on August 8, 2019, 12 stocks had a round lot size other than 100
shares,\251\ and because they are round lots, they are protected
quotations to the extent that they satisfy the other requirements in
the definition.\252\ Therefore, Rule 611 currently applies to orders of
those stocks in their non-100 share round lot sizes. The proposed
amendment to the definition of protected bid and protected offer would
mean that the smaller round lot orders in these 12 stocks would no
longer be protected quotations, and therefore they would no longer be
subject to Rule 611. The Commission preliminarily believes that the
rule should be consistently applied to protected quotations of 100
shares or more (or quotations of fewer than 100 shares that can be
aggregated at a single price into 100 shares or more). The Commission
preliminarily believes that a single test for the applicability of the
protected quotation definition, without special exceptions for certain
stocks, would be simpler, would facilitate compliance with Rule 611,
and would set consistent expectations among market participants.
Further, the Commission preliminarily believes that competition among
broker-dealers, improvements in trading and order routing
technology,\253\ and the continued applicability of best execution
requirements to sub-100 share orders of these stocks would provide
sufficient incentives for the attainment of high-quality executions of
such orders even in the absence of trade-through protection pursuant to
Rule 611.\254\
---------------------------------------------------------------------------

    \250\ See supra note 141.
    \251\ Of the 12 stocks that had non-100 share round lot sizes,
ten had a round lot of ten, and two had a round lot of one. Seven
are common stocks, and five are preferred stocks. Prices of these
stocks ranged from about $27 to over $300,000. See supra note 141
and accompanying text. Currently, each of these stocks is thinly-
traded. For example, during the third quarter of 2019, each of these
stocks had: An average daily share volume below 40,000, with most
trading only hundreds of shares a day; an average trade count of
less than 3,200, with some trading only dozens of times per day; and
an average daily dollar volume of less than $130 million, with most
trading on average less than $1 million per day.
    \252\ A ``protected bid or protected offer'' is defined as a
``quotation in an NMS stock that (i) is displayed by an automated
trading center; (ii) is disseminated pursuant to an effective NMS
plan; and (iii) is an automated quotation that is the best bid or
best offer of a national securities exchange . . . or national
securities association.'' Rule 600(b)(61), 17 CFR 242.600(b)(61).
``Protected quotation means a protected bid or protected offer.''
Rule 600(b)(62), 17 CFR 242.600(b)(62). As explained above,
``protected quotations'' must be round lots, and exchange rules
permit round lot sizes other than 100, so quotes in these stocks in
their non-100 round lot sizes are ``protected quotes.'' See supra
notes 141, 235. Similarly, other rules in Regulation NMS that apply
to round lots as a result of references to ``bid or offer'' or other
defined terms that directly or indirectly reference ``round lot,''
such as Rules 602, 603, 604, and 605, also apply to 1 or 10 share
round lot quotes of these stocks.
    \253\ See supra notes 241-244 and accompanying text.
    \254\ See supra note 245.
---------------------------------------------------------------------------

    The Commission is also proposing to delete the references to ``The
Nasdaq Stock Market, Inc.'' in the definition of protected bid or
protected offer. Since the Nasdaq Stock Market is now a national
securities exchange, that language is redundant.
    Finally, the locked and crossed markets restrictions of Rule 610
are based on the term ``protected quotation.'' Specifically, Rule
610(d) requires each national securities exchange and national
securities association to establish, maintain, and enforce rules that,
among other things, require its members to reasonably avoid displaying
quotations that lock or cross any protected quotation in an NMS stock
and that prohibit its members from engaging in a pattern or practice of
displaying quotations that lock or cross any protected quotation in an
NMS stock, absent an applicable exception. Under the proposed
amendments to the definition of protected bid or protected offer,
``protected quotation'' will refer to displayed, automated quotations
that are the best bids or offers of at least 100 shares of a national
securities exchange or association. As a result, quotations in the new,
smaller proposed round lot sizes would not be subject to Rule 610(d)
and could be locked or crossed.\255\
---------------------------------------------------------------------------

    \255\ For example, pursuant to the proposed definitions of round
lot and protected bid or offer, a 20 share buy order for a stock
that had an average monthly closing price of between $50.01 and
$100.00 could be locked or crossed.
---------------------------------------------------------------------------

    As with Rule 611, the locked and crossed markets provisions of Rule
610 continue to be the subject of much debate, with some arguing that
they create additional market complexity without a clear benefit.\256\
Recently, a Subcommittee of the Commission's EMSAC advocated that the
EMSAC recommend that the Commission consider repealing the locked and
crossed markets provisions of Rule 610 on a pilot basis to test its
impact, in conjunction with an access fee pilot.\257\ In light of the
concerns about the existing scope of the locked and crossed markets
provisions of Rule 610, the Commission preliminarily believes that such
provisions should not be extended to smaller sized quotations reflected
in the proposed definition of round lot. In addition, the Commission
preliminarily believes that market forces, such as the economic
incentives of market participants to obtain the best price and resolve
locked or crossed markets, as well as improvements in trading and order
routing technology,\258\ are sufficient to mitigate excessive locking
or crossing of quotations in the new round lot sizes and to resolve
such locked or crossed markets efficiently.
---------------------------------------------------------------------------

    \256\ See Memorandum to EMSAC from the Subcommittee, supra note
236; Letter from Joanna Mallers, Secretary, FIA Principal Trading
Group, to Brent J. Fields, Secretary, SEC, 2-3 (Mar. 13, 2017),
available at https://www.sec.gov/comments/s7-21-16/s72116-1686170-149597.pdf (recommending the Commission review Rule 610(d) in light
of increased complexity associated with restrictions on locking and
crossing quotations); Letter from William R. Harts, CEO, Modern
Markets Initiative, to Brent J. Fields, Secretary, SEC (Dec. 9,
2016), available at https://www.sec.gov/comments/s7-21-16/s72116-9.pdf (recommending the Commission review the prohibition on locking
or crossing quotations in light of the unnecessary complexity and
investor confusion).
    \257\ See Memorandum to EMSAC from the Subcommittee, supra note
236.
    \258\ See supra notes 241-244 and accompanying text.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendments to the
definition of protected bid or protected offer in proposed Rule
600(b)(69). In particular, the Commission solicits comment on the
following:
    29. Do commenters believe that the Commission's proposed amendments
to the definition of protected bid or protected offer are an effective
way to continue to require order protection for 100 share orders but
not for smaller orders, or would an alternative be better? Please
explain.
    30. Do commenters believe that the definition of NBBO should
reflect the proposed round lot sizes or should it remain consistent
with the 100-share protected quotation? Why or why not?
    31. Do commenters believe that Rule 611 should be extended to
orders in the smaller round lot sizes set forth in the proposed
definition of round lot? Why or why not? If Rule 611 were to be
extended to the proposed smaller round lot sizes, would there be any
negative or unintended consequences? Please explain in detail.
    32. Do commenters believe it would be costly for market
participants to adjust procedures and systems to comply with Rule 611
and prevent trade-throughs at the smaller round lot sizes? Please
describe the necessary changes and any consequent costs in detail.
    33. Do commenters believe it would be costly for market
participants to

adjust procedures and systems to comply with Rule 611 and prevent
trade-throughs at 100 share order sizes when the new round lot size may
be smaller? Please describe the necessary changes and any consequent
costs in detail. Please also discuss how this differs meaningfully from
today, if at all, for market participants that are currently using
proprietary data feeds that include odd-lot information.
    34. Do commenters believe that the best execution obligation,
combined with the greater transparency that the Commission is proposing
for smaller-sized orders in higher-priced stocks, is sufficient, in the
absence of the order protection rule, for market participants to engage
with the liquidity represented by orders in the proposed round lot
sizes to obtain the best execution for smaller-sized customer orders?
    35. Should the Commission maintain the applicability of Rule 611 to
the small number of stocks \259\ that currently have a round lot other
than 100? Why or why not?
---------------------------------------------------------------------------

    \259\ See supra note 141.
---------------------------------------------------------------------------

    36. Do commenters agree with the proposal not to extend Rule 610's
locking and crossing requirements to orders with the proposed smaller-
round lot sizes? If not, why not? Do commenters have views or data on
the frequency with which smaller-sized orders would be locked or
crossed? Please explain. Would it be costly to apply locking and
crossing prevention mechanisms to the new round lot sizes? Please
explain.
(iii) Proposed Amendments to the Definition of National Best Bid and
National Best Offer
    Today, the NBBO is calculated by the exclusive SIPs and
disseminated over the consolidated tapes.\260\ The NBBO is defined in
Rule 600(b)(43) as the best bid and best offer \261\ for an NMS
security \262\ that is calculated and disseminated on a current and
continuous basis by the exclusive SIPs. The definition further provides
that if two or more market centers transmit identical bids or offers
for an NMS security, the best bid or best offer shall be determined by
ranking all identical bids or offers first by size (giving the highest
ranking to the bid or offer associated with the largest size) and then
by time (giving the highest ranking to the bid or offer received first
in time). Accordingly, the NBBO reflects one market center that is the
best bid and one market center that is the best offer across all market
centers.
---------------------------------------------------------------------------

    \260\ In addition, market participants that purchase exchange
proprietary feeds may calculate their own NBBOs for their internal
purposes.
    \261\ As discussed above, the best bid or best offer for an NMS
stock of an exchange may contain multiple prices that are better
than the best bid or best offer to the extent that an exchange
aggregates better priced odd-lots and provides them to the exclusive
SIPs at the least aggressive price that forms a round lot.
    \262\ The definition of NMS security is broader than NMS stock
and includes ``any security or class of securities for which
transaction reports are collected, processed, and made available
pursuant to an effective transaction reporting plan, or an effective
national market system plan for reporting transactions in listed
options.'' 17 CFR 242.600(47).
---------------------------------------------------------------------------

    As noted above, the proposed round lot definition would affect the
calculation of the NBBO by requiring that the best bids and offers
transmitted by the SROs to be in the new round lot sizes.\263\
Accordingly, the proposed definition of round lot, if adopted, would
result in an NBBO that reflects the smaller round lot sizes.
---------------------------------------------------------------------------

    \263\ See supra Section III.C.1(d)(i).
---------------------------------------------------------------------------

    The proposed definition of round lot does not necessitate changes
to the definition of NBBO. However, as discussed further below, the
Commission is proposing a decentralized consolidation model where
competing consolidators and self-aggregators would replace the
exclusive SIPs. Therefore, the Commission is proposing amendments to
the definition of NBBO to reflect that competing consolidators and
self-aggregators, rather than the exclusive SIPs, would be calculating
the NBBO in the proposed decentralized consolidation model. In
addition, to accommodate this proposed decentralized consolidation
model, the Commission is proposing to bifurcate the NBBO definition
between NMS stocks and other NMS securities (i.e., listed options) to
reflect that the proposed decentralized consolidation would apply only
with regard to NMS stocks, and therefore the exclusive SIP for options
would continue to be responsible for calculating and disseminating the
NBBO in listed options.\264\ The proposed changes to the definition of
NBBO would not impact the manner in which the NBBO is calculated for
NMS stocks or listed options.
---------------------------------------------------------------------------

    \264\ The competing consolidator model described herein
addresses the current market data infrastructure for NMS stocks and
not the exclusive SIP for options. See infra note 417.
---------------------------------------------------------------------------

    Specifically, the NBBO for an NMS stock would be the best bid and
best offer for such stock that is calculated and disseminated on a
current and continuing basis by a competing consolidator or calculated
by a self-aggregator.\265\ The Commission is proposing to remove
references to a plan processor for NMS stocks because under the
proposed decentralized consolidation model, there would not be plan
processors. Further, competing consolidators and self-aggregators would
have to calculate the NBBO in the same manner as it is calculated by
the exclusive SIPs today, including the method currently set forth in
the definition of NBBO for determining the best bid or offer in the
event that two or more market centers transmit identical bid or offer
prices.
---------------------------------------------------------------------------

    \265\ See infra notes 499-502 and accompanying text.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendments to the
definition of national best bid and national best offer in proposed
Rule 600(b)(50). In particular, the Commission solicits comment on the
following:
    37. What are commenters' views on the proposed amendments to the
definition of national best bid and national best offer? Do the
proposed amendments make appropriate adjustments to the definition to
accommodate the proposed introduction of a consolidated market data
distribution model with competing consolidators and self-aggregators?
Are any additional amendments needed, whether to the definition of NBBO
or to other provisions? Please be specific.
2. Depth of Book Data
    Core data currently lacks quotation information in NMS stocks
beyond the best round lot quotes of each SRO, commonly referred to as
the ``top of book.'' However, as regulatory changes and market
developments, such as decimalization, have increased the significance
of information on quotes away from the best prices,\266\ some have
suggested that core data be expanded to include certain depth of book
data (i.e., quotations and aggregate size at prices outside the
BBO).\267\
---------------------------------------------------------------------------

    \266\ See infra notes 276-277 and accompanying text.
    \267\ See, e.g., Roundtable Day One Transcript at 120 (Jeff
Brown, Charles Schwab) (``So our recommendation for this panel and
for this day is that the SEC move to impose . . . depth of book on
the SIP.''). Suggestions for enhancing core data, however, have
failed to garner the support by participants to the Equity Data
Plans necessary for action. See infra Section III.C.2(c); supra note
164 and accompanying text; supra Section II.A (discussing the
distinction between the exclusive SIPs and proprietary DOB data
feeds and market participants' views regarding their ability to use
core data to be competitive in today's markets and provide best
execution to their customers). See also, e.g., NYSE Sharing Data-
Driven Insights--Stock Quotes and Trade Data: One Size Doesn't Fit
All (Aug. 22, 2019), available at https://www.nyse.com/equities-insights#20190822 (proposing to replace the exclusive SIP feeds with
three tiered levels of service, including certain DOB data, based on
the needs of specific types of investors).
---------------------------------------------------------------------------

    The Commission is proposing to define core data to include certain

``depth of book data.'' Specifically, depth of book data would be
defined to include aggregated quotes at each price between the best bid
(and best offer) and the protected bid (and protected offer) (if
different), as well as the five price levels above the protected offer
and below the protected bid.\268\ The Commission preliminarily believes
this approach would approximate the level of liquidity information
available to market participants at the best bid or offer prior to
decimalization and enable market participants to use proposed core data
to trade in a more informed and effective manner.\269\
---------------------------------------------------------------------------

    \268\ See supra Section III.C.1(d).
    \269\ Id. See also infra notes 310-313 and accompanying text
(describing how depth of book data can be used to optimize order
placement and to provide directional signals regarding near-term
market movements.).
---------------------------------------------------------------------------

(a) Regulatory Background
    Regulation NMS and the Equity Data Plans neither require nor
prohibit the collection, consolidation, or dissemination of depth of
book data. Rule 602 requires that national securities exchanges and
associations make available their best bids and best offers, which are
defined in Rule 600(b)(8) as the highest priced bid and lowest priced
offer. Similarly, Rule 603(b) requires the dissemination of an NBBO,
and the definition of NBBO in Rule 600(b)(43) refers to best bids and
best offers. Market participants that want depth of book data for
trading must rely upon the proprietary feeds offered by the exchanges,
which include varying degrees of depth of book data.\270\
---------------------------------------------------------------------------

    \270\ For example, CBOE One Premium offers five levels of
aggregated depth while NYSE XDP Integrated, Nasdaq Total View, and
CBOE Depth offer complete depth of book.
---------------------------------------------------------------------------

    In adopting Regulation NMS, the Commission considered the scope of
quotations to which trade-through protection should apply under Rule
611. The Commission decided to apply Rule 611 to protected quotations
\271\ but not to depth of book quotations.\272\ Similarly, the
Commission determined not to require that depth of book quotations be
included in core data, reasoning that investors who needed depth of
book data would be able to obtain that data from markets or third-party
vendors.\273\ However, the Commission acknowledged that depth of book
data is important to investors and updated former Exchange Act Rule
11Ac1-2 (redesignated as Rule 603) to address the independent
dissemination of depth of book and other market data by the
exchanges.\274\ After the adoption of Regulation NMS in 2005, exchanges
began to sell their proprietary data products separately from the core
data required by Rule 603(b) of Regulation NMS.\275\
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    \271\ See supra note 115.
    \272\ Specifically, the Commission considered a ``Voluntary
Depth Alternative'' under which, in addition to protecting the best
bids and offers of each SRO (the Market BBO Alternative), depth of
book quotations that markets voluntarily disseminate in the
consolidated quotations stream would be protected as well. See
Regulation NMS Adopting Release, supra note 10, at 37529. The
Commission decided to adopt the Market BBO Alternative, explaining
that it would represent a major step toward achieving the objectives
of intermarket price protection but with fewer of the costs and
drawbacks associated with the Voluntary Depth Alternative. The
Commission noted that the Market BBO Alternative will promote best
execution for retail investors on an order-by-order basis, given
that most retail investors justifiably expect that their orders will
be executed at the NBBO and that the Market BBO Alternative would
not require an expansion of the data disseminated through the
exclusive SIP Plans. Id. at 37530.
    \273\ See Regulation NMS Adopting Release, supra note 10, at
37567. In making that determination, the Commission stated that this
would be ``a competition-driven outcome [that] would benefit
investors and the markets in general.'' See id. at 37530.
    \274\ See Regulation NMS Adopting Release, supra note 10, at
37565; 17 CFR 242.603(a)(2) (an exchange ``that distributes
information with respect to quotations for or transactions in an NMS
stock to a securities information processor, broker, dealer, or
other persons shall do so on terms that are not unreasonably
discriminatory''). While the pre-Regulation NMS rules did not
prohibit the independent distribution of quotes by individual SROs,
Rule 603(a) was intended to impose ``uniform standards'' to such
distribution (i.e., the ``fair and reasonable'' and ``not
unreasonably discriminatory'' standards). See Regulation NMS
Adopting Release, supra note 10, at 37569. Prior to Regulation NMS,
however, SROs and their members were prohibited from disseminating
their trade reports independently. Id. at 37589.
    \275\ See supra note 19 and accompanying text.
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(b) Market Evolution
    The decimalization of securities pricing in 2001, and the resulting
shift away from the larger fractional quoting and trading
increments,\276\ had significant implications for the amount of
liquidity available at the top of book, the transparency of order book
liquidity, and the need for market participants to obtain depth of book
information. With the larger quoting and trading increments associated
with fractional quoting, such as one-sixteenth of a dollar, trading
interest was distributed across fewer price points and more liquidity
(i.e., aggregate order interest) was concentrated at the top of book.
For example, as the Commission noted in adopting Regulation NMS,
``depth-of-book quotations have become increasingly important as
decimal trading has spread displayed depth across a greater number of
price points.'' \277\
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    \276\ See Securities Exchange Act Release No. 42914 (June 8,
2000), 65 FR 38010 (June 19, 2000) (directing the National
Association of Securities Dealers and the national securities
exchanges to act jointly in developing a plan to convert their
quotations in equity securities and options from fractions to
decimals).
    \277\ Regulation NMS Adopting Release, supra note 10, at 37592;
see also Securities Exchange Act Release No. 50870 (Dec. 16, 2004),
69 FR 77424 (Dec. 27, 2004) (``the initiation of trading in penny
increments in 2001 transformed the equity markets. The number of
quotation updates increased, and the quoted size at any particular
price level dropped'').
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    Since the implementation of decimalization, market participants
have raised concerns about reduced price transparency and difficulty
executing large transactions at the best prices due to lower
concentrations of trading interest at the top of book.\278\ In the
Report to Congress on Decimalization, required under Section 106 of the
Jumpstart Our Business Startups Act, Commission staff noted academic
literature that found that quoted depth, on average, declined after
decimalization.\279\
---------------------------------------------------------------------------

    \278\ See, e.g., Regulation NMS Adopting Release, supra note 10,
at 37529 (noting a comment from the Consumer Federation of America
concerning ``complaints that decimal pricing has reduced price
transparency because of the relatively thin volume of trading
interest displayed in the best bid and offer''); Letter from Craig
S. Tyle, General Counsel, Investment Company Institute, to Jonathan
G. Katz, Secretary, Commission (Nov. 20, 2001), available at https://www.sec.gov/rules/concept/s71401/tyle1.htm#P41_3920 (``As we have
previously noted, the reduction in quoted market depth as the
minimum quoting increment has narrowed to a penny has adversely
affected institutional investors' ability to execute large orders .
. . Preliminary data has shown that, post-decimalization, it has
become more difficult for large institutional orders to be filled
entirely at the inside.'').
    \279\ Report to Congress on Decimalization, 10-11 (July 2012),
available at https://www.sec.gov/news/studies/2012/decimalization-072012.pdf. Cumulative depth at competitive prices did not change,
however. Id. See also Phil MacKintosh, What is Liquidity? (Dec. 12,
2019), available at https://www.nasdaq.com/articles/what-is-liquidity-2019-12-12 (stating that while smaller quantity of the
NBBO and smaller average trade sizes may suggest falling liquidity,
depth of book liquidity suggests that overall liquidity is stronger
than ever before); Citadel Securities Market Lens--Has Market
Structure Evolution Made Equities Less Liquid (Sep. 2019), available
at https://s3.amazonaws.com/citadel-wordpress-prd102/wp-content/uploads/sites/2/2019/09/27211934/Market-Lens-Has-Market-Structure-Evolution-Made-Equities-Less-Liquid.pdf (analyzing full depth of
displayed liquidity from the exchanges' proprietary data feeds and
finding that liquidity remained stable over the past eight years).
---------------------------------------------------------------------------

(c) Comments and Roundtable Discussion
    These developments have led market participants to call for depth
of book data to be distributed through the Equity Data Plans. In
connection with the Roundtable, several panelists and commenters
recommended adding depth of book data to SIP data or otherwise
emphasized their views about

the importance of depth of book data.\280\ One panelist stated that the
exclusive SIPs could be upgraded and made ``relevant again'' by adding
depth of book data, which would benefit retail investors by giving them
information on which direction a stock may be moving and what type of
order they may need to use.\281\ Another panelist stated that both his
firm and the brokers it employs cannot rely solely on SIP data, as they
believe they need depth of book data to have a full view of the market
and to trade competitively, particularly with respect to large
orders.\282\ One commenter stated that the Commission should require
depth of book data to be included in SIP data and recommended adding at
least five levels of depth.\283\
---------------------------------------------------------------------------

    \280\ See Roundtable Day Two Transcript at 245 (Tyler Gellasch,
Healthy Markets) (stating that the exclusive SIPs should include
depth of book data (as well as auction imbalance data and odd-lot
quote data)); Roundtable Day One Transcript at 228-29 (Joseph Wald,
Clearpool Group) (explaining that the lack of depth of book and
auction data on the exclusive SIP feeds needs to be addressed);
Letter to Brent J. Fields, Secretary, Commission, from Joe Wald,
Chief Executive Officer, The Clearpool Group (Oct. 23, 2018)
(``Clearpool Group Letter'') (``We believe that certain information
currently provided through proprietary data feeds, for example,
imbalance data and order depth-of-book information, should be
considered core data and provided to all market participants through
the SIP.''); MFA and AIMA Letter at 6 (stating that its members
``purchase proprietary market data (e.g., depth-of-book and
imbalance data) from exchanges for a variety of reasons, including
strategy implementation, risk-analysis, best-execution, less latency
than other sources and to fulfill fiduciary obligations.'').
    \281\ See Roundtable Day One Transcript at 119-120 (Jeff Brown,
Charles Schwab).
    \282\ See Roundtable Day One Transcript at 136, 165-66 (Simon
Emrich, Norges Bank Investment Management).
    \283\ See SIFMA Letter II at 2 (stating that retail firms
generally use one level of depth for order routing and institutional
firms generally use up to five levels of depth (sometimes as much as
ten) and that the Commission should balance the need for more
comprehensive information with the additional cost and potential
increase in latency from including additional quotes, as well as
adjust the exclusive SIP subscriber fee model to account for firms
that do not need depth of book data).
---------------------------------------------------------------------------

    Some panelists and commenters went further, suggesting that depth
of book data (or data provided on the exchange proprietary feeds more
generally) is needed to fulfill best execution obligations.\284\ One
panelist stated that paying for full depth of book data from each
exchange is essential to effective order routing and to fulfilling best
execution obligations, noting that if his firm did not get depth of
book--top of book and many levels away--it could not provide best
execution to its clients.\285\ Another commenter noted that broker-
dealers do not have the option to forgo buying proprietary data because
SIP data has less content and is slower, and that, even if the
Commission provided a safe harbor that best execution requirements may
be satisfied by relying on SIP data, buying proprietary data would
still be necessary from a business perspective.\286\
---------------------------------------------------------------------------

    \284\ See Roundtable Day One Transcript at 192-193 (Jamil
Nazarali, Citadel Securities) (stating that proprietary feeds are
required for best execution); Roundtable Day One Transcript at 48
(Prof. Hal Scott, Committee on Capital Markets Regulation) (making a
similar statement); Roundtable Day Two Transcript at 58-59 (Prof.
Robert Bartlett, UC Berkeley) (making a similar statement); MFA and
AIMA Letter at 3-4 (stating that broker-dealers that do not have
depth of book information will be challenged to provide best
execution).
    \285\ See Roundtable Day One Transcript at 27, 57-58, 73 (Doug
Cifu, Virtu Financial); Letter to Brent J. Fields, Secretary,
Commission, from Douglas A. Cifu, Chief Executive Officer, Virtu
Financial Inc., 4 (Oct. 23, 2018) (``Virtu Letter I'') (``Simply
put, Virtu could not fulfill its obligations to its myriad of retail
customers and institutional clients without full depth of book
market data feeds and robust exchange connectivity features that the
SIP feeds alone do not offer.'').
    \286\ See Letter to Brent J. Fields, Secretary, Commission, from
Mehmet Kinak, Global Head of Systematic Trading and Market
Structure, and Jonathan D. Siegel, Vice President--Senior Legal
Counsel, T. Rowe Price, 2 (Jan. 10, 2019) (``T. Rowe Price
Letter'').
---------------------------------------------------------------------------

    However, some panelists were reluctant to embrace the idea of
adding depth of book data to SIP data and pointed out possible negative
impacts from doing so. One panelist representing a retail brokerage
firm stated that depth may be important for active traders and that his
firm has platforms that incorporate it but added that depth is less
important for retail investors who trade infrequently and that some of
his firm's platforms do not incorporate it.\287\ This panelist also
stated that there could be technological challenges and latency
implications (i.e., added latency associated with the need to process
additional message traffic) to adding depth of book data to SIP
data.\288\ Furthermore, several panelists noted that adding depth of
book data to the SIP data, particularly on an order-by-order basis,
could be confusing, but some suggested that the data could be
aggregated at certain price levels or otherwise simplified.\289\
---------------------------------------------------------------------------

    \287\ See Roundtable Day One Transcript at 162-163 (Matt
Billings, TD Ameritrade).
    \288\ Id.; see also Roundtable Day Two Transcript at 74 (Michael
Blaugrund, NYSE).
    \289\ See Roundtable Day One Transcript at 227 (Chris Isaacson,
Cboe) (stating that he would not go as far as to add depth of book
data to the consolidated market data, stating that doing so could
potentially cause confusion, and emphasizing the difference between
the plan processors and non-SIPs); Roundtable Day One Transcript at
230 (Ronan Ryan, IEX) (stating that adding depth data could be
confusing, but suggesting that perhaps there could be simpler
alternatives, such as an aggregated size at each price level rather
than order-by-order); Roundtable Day One Transcript at 232 (Michael
Friedman, Trillium Management) (suggesting that perhaps some
abbreviated version of depth rather than full depth of book could be
added to the consolidated market data); Roundtable Day Two
Transcript at 70 (Adam Nunes, Hudson River Trading) (cautioning
against trying to force every market's depth of book into a single
feed).
---------------------------------------------------------------------------

    In addition, some commenters stated that depth of book data is
unnecessary for best execution and not useful for retail investors and
other market participants.\290\ In an article submitted to the comment
file for the Roundtable, one commenter expressed the view that depth of
book data is not helpful for many types of market participants, citing
a 2014 statistic that only 3.3% of all trades take place outside the
NBBO, where depth of book information would be particularly useful. The
commenter also noted that the Commission has stated that depth of book
data is not necessary for a broker to comply with its best execution
obligations.\291\
---------------------------------------------------------------------------

    \290\ See Letter to Brent J. Fields, Secretary, Commission, from
Thomas Wittman, Executive Vice President, Head of Global Trading and
Market Services and CEO, Nasdaq Stock Exchange, 11 (Oct. 25, 2018)
(``Wittman Letter'') (``Main Street investors do not need the
exchanges' proprietary depth-of-book data offerings, and the fact
that some firms choose to purchase them has no adverse consequence
to the Main Street investor. Nearly 97% of trades occur at or within
the NBBO, reflecting that most customers do not require any sort of
depth-of-book data.''); NYSE Group Letter at 13 (``NYSE Group
believes that the Commission's prior conclusion that retail
investors do not need depth-of-book data has not changed.'').
    \291\ See Letter to Brent J. Fields, Secretary, Commission, from
Charles M. Jones, Robert W. Lear Professor of Finance and Economics,
Columbia Business School, 15-16 (Oct. 21, 2018) (``Jones Letter'')
(citing Securities Exchange Act Release No. 59039, supra note 242).
---------------------------------------------------------------------------

(d) Commission Discussion and Proposal
    Decimalization led to a dispersion of quoted volume away from the
top of book.\292\ Consequently, the top of book (or NBBO) currently
shown in SIP data has become less informative, and some market
participants have come to view depth of book data as essential both to
their efforts to trade competitively and to provide best execution to
customer orders.\293\ The Commission preliminarily believes that: (1)
The lack of depth of book information in SIP data creates a significant
information asymmetry between SIP data and proprietary data; and (2)
the availability of the additional information could help enhance the
best execution analyses of market participants who currently rely
solely on SIP data.
---------------------------------------------------------------------------

    \292\ See supra Section III.C.2(b).
    \293\ See supra notes 278, 280-286 and accompanying text.
---------------------------------------------------------------------------

    Accordingly, the Commission preliminarily believes that core data,
as proposed, should include certain depth of book data, including
aggregated orders at each price between the best

bid and best offer and the protected bid and protected offer (if
different), as well as several price levels above and below the
protected bid and protected offer. The Commission believes that the
number of additional price levels should strike an appropriate balance
by significantly enhancing the utility of proposed core data for a wide
range of market participants, without risking the excessive message
traffic \294\ or complexity that might result from the inclusion of
full depth of book information in proposed core data. The Commission
preliminarily believes that this balance is appropriately struck at
five price levels (below and above the protected bid and protected
offer) as this would approximate the level of liquidity available to
market participants at the best bid or offer prior to
decimalization.\295\ The Commission is seeking comment on whether and
to what extent depth of book data should be included in the proposed
definition of core data.
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    \294\ As discussed below, aggregated quotation sizes at the
price levels between the best quotes and protected quotes and the
five levels above and below the protected quotes, particularly for
the most liquid stocks, represent only a subset of all depth of book
price levels at which there are quotations and could hence be
represented in fewer messages.
    \295\ Prior to decimalization, when stocks were quoted in
sixteenths of a dollar ($0.0625), there were five one cent
increments between each permissible quoting increment. For example,
market participants could bid $20.0625 or bid $20.125 but not
$20.07, $20.08, $20.09, $20.10, $20.11. Decimalization permitted
quoting at these intermediate, one-cent price levels, spreading
quotation volume to these price levels. As a result of the
Commission's proposal to define depth of book data to include
aggregated quotation sizes at the five levels above and below the
protected quotations, the proposed core data would provide