[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Notices]
[Pages 41128-41138]
[FR Doc No: 2018-17736]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83831; File No. SR-CboeBYX-2018-014]

Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Make Permanent Rule 11.24, Which
Sets Forth the Exchange's Pilot Retail Price Improvement Program

August 13, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 30, 2018, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to make permanent Rule 11.24, which
sets forth the Exchange's pilot Retail Price Improvement Program.
    The text of the proposed rule change is available at the Exchange's
website at www.markets.cboe.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend Rule 11.24 to
make permanent the Retail Price Improvement Program (the ``Program''),
which is currently offered on a pilot basis. The Exchange has operated
the pilot for a six year period and believes that it has been
successful in its stated goal of providing price improvement
opportunities to retail investors. The analysis conducted by the
Exchange shows that retail investors have been provided a total of $4.5
million of price improvement during the 2.5 year period reviewed from
January 2016 through June 2018. In addition, the Exchange's analysis
shows that the Program has provided these benefits to retail investors
without having an adverse impact on the broader market. The proposal
provides an analysis of the economic benefits to retail investors and
the marketplace flowing from operation of the Program, which the
Exchange believes supports making the Program permanent.
Background
    In November 2012, the Commission approved the Program on a pilot
basis.\3\ The Program is designed to attract retail order flow to the
Exchange, and allow such order flow to receive potential price
improvement. The Program is currently limited to trades occurring at
prices equal to or greater than $1.00 per share.\4\ Under the Program,
a class of market participant called a Retail Member Organization
(``RMO'') is eligible to submit certain retail order flow (``Retail
Orders'') to the Exchange. Users \5\ are permitted to provide potential
price improvement for Retail Orders \6\ in the form of non-displayed
interest that is better than the national best bid that is a Protected
Quotation (``Protected NBB'') or the national best offer that is a
Protected Quotation (``Protected NBO'', and together with the Protected
NBB, the ``Protected NBBO'').\7\ The Program was approved by the
Commission on a pilot basis running one-year from the date of
implementation.\8\ The Commission approved the Program on November 27,
2012.\9\ The Exchange implemented the Program on January 11, 2013, and
has extended the pilot period five times.\10\

The pilot period for the Program is scheduled to expire on July 31,
2018.\11\ The Exchange believes that the Program has been successful in
its goal of providing price improvement to Retail Orders, and is
therefore proposing to amend Rule 11.24 to make this pilot permanent so
that retail investors can continue to reap the benefits of the
Program.\12\
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    \3\ See Securities Exchange Act Release No. 68303 (November 27,
2012), 77 FR 71652 (December 3, 2012) (``RPI Approval Order'') (SR-
BYX-2012-019).
    \4\ The Exchange will periodically notify the membership
regarding the securities included in the Program through an
information circular.
    \5\ A ``User'' is defined in Rule 1.5(cc) as any member or
sponsored participant of the Exchange who is authorized to obtain
access to the System.
    \6\ A ``Retail Order'' is defined in Rule 11.24(a)(2) as an
agency order that originates from a natural person and is submitted
to the Exchange by a RMO, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any
computerized methodology. See Rule 11.24(a)(2).
    \7\ The term Protected Quotation is defined in BYX Rule 1.5(t)
and has the same meaning as is set forth in Regulation NMS Rule
600(b)(58). The terms Protected NBB and Protected NBO are defined in
BYX Rule 1.5(s). The Protected NBB is the best-priced protected bid
and the Protected NBO is the best-priced protected offer. Generally,
the Protected NBB and Protected NBO and the national best bid
(``NBB'') and national best offer (``NBO'', together with the NBB,
the ``NBBO'') will be the same. However, a market center is not
required to route to the NBB or NBO if that market center is subject
to an exception under Regulation NMS Rule 611(b)(1) or if such NBB
or NBO is otherwise not available for an automatic execution. In
such case, the Protected NBB or Protected NBO would be the best-
priced protected bid or offer to which a market center must route
interest pursuant to Regulation NMS Rule 611.
    \8\ See RPI Approval Order, supra note 3 at 71652.
    \9\ Id.
    \10\ See Securities Exchange Act Release Nos. 71249 (January 7,
2014), 79 FR 2229 (January 13, 2014) (SR-BYX-2014-001); 74111
(January 22, 2015), 80 FR 4598 (January 28, 2015) (SR-BYX-2015-05);
76965 (January 22, 2016), 81 FR 4682 (January 27, 2016) (SR-BYX-
2016-01); 78180 (June 28, 2016), 81 FR 43306 (July 1, 2016) (SR-BYX-
2016-15); 81368 (August 10, 2017), 82 FR 38960 (August 16, 2017)
(SR-BYX-2017-18).
    \11\ Concurrently with the filing of this proposed rule change,
the Exchange is filing to extend the current pilot period until the
earlier of approval of the filing to make this rule permanent (i.e.,
this proposed rule change) or December 31, 2018.
    \12\ The Program will continue to only apply to trades occurring
at prices equal to or greater than $1.00 per share.
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    The SEC approved the Program on a pilot basis, in part, because it
concluded, ``the Program is reasonably designed to benefit retail
investors by providing price improvement to retail order flow.'' \13\
The Commission also found that ``while the Program would treat retail
order flow differently from order flow submitted by other market
participants, such segmentation would not be inconsistent with Section
6(b)(5) of the Act, which requires that the rules of an exchange are
not designed to permit unfair discrimination.'' \14\ As the SEC
acknowledged, the retail order segmentation was designed to create
greater retail order flow competition and thereby increase the amount
of this flow to transparent and well-regulated exchanges. This would
help to ensure that retail investors benefit from competitive price
improvement that exchange-based liquidity providers provide. As
discussed below, the Exchange believes that the Program data supports
the conclusion that it provides valuable price [sic] to retail
investors that they may not otherwise have received, and that it is
therefore appropriate to make the Program permanent.
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    \13\ See RPI Approval Order, supra note 3 at 71655.
    \14\ Id.
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Definitions
    The Exchange adopted the following definitions under Rule 11.24(a):
    First, the term ``Retail Member Organization'' is defined as a
Member (or a division thereof) that has been approved by the Exchange
to submit Retail Orders.
    Second, the term ``Retail Order'' is defined as an agency order or
riskless principal that meets the criteria of FINRA Rule 5320.03 \15\
that originates from a natural person and is submitted to the Exchange
by a Retail Member Organization, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any other
computerized methodology. A Retail Order is an Immediate or Cancel
(``IOC'') Order and shall operate in accordance with Rule 11.24(f). A
Retail Order may be an odd lot, round lot, or mixed lot.
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    \15\ FINRA Rule 5320.03 clarifies that an RMO may enter Retail
Orders on a riskless principal basis, provided that (i) the entry of
such riskless principal orders meet the requirements of FINRA Rule
5320.03, including that the RMO maintains supervisory systems to
reconstruct, in a time-[sic] sequenced manner, all Retail Orders
that are entered on a riskless principal basis; and (ii) the RMO
submits a report, contemporaneously with the execution of the
facilitated order, that identifies the trade as riskless principal.
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    Finally, the term ``Retail Price Improvement Order'' or ``RPI
Order'' consists of non-displayed interest on the Exchange that is
priced better than the Protected NBB or Protected NBO by at least
$0.001 and that is identified as such (``RPI interest'').\16\ The
System \17\ will monitor whether RPI buy or sell interest, adjusted by
any offset and subject to the ceiling or floor price, is eligible to
interact with incoming Retail Orders. An RPI Order remains non-
displayed in its entirety (the buy or sell interest, the offset, and
the ceiling or floor). An RPI Order may also be entered in a sub-penny
increment with an explicit limit price. Any User is permitted, but not
required, to submit RPI Orders. An RPI Order may be an odd lot, round
lot or mixed lot.
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    \16\ Exchange systems prevent Retail Orders from interacting
with RPI Orders if the RPI Order is not priced at least $0.001
better than the Protected NBBO. The Exchange notes, however, that
price improvement of $0.001 would be a minimum requirement and Users
could enter RPI Orders that better the Protected NBBO by more than
$0.001. Exchange systems will accept RPI Orders without a minimum
price improvement value; however, such interest will execute at its
floor or ceiling price only if such floor or ceiling price is better
than the Protected NBBO by $0.001 or more.
    \17\ The ``System'' is defined in BYX Rule 1.5(aa) as ``the
electronic communications and trading facility designated by the
Board through which securities orders of Users are consolidated for
ranking, execution and, when applicable, routing away.''
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    The price of an RPI Order is determined by a User's entry of the
following into the Exchange: (1) RPI buy or sell interest; (2) an
offset, if any; and (3) a ceiling or floor price. RPI Orders submitted
with an offset are similar to other peg orders available to Users in
that the order is tied or ``pegged'' to a certain price, and would have
its price automatically set and adjusted upon changes in the Protected
NBBO, both upon entry and any time thereafter. RPI buy or sell interest
is typically entered to track the Protected NBBO, that is, RPI Orders
are typically submitted with an offset. The offset is a predetermined
amount by which the User is willing to improve the Protected NBBO,
subject to a ceiling or floor price. The ceiling or floor price is the
amount above or below which the User does not wish to trade. RPI Orders
in their entirety (the buy or sell interest, the offset, and the
ceiling or floor) will remain non-displayed. The Exchange also allows
Users to enter RPI Orders that establish the exact limit price, which
is similar to a non-displayed limit order currently accepted by the
Exchange except the Exchange accepts sub-penny limit prices on RPI
Orders in increments of $0.001. The Exchange monitors whether RPI buy
or sell interest, adjusted by any offset and subject to the ceiling or
floor price, is eligible to interact with incoming Retail Orders.
    Users and RMOs may enter odd lots, round lots or mixed lots as RPI
Orders and as Retail Orders respectively. As discussed below, RPI
Orders are ranked and allocated according to price and time of entry
into the System consistent with Rule 11.12 and therefore without regard
to whether the size entered is an odd lot, round lot or mixed lot
amount. Similarly, Retail Orders interact with RPI Orders according to
the Priority and Allocation rules of the Program and without regard to
whether they are odd lots, round lots or mixed lots. Finally, Retail
Orders are designated as Type 1 or Type 2 without regard to the size of
the order.
    RPI Orders interact with Retail Orders as follows. Assume a User
enters RPI sell interest with an offset of $0.001 and a floor of $10.10
while the Protected NBO is $10.11. The RPI Order could interact with an
incoming buy Retail Order at $10.109. If, however, the Protected NBO
was $10.10, the RPI Order could not interact with the Retail Order
because the price required to deliver the minimum $0.001 price
improvement ($10.099) would violate the User's floor of $10.10. If a
User otherwise enters an offset greater than the minimum required price
improvement and the offset would produce a price that would violate the
User's floor, the offset would be applied only to the extent that it
respects the User's floor. By way of illustration, assume RPI buy
interest is entered with an offset of $0.005 and a ceiling of $10.112
while the Protected NBB is at $10.11. The RPI Order could interact with
an incoming sell Retail Order at $10.112, because it would produce the
required price improvement without violating the User's ceiling, but it
could not interact above the $10.112 ceiling. Finally, if a User enters
an RPI Order

without an offset (i.e., an explicitly priced limit order), the RPI
Order will interact with Retail Orders at the level of the User's limit
price as long as the minimum required price improvement is produced.
Accordingly, if RPI sell interest is entered with a limit price of
$10.098 and no offset while the Protected NBO is $10.11, the RPI Order
could interact with the Retail Order at $10.098, producing $0.012 of
price improvement. The System will not cancel RPI interest when it is
not eligible to interact with incoming Retail Orders; such RPI interest
will remain in the System and may become eligible again to interact
with Retail Orders depending on the Protected NBBO.
RMO Qualifications and Application Process
    Under Rule 11.24(b), any Member may qualify as an RMO if it
conducts a retail business or routes retail orders on behalf of another
broker-dealer. For purposes of Rule 11.24(b), conducting a retail
business shall include carrying retail customer accounts on a fully
disclosed basis. Any Member that wishes to obtain RMO status is
required to submit: (1) An application form; (2) supporting
documentation sufficient to demonstrate the retail nature and
characteristics of the applicant's order flow; and (3) an attestation,
in a form prescribed by the Exchange, that substantially all orders
submitted as Retail Orders will qualify as such under Rule 11.24.\18\
The Exchange shall notify the applicant of its decision in writing.
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    \18\ For example, a prospective RMO could be required to provide
sample marketing literature, website screenshots, other publicly
disclosed materials describing the retail nature of their order
flow, and such other documentation and information as the Exchange
may require to obtain reasonable assurance that the applicant's
order flow would meet the requirements of the Retail Order
definition.
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    An RMO is required to have written policies and procedures
reasonably designed to assure that it will only designate orders as
Retail Orders if all requirements of a Retail Order are met. Such
written policies and procedures must require the Member to (i) exercise
due diligence before entering a Retail Order to assure that entry as a
Retail Order is in compliance with the requirements of this rule, and
(ii) monitor whether orders entered as Retail Orders meet the
applicable requirements. If the RMO represents Retail Orders from
another broker-dealer customer, the RMO's supervisory procedures must
be reasonably designed to assure that the orders it receives from such
broker-dealer customer that it designates as Retail Orders meet the
definition of a Retail Order. The RMO must (i) obtain an annual written
representation, in a form acceptable to the Exchange, from each broker-
dealer customer that sends it orders to be designated as Retail Orders
that entry of such orders as Retail Orders will be in compliance with
the requirements of this rule, and (ii) monitor whether its broker-
dealer customers' Retail Order flow continues to meet the applicable
requirements.\19\
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    \19\ The Exchange or another self-regulatory organization on
behalf of the Exchange will review an RMO's compliance with these
requirements through an exam-based review of the RMO's internal
controls.
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    If the Exchange disapproves the application, the Exchange provides
a written notice to the Member. The disapproved applicant could appeal
the disapproval by the Exchange as provided in Rule 11.24(d), and/or
reapply for RMO status 90 days after the disapproval notice is issued
by the Exchange. An RMO also could voluntarily withdraw from such
status at any time by giving written notice to the Exchange.
Failure of RMO To Abide by Retail Order Requirements
    Rule 11.24(c) addresses an RMO's failure to abide by Retail Order
requirements. If an RMO designates orders submitted to the Exchange as
Retail Orders and the Exchange determines, in its sole discretion, that
those orders fail to meet any of the requirements of Retail Orders, the
Exchange may disqualify a Member from its status as an RMO. When
disqualification determinations are made, the Exchange provides a
written disqualification notice to the Member. A disqualified RMO may
appeal the disqualification as provided in Rule 11.24(d) and/or reapply
for RMO status 90 days after the disqualification notice is issued by
the Exchange.

Appeal of Disapproval or Disqualification

    Rule 11.24(d) provides appeal rights to Members. If a Member
disputes the Exchange's decision to disapprove it as an RMO under Rule
11.24(b) or disqualify it under Rule 11.24(c), such Member
(``appellant'') may request, within five business days after notice of
the decision is issued by the Exchange, that the Retail Price
Improvement Program Panel (``RPI Panel'') review the decision to
determine if it was correct.
    The RPI Panel consists of the Exchange's Chief Regulatory Officer
(``CRO''), or a designee of the CRO, and two officers of the Exchange
designated by the Chief Operating Officer (``COO''). The RPI Panel
reviews the facts and render [sic] a decision within the time frame
prescribed by the Exchange. The RPI Panel may overturn or modify an
action taken by the Exchange and all determinations by the RPI Panel
constitute final action by the Exchange on the matter at issue.

Retail Liquidity Identifier

    Under Rule 11.24(e), the Exchange disseminates an identifier when
RPI interest priced at least $0.001 better than the Exchange's
Protected Bid or Protected Offer for a particular security is available
in the System (``Retail Liquidity Identifier''). The Retail Liquidity
Identifier is disseminated through consolidated data streams (i.e.,
pursuant to the Consolidated Tape Association Plan/Consolidated
Quotation Plan, or CTA/CQ, for Tape A and Tape B securities, and the
Nasdaq UTP Plan for Tape C securities) as well as through proprietary
Exchange data feeds.\20\ The Retail Liquidity Identifier reflects the
symbol and the side (buy or sell) of the RPI interest, but does not
include the price or size of the RPI interest. In particular, CQ and
UTP quoting outputs include a field for codes related to the Retail
Liquidity Identifier. The codes indicate RPI interest that is priced
better than the Exchange's Protected Bid or Protected Offer by at least
the minimum level of price improvement as required by the Program.
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    \20\ The Exchange notes that the Retail Liquidity Identifier for
Tape A and Tape B securities are disseminated pursuant to the CTA/CQ
Plan. The identifier is also available through the consolidated
public market data stream for Tape C securities. The processor for
the Nasdaq UTP quotation stream disseminates the Retail Liquidity
Identifier and analogous identifiers from other market centers that
operate programs similar to the RPI Program.
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Retail Order Designations

    Under Rule 11.24(f), an RMO can designate how a Retail Order would
interact with available contra-side interest as follows:
    A Type 1-designated Retail Order will interact with available
contra-side RPI Orders and other price improving contra-side interest
but will not interact with other available contra-side interest in the
System that is not offering price improvement or route to other
markets. The portion of a Type 1-designated Retail Order that does not
execute against contra-side RPI Orders or other price improving
liquidity will be immediately and automatically cancelled.
    A Type 2-designated Retail Order will interact first with available
contra-side RPI Orders and other price improving liquidity and then any
remaining

portion of the Retail Order will be executed as an Immediate-or-Cancel
(``IOC'') Order pursuant to Rule 11.9(b)(1). A Type 2-designated Retail
Order can either be submitted as a BYX Only Order \21\ or as an order
eligible for routing pursuant to Rule 11.13(a)(2).
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    \21\ A BYX Only Order is defined in BYX Rule 11.9(c)(4) and
includes orders that are not eligible for routing to other trading
centers.
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Priority and Order Allocation

    Under Rule 11.24(g), competing RPI Orders in the same security are
ranked and allocated according to price then time of entry into the
System. Executions occur in price/time priority in accordance with Rule
11.12. Any remaining unexecuted RPI interest remains available to
interact with other incoming Retail Orders if such interest is at an
eligible price. Any remaining unexecuted portion of the Retail Order
will cancel or execute in accordance with Rule 11.24(f). The following
example illustrates this method:

 Protected NBBO for security ABC is $10.00-$10.05
 User 1 enters an RPI Order to buy ABC at $10.015 for 500
 User 2 then enters an RPI Order to buy ABC at $10.02 for 500
 User 3 then enters an RPI Order to buy ABC at $10.035 for 500

    An incoming Retail Order to sell ABC for 1,000 executes first
against User 3's bid for 500 at $10.035, because it is the best priced
bid, then against User 2's bid for 500 at $10.02, because it is the
next best priced bid. User 1 is not filled because the entire size of
the Retail Order to sell 1,000 is depleted. The Retail Order executes
against RPI Orders in price/time priority.
    However, assume the same facts above, except that User 2's RPI
Order to buy ABC at $10.02 is for 100. The incoming Retail Order to
sell 1,000 executes first against User 3's bid for 500 at $10.035,
because it is the best priced bid, then against User 2's bid for 100 at
$10.02, because it is the next best priced bid. User 1 then receives an
execution for 400 of its bid for 500 at $10.015, at which point the
entire size of the Retail Order to sell 1,000 is depleted.
    As a final example, assume the same facts as above, except that
User 3's order was not an RPI Order to buy ABC at $10.035, but rather,
a non-displayed order to buy ABC at $10.03. The result would be similar
to the result immediately above, in that the incoming Retail Order to
sell 1,000 executes first against User 3's bid for 500 at $10.03,
because it is the best priced bid, then against User 2's bid for 100 at
$10.02, because it is the next best priced bid. User 1 then receives an
execution for 400 of its bid for 500 at $10.015, at which point the
entire size of the Retail Order to sell 1,000 is depleted.
Eligible Securities
    All Regulation NMS securities traded on the Exchange are eligible
for inclusion in the RPI Program. The Exchange limits the Program to
trades occurring at prices equal to or greater than $1.00 per share.
Toward that end, Exchange trade validation systems prevent the
interaction of RPI buy or sell interest (adjusted by any offset) and
Retail Orders at a price below $1.00 per share.\22\ For example, if
there is RPI buy interest tracking the Protected NBB at $0.99 with an
offset of $0.001 and a ceiling of $1.02, Exchange trade validation
systems would prevent the execution of the RPI Order at $0.991 with a
sell Retail Order with a limit of $0.99. However, if the Retail Order
was Type 2 as defined the Program,\23\ it would be able to interact at
$0.99 with liquidity outside the Program in the Exchange's order book.
In addition to facilitating an orderly \24\ and operationally intuitive
program, the Exchange believes that limiting the Program to trades
equal to or greater than $1.00 per share enabled it better to focus its
efforts to monitor price competition and to assess any indications that
data disseminated under the Program is potentially disadvantaging
retail orders. As part of that review, the Exchange produced data
throughout the pilot, which included statistics about participation,
the frequency and level of price improvement provided by the Program,
and any effects on the broader market structure.
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    \22\ As discussed above, the price of an RPI is determined by a
User's entry of buy or sell interest, an offset (if any) and a
ceiling or floor price. RPI sell or buy interest typically tracks
the Protected NBBO.
    \23\ Type 2 Retail Orders are treated as IOC orders that execute
against displayed and non-displayed liquidity in the Exchange's
order book where there is no available liquidity in the Program.
Type 2 Retail Orders can either be designated as eligible for
routing or as BYX Only Orders, and thus non-routable, as described
above.
    \24\ Given the limitation, the Program would have no impact on
the minimum pricing increment for orders priced less than $1.00 and
therefore no effect on the potential of markets executing those
orders to lock or cross. In addition, the non-displayed nature of
the liquidity in the Program simply has no potential to disrupt
displayed, protected quotes. In any event, the Program would do
nothing to change the obligation of exchanges to avoid and reconcile
locked and crossed markets under NMS Rule 610(d).
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Rationale for Making the Program Pilot Permanent
    The Exchange established the Program in an attempt to attract
retail order flow to the Exchange by providing an opportunity for price
improvement to such order flow. The Exchange believes that the Program
promotes transparent competition for retail order flow by allowing
Exchange members to submit RPI Orders to interact with Retail Orders.
Such competition promotes efficiency by facilitating the price
discovery process and generating additional investor interest in
trading securities, thereby promoting capital formation and retail
investment opportunities. The Program will continue to be limited to
trades occurring at prices equal to or greater than $1.00 per share.
    In accordance with its filing establishing the pilot, the Exchange
did ``produce data throughout the pilot, which will include statistics
about participation, the frequency and level of price improvement
provided by the Program, and any effects on the broader market
structure.'' \25\ The Exchange has fulfilled this obligation through
the reports and assessments it has submitted to the Commission since
the implementation of the pilot Program. The Exchange believes that the
data provided to the Commission to date, as well as the data being
provided in this proposed rule change, support the continued operation
of the Program on a permanent basis.
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    \25\ RPI Approval Order, 77 FR at 71655.
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    The SEC stated in the RPI Approval Order that the Program could
promote competition for retail order flow among execution venues, and
that this could benefit retail investors by creating additional well-
regulated and transparent price improvement opportunities for
marketable retail order flow, most of which is currently executed in
the Over-the-Counter (``OTC'') markets without ever reaching a public
exchange.\26\ The Exchange believes that it has achieved its goal of
attracting retail order flow to the Exchange. As the Exchange's
analysis of the Program data below demonstrates, there has been
consistent retail investor interest in the Program, which has provided
tangible price improvement to those retail investors through a
competitive pricing process over the course of the pilot. The data also
demonstrates that the Program had an overall negligible impact on
broader market quality outside of the Program. The Exchange has not
received any

complaints or negative feedback concerning the Program.
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    \26\ Id.
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I. Overall Analysis of the Program

    Brokers route retail orders to a wide range of different trading
systems. The Program offers a transparent and well-regulated option,
providing meaningful competition and price improvement. As explained
above, the purpose of the Program is to attract retail order flow to
the Exchange by providing an opportunity for retail investors to
receive price improvement. The Exchange believes that the Program has
satisfied this goal, having provided a total of $4.5 million of price
improvement, or approximately $153,000 per month, in the last 2.5
years. Furthermore, while the amount of price improvement provided in
the Program varies month to month, the amount of price improvement
provided in recent months has generally increased relative to prior
months due to additional participation in the Program by market
participants with retail order flow. The Exchange believes that this
supports permanent approval of the pilot as retail investors continue
to reap the benefits afforded by the Program. The amount of monthly and
cumulative price improvement provided in the Program is illustrated in
Chart 1 below.
[GRAPHIC] [TIFF OMITTED] TN17AU18.019

    Furthermore, Retail Order volume executed in the Program accounted
for between 0.86% and 2.32% of total BYX volume from January 2017 to
June 2018, as shown in Chart 2 below, and between 0.05% and 0.11% of
total consolidated volume, as shown in Chart 3 below. Despite its size
relative to total volume executed on the Exchange or the broader
market, the Program has continued to provide considerable price
improvement each month to retail investors that participated in the
Program. In addition, the Exchange believes that the relatively modest
volume executed in the Program relative to total BYX volume and total
consolidated volume limits the potential impact of the Program on
broader market quality on the Exchange.\27\ The Exchange therefore
believes that the Program has demonstrated the effectiveness of a
transparent, on-exchange retail order price improvement functionality,
notwithstanding that the majority of retail volume is still traded off-
exchange.
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    \27\ The Exchange has also performed an analysis of the impact
of the Program on other market quality indicators, which found that
the Program did not have a significant impact on market quality in
the broader market. See Section III below.

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[GRAPHIC] [TIFF OMITTED] TN17AU18.020

[GRAPHIC] [TIFF OMITTED] TN17AU18.021

    Retail Orders are routed by sophisticated brokers using systems
that seek the highest fill rates and amounts of price improvement.
These brokers have many choices of execution venues for this order
flow. When they choose to route to the Program, they have determined
that it is the best opportunity for fill rate and price improvement at
that time. As shown in Table 1 below, Retail Order average daily volume
(``ADV'') executed in the Program averaged between 2 and 7 million
shares from January 2016 to June 2018. Increased volatility in February
2018 likely contributed to the increased Retail Order shares executed
in the Program that month. Fill rates for the majority of the period
studied ranged from 11%-19% with fill rates declining below 10%
starting in December 2017, likely due to additional participation in
the Program that resulted in a significant increase in the Retail Order
volume entered on the Exchange. Retail Orders also continue to receive
more than the minimum $0.001 price improvement required of a liquidity
providing RPI Order, with the monthly average price improvement
provided to Retail Orders ranging from $0.0011-$0.0014 per share, and
the monthly effective/quoted spread ratio ranging from 0.77-0.90. The
Exchange believes that this data supports permanent approval of the
Program as this would allow retail investors to continue to execute
their orders with price improvement in the Program.

                                                       Table 1--Summary Statistics on the Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Effective/
                  Date                     Retail shares   Retail orders     Effective     Quoted spread   quoted spread       Price       Fill rate (%)
                                           executed ADV     placed ADV      spread BPS          BPS            ratio        improvement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jan-16..................................       4,666,052          20,560              19              22            0.89         $0.0011           16.09
Feb-16..................................       4,083,670          18,025              19              22            0.87          0.0011           16.10
Mar-16..................................       3,474,997          15,103              21              24            0.90          0.0011           17.50
Apr-16..................................       3,216,923          14,126              18              21            0.88          0.0011           19.23
May-16..................................       2,912,160          12,980              18              21            0.87          0.0011           19.73

Jun-16..................................       3,144,024          13,924              16              18            0.89          0.0011           19.65
Jul-16..................................       4,009,916          17,257              18              20            0.90          0.0011           19.97
Aug-16..................................       3,906,624          17,135              19              21            0.90          0.0011           17.66
Sep-16..................................       4,887,221          20,708              17              19            0.88          0.0011           17.28
Oct-16..................................       3,595,900          15,922              24              27            0.90          0.0012           17.19
Nov-16..................................       2,273,885           8,972              29              33            0.88          0.0013           12.71
Dec-16..................................       3,192,065          12,768              36              41            0.88          0.0013           14.82
Jan-17..................................       3,122,721          16,951              31              36            0.88          0.0013           16.09
Feb-17..................................       3,262,046          21,151              31              35            0.88          0.0013           14.71
Mar-17..................................       3,068,930          20,921              33              38            0.88          0.0014           13.85
Apr-17..................................       2,680,646          18,518              34              38            0.88          0.0013           13.97
May-17..................................       3,407,603          23,437              29              33            0.87          0.0013           16.88
Jun-17..................................       7,896,833          46,398              28              32            0.88          0.0013           17.07
Jul-17..................................       5,966,961          36,717              27              31            0.88          0.0012           16.43
Aug-17..................................       6,467,615          38,608              23              26            0.88          0.0013           16.24
Sep-17..................................       5,237,243          33,314              27              31            0.87          0.0013           15.76
Oct-17..................................       5,702,759          33,578              34              40            0.84          0.0012           16.77
Nov-17..................................       4,427,779          62,352              33              40            0.83          0.0012           11.61
Dec-17..................................       5,131,502         142,810              34              41            0.84          0.0012            8.30
Jan-18..................................       6,359,122         167,730              29              36            0.82          0.0013            7.98
Feb-18..................................       7,230,230         227,980              21              27            0.79          0.0012            8.29
Mar-18..................................       5,967,844         202,050              23              31            0.73          0.0011            7.69
Apr-18..................................       4,976,642         178,009              20              27            0.75          0.0011            7.90
May-18..................................       4,367,743         169,085              23              28            0.83          0.0011            7.02
Jun-18..................................       5,211,044         202,601              23              31            0.77          0.0011            7.19
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II. Analysis of Retail Orders by Order Size

    Tables 2, 3, and 4 show the distribution of Retail Orders entered
and executed in the Program for the period from January 2017 to June
2018. As shown in Table 2, a majority of all Retail Orders entered to
participate in the Program from January 2016 to June 2018 were for a
round lot or fewer shares. Specifically, Retail Orders of one round lot
or fewer shares accounted for an average of approximately 56% of the
total number of Retail Orders entered. More than 73% of Retail Orders
entered were for 300 shares or less. Very large orders of more than
7,500 shares accounted for only 1.9% of Retail Orders submitted to the
Program but accounted for a significant portion (approximately 40%) of
the shares entered, as shown in Table 3. In addition, despite lower
fill rates, large orders account for a reasonable portion
(approximately 9%) of the shares executed in the Program, as shown in
Table 4. The Program also receives a significantly large number of odd
lot and single lot sized shares, which could be representative of
retail marketable orders from retail customers. By providing price
improvement to these orders, retail customers would continue to benefit
from the Program.

                                              Table 2--Distribution of Retail Orders Entered by Order Size
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                                                                            501-1,000   1,001-2,000  2,001-4,000  4,001-7,500  7,500-15,000
               Date                  <=100 (%)   101-300 (%)  301-500 (%)      (%)          (%)          (%)          (%)           (%)      >15,000 (%)
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Jan-17............................        44.90        18.45         8.60        10.12         6.84         4.90         3.10          1.93         1.16
Feb-17............................        47.80        18.04         8.21         9.61         6.27         4.41         2.82          1.75         1.09
Mar-17............................        47.60        17.76         8.16         9.67         6.36         4.60         3.01          1.78         1.05
Apr-17............................        48.82        17.30         7.88         9.48         6.19         4.61         2.88          1.82         1.02
May-17............................        52.39        18.69         7.13         8.13         5.21         3.81         2.40          1.41         0.83
Jun-17............................        55.32        13.89         6.67         8.08         5.35         4.47         3.24          2.03         0.95
Jul-17............................        53.18        15.12         7.32         8.85         5.86         4.12         2.71          1.79         1.05
Aug-17............................        49.41        16.53         8.00         9.65         6.33         4.49         2.75          1.76         1.08
Sep-17............................        49.88        16.51         7.94         9.50         6.27         4.49         2.71          1.71         1.00
Oct-17............................        49.92        16.17         7.73         9.45         6.49         4.67         2.76          1.79         1.02
Nov-17............................        61.01        17.66         5.65         6.33         3.86         2.54         1.39          0.98         0.59
Dec-17............................        61.48        18.49         6.31         6.65         3.40         1.97         0.93          0.49         0.28
Jan-18............................        61.20        17.06         6.54         7.14         3.84         2.25         1.06          0.58         0.33
Feb-18............................        66.63        15.79         5.61         5.80         2.98         1.70         0.80          0.43         0.25
Mar-18............................        66.11        15.39         5.82         6.22         3.25         1.76         0.78          0.41         0.24
Apr-18............................        67.41        15.45         5.40         6.06         3.10         1.43         0.59          0.34         0.22
May-18............................        66.09        16.12         5.43         6.30         3.41         1.47         0.59          0.35         0.24
Jun-18............................        66.29        16.17         5.59         6.14         3.20         1.46         0.59          0.35         0.22
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                                                  Table 3--Distribution of Shares Entered by Order Size
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                                                                            501-1,000   1,001-2,000  2,001-4,000  4,001-7,500  7,500-15,000
               Date                  <=100 (%)   101-300 (%)  301-500 (%)      (%)          (%)          (%)          (%)           (%)      >15,000 (%)
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Jan-17............................         2.15         3.45         3.27         7.03         9.15        12.48        14.61         17.00        30.87
Feb-17............................         2.36         3.64         3.40         7.30         9.16        12.29        14.52         16.80        30.53

Mar-17............................         2.25         3.55         3.36         7.32         9.21        12.68        15.38         16.92        29.33
Apr-17............................         2.36         3.54         3.32         7.32         9.17        13.00        14.92         17.45        28.91
May-17............................         3.44         4.59         3.60         7.51         9.25        12.92        15.02         16.32        27.35
Jun-17............................         1.89         2.89         2.92         6.64         8.44        13.27        17.56         20.05        26.34
Jul-17............................         1.98         3.18         3.22         7.24         9.17        12.23        14.73         18.29        29.96
Aug-17............................         1.92         3.36         3.39         7.59         9.57        12.76        14.33         17.21        29.87
Sep-17............................         2.15         3.49         3.43         7.55         9.70        13.15        14.55         17.27        28.70
Oct-17............................         1.97         3.34         3.30         7.41         9.91        13.48        14.54         17.90        28.16
Nov-17............................         6.28         5.19         3.86         7.92         9.53        12.10        12.18         16.22        26.72
Dec-17............................         9.96         7.34         5.96        11.51        11.24        12.70        11.15         11.31        18.83
Jan-18............................         8.56         6.29         5.64        11.27        11.49        13.17        11.61         12.18        19.79
Feb-18............................        11.33         7.16         6.01        11.31        11.12        12.42        10.99         11.30        18.37
Mar-18............................        11.06         6.96         6.10        12.00        11.88        12.69        10.62         10.82        17.88
Apr-18............................        12.30         7.46         5.95        12.51        12.19        11.17         8.89          9.73        19.80
May-18............................        12.14         7.50         5.74        12.40        12.76        11.08         8.53          9.67        20.17
Jun-18............................        12.39         7.77         6.12        12.60        12.60        11.42         8.76          9.89        18.45
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                                                 Table 4--Distribution of Shares Executed by Order Size
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                                                                            501-1,000   1,001-2,000  2,001-4,000  4,001-7,500  7,500-15,000
               Date                  <=100 (%)   101-300 (%)  301-500 (%)      (%)          (%)          (%)          (%)           (%)      >15,000 (%)
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Jan-17............................        11.39        14.06        10.40        18.41        15.88        12.34         8.41          5.26         3.86
Feb-17............................        13.96        15.27        10.48        17.77        14.54        11.44         7.82          5.15         3.60
Mar-17............................        14.14        14.99        10.15        17.53        14.74        11.80         8.15          5.02         3.48
Apr-17............................        14.69        14.83        10.01        17.80        14.84        11.55         7.85          5.00         3.42
May-17............................        17.86        18.10         9.98        16.46        13.17        10.48         6.94          4.23         2.78
Jun-17............................         9.74        11.25         8.91        16.71        14.58        14.86        12.03          7.97         3.95
Jul-17............................        10.37        12.33         9.91        18.84        16.17        12.75         8.96          6.56         4.11
Aug-17............................         9.39        12.34        10.01        18.97        16.70        13.36         8.77          6.15         4.31
Sep-17............................        10.60        12.93        10.22        18.87        16.28        13.00         8.56          5.74         3.79
Oct-17............................         9.40        12.40        10.16        19.36        17.12        13.45         8.58          5.86         3.66
Nov-17............................        12.42        13.48         9.27        16.56        15.84        13.24         7.98          6.63         4.56
Dec-17............................        14.98        15.80        10.29        16.77        14.92        11.67         6.98          5.04         3.55
Jan-18............................        14.27        14.96        10.28        17.53        15.27        11.90         7.12          5.16         3.50
Feb-18............................        16.74        15.75        10.78        17.05        14.27        11.08         6.48          4.57         3.30
Mar-18............................        17.27        15.97        10.58        16.87        13.81        10.51         6.66          4.63         3.70
Apr-18............................        17.12        15.58        10.24        16.30        13.60        10.04         6.71          5.37         5.03
May-18............................        18.24        16.29        10.18        15.89        12.80         9.80         6.25          5.25         5.31
Jun-18............................        18.93        17.28        10.59        16.16        12.96         9.64         5.66          4.95         3.84
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    The Exchange also analyzed fill rates across the different order
size buckets and found that while fill rates are higher for smaller
orders as expected, large size orders are still able to access
liquidity and therefore receive price improvement in the Program.
Moreover, overall fill rates indicate that market participants that
provide liquidity are responding with quote depth when the contra side
order is looking for a fill. While fill rates decreased starting in
November 2017, the Exchange believes that this is due to new Retail
Order flow being routed to the Program, rather than a decrease in the
available liquidity. Monthly volume executed in the Program, as shown
in Table 1, has therefore remained constant or increased since November
2017 despite the lower overall fill rates for those months. The
Exchange therefore believes that the Program is an attractive option
for market participants looking to fill Retail Orders with price
improvement.

                                                                   Table 5--Fill Rates
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                                                                            501-1,000   1,001-2,000  2,001-4,000  4,001-7,500  7,500-15,000
               Date                  <=100 (%)   101-300 (%)  301-500 (%)      (%)          (%)          (%)          (%)           (%)      >15,000 (%)
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Jan-17............................        85.19        65.62        51.13        42.16        27.93        15.91         9.26          4.98         2.01
Feb-17............................        87.21        61.69        45.31        35.83        23.36        13.69         7.92          4.51         1.73
Mar-17............................        87.04        58.53        41.87        33.20        22.18        12.89         7.34          4.11         1.65
Apr-17............................        86.90        58.46        42.12        33.97        22.59        12.40         7.35          4.00         1.65
May-17............................        87.53        66.54        46.75        36.99        24.03        13.69         7.80          4.38         1.71
Jun-17............................        87.78        66.50        52.07        42.98        29.48        19.12        11.70          6.78         2.56
Jul-17............................        85.99        63.63        50.52        42.77        28.96        17.12         9.99          5.89         2.25
Aug-17............................        79.61        59.74        48.02        40.59        28.33        17.00         9.94          5.81         2.34
Sep-17............................        77.55        58.32        46.98        39.39        26.44        15.58         9.27          5.24         2.08
Oct-17............................        80.19        62.29        51.71        43.82        28.97        16.73         9.90          5.49         2.18
Nov-17............................        22.78        29.93        27.66        24.11        19.16        12.61         7.55          4.71         1.97
Dec-17............................        12.14        17.37        13.96        11.77        10.72         7.42         5.05          3.60         1.52
Jan-18............................        12.84        18.31        14.06        11.98        10.24         6.96         4.72          3.26         1.36
Feb-18............................        11.79        17.56        14.32        12.03        10.24         7.12         4.70          3.23         1.43
Mar-18............................        11.56        17.00        12.85        10.42         8.60         6.13         4.64          3.17         1.53
Apr-18............................        10.61        15.91        13.11         9.93         8.50         6.85         5.76          4.21         1.94
May-18............................        10.11        14.61        11.93         8.62         6.75         5.95         4.93          3.65         1.77
Jun-18............................        10.57        15.39        11.98         8.88         7.12         5.84         4.47          3.46         1.44
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III. Impact of the Program on Broader Market Quality

    As shown in Charts 2 and 3 above, Retail Order volume executed in
the Program is a small percentage of both total volume executed on the
Exchange and total consolidated volume. While the Program has better
depth available for Retail Orders, it does not significantly affect the
market volume of BYX. The average volume within the 95th percentile is
between 1.3% and 1.7%. With the Program volume mostly below 2.5% of BYX
volume, the Exchange does not believe that it is able to significantly
impact BYX market quality. Nevertheless, to test the impact of the
Program on broader market quality, the Exchange reviewed the
correlation between metrics that are tied to overall market quality
with relevant Program metrics over both 2017 and 2018. Based on this
analysis, which is provided in Table 6 below, the Exchange does not
believe that the Program has had any significant impact on broader
market quality.
    Specifically, the Exchange's analysis shows that: (1) Inside size
in the broader market is not correlated with either RPI effective
spreads or the percentage of volume executed in the Program, which
suggests that market participants are not moving volume from the
regular market to the Program as effective spreads narrow or volume
executed in the Program increases; (2) effective spreads in the broader
market are not correlated with the percentage of volume executed in the
Program, which suggests that spreads are not widening as a result of
more Retail Order flow being executed in the Program, (3) midpoint
volume executed is not correlated with effective spreads in the
Program, which suggests that market participants are not moving
midpoint liquidity from the regular market to instead receive price
improvement in the Program, and (4) displayed volume executed is not
correlated with quoted spreads in the Program, which suggest that
market participants are not entering non-displayed retail price
improving interest in the Program as an alternative to displaying
interest on an order book. The Exchange therefore believes that the
Program can continue on a permanent basis--and thereby provide
increased price improvement opportunities to retail investors on a
transparent well-regulated exchange--without degrading market quality
outside of the Program.

            Table 6--BYX Market Quality Correlation Analysis
------------------------------------------------------------------------
                                                       Date
                                         -------------------------------
                                               2017            2018
------------------------------------------------------------------------
Correlation of RPI Effective Spread to           -0.0145         -0.0096
 Average Inside Size across all Equities
 Exchanges \28\.........................
Correlation of RPI Volume as a Percent           -0.0217         -0.0056
 of Total Volume to Average Inside Size
 across all Equities Exchanges..........
Correlation of RPI Volume as a Percent            0.1175          0.0134
 of Total Volume to Average Effective
 Spread across all Venues...............
Correlation of RPI Effective Spread to           -0.1438         -0.1366
 Total Midpoint Volume across all Venues
Correlation of RPI Quoted Spread to              -0.1221         -0.0999
 Total Protected Lit Volume across all
 Equities Exchanges.....................
------------------------------------------------------------------------

IV. Conclusion

    Based on the Exchange's experience in operating the Program, and
the data provided here and during the duration of the pilot, the
Exchange believes that the Program has been a positive experiment in
attracting retail order flow to a public exchange. The data provided by
the Exchange describes a valuable service that delivers considerable
price improvement in a transparent and well-regulated environment. The
Program represents just a fraction of retail orders, most of which are
executed off-exchange by a wide range of order handling services that
have considerably more market share, and which operate pursuant to
different rules and regulatory requirements. The order flow the Program
attracted to the Exchange provided tangible price improvement to retail
investors through a competitive and transparent pricing process
unavailable in non-exchange venues. As such, despite relatively modest
volumes, the Exchange believes that the Program satisfied the twin
goals of attracting retail order flow to the Exchange and allowing such
order flow to receive potential price improvement. Moreover, the
Exchange believes that the data collected supports the conclusion that
the Program did not have a negative impact on broader market quality.
Although the results of the Program highlight the substantial
advantages that broker-dealers retain when managing the benefits of
retail order flow, the Exchange believes that the level of price
improvement provided by the Program and the scant evidence that the
Program negatively impacted the marketplace justifies making the
Program permanent.
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    \28\ Inside size is the average bid or ask size when the venue
is at the NBB or NBO.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act,\29\ in general, and
Section 6(b)(5) of the Act,\30\ in particular, in that it is designed
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest and not to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that making the pilot permanent is consistent
with these principles because the Program is reasonably designed to
attract retail order flow to the exchange environment, while helping to
ensure that retail investors benefit from the better price that
liquidity providers are willing to give their orders. During the pilot
period, the Exchange has provided data and analysis to the Commission.
The Exchange believes that this data and analysis, as well as the
further analysis provided in this filing, show that the Program has
provided the intended benefits to the market, and retail investors in
particular, and is therefore consistent with the Act.
    Additionally, the Exchange believes the proposed rule change is
designed to facilitate transactions in securities and to remove
impediments to, and perfect the mechanisms of, a free and open market
and a national market system because making the Program permanent would
allow the Exchange to continue to attract retail order flow to a public
exchange and allow such order flow to receive potential price
improvement. The data provided by the Exchange to the Commission staff
demonstrates that the Program provided tangible price improvement to
retail investors through a competitive pricing process

unavailable in non-exchange venues, and otherwise had an insignificant
impact on the broader market. The Exchange believes that making the
Program permanent would encourage the additional utilization of, and
interaction with, the Exchange and provide retail customers with an
additional venue for price discovery, liquidity, competitive quotes,
and price improvement. For the same reasons, the Exchange believes that
making the Program permanent would promote just and equitable
principles of trade and remove impediments to and perfect the mechanism
of a free and open market.
    Finally, the Exchange also believes that it is subject to
significant competitive forces, as described below in the Exchange's
statement regarding the burden on competition. For all of these
reasons, the Exchange believes that the proposed rule change is
consistent with the Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
believes that making the Program permanent would continue to promote
competition for retail order flow among execution venues and contribute
to the public price discovery process. The Exchange believes that the
data supplied to the Commission, and experience gained over the life of
the pilot, have demonstrated that the Program creates price improvement
opportunities for retail orders that are equal to what would be
provided under OTC internalization arrangements, thereby benefiting
retail investors and increasing competition between execution venues.
The Exchange also believes that making the Program permanent will
promote competition between execution venues operating their own retail
liquidity programs. Such competition will lead to innovation within the
market, thereby increasing the quality of the national market system.
Finally, the Exchange notes that it operates in a highly competitive
market in which market participants can easily direct their orders to
competing venues, including off-exchange venues. In such an
environment, the Exchange must continually review, and consider
adjusting the services it offers and the requirements it imposes to
remain competitive with other U.S. equity exchanges. For the reasons
described above, the Exchange believes that the proposed rule change
reflects this competitive environment.

(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File No. SR-CboeBYX-2018-014 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. SR-CboeBYX-2018-014. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing will also be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File No. SR-CboeBYX-2018-014 and should be submitted on
or before September 7, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17736 Filed 8-16-18; 8:45 am]
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[Federal Register Volume 83, Number 56 (Thursday, March 22, 2018)]
[Rules and Regulations]
[Pages 12483-12485]
[FR Doc No: 2018-05843]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1

[Docket No. FDA-2018-D-0721]

Application of the Foreign Supplier Verification Program
Regulation to the Importation of Live Animals: Guidance for Industry;
Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notification of availability.

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SUMMARY: The Food and Drug Administration (FDA, Agency, or we) is
announcing the availability of a guidance for industry entitled
``Application of the Foreign Supplier Verification Program Regulations
to the Importation of Live Animals: Guidance for Industry.'' The
purpose of this document is to state FDA's intent to exercise
enforcement discretion regarding application of the regulation on
foreign supplier verification programs (FSVPs) to importers of certain
live animals. The enforcement discretion would apply to importers of
live animals that are required to be slaughtered and processed at U.S.
Department of Agriculture (USDA) regulated establishments subject to
USDA-administered Hazard Analysis and Critical Control Point (HACCP)
requirements, or at State-inspected establishments subject to
requirements equivalent to the Federal standard.

DATES: The announcement of the guidance is published in the Federal
Register on March 22, 2018.

ADDRESSES: You may submit either electronic or written comments on
Agency guidances at any time as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2018-D-0721 for ``Application of the Foreign Supplier Verification
Program

Regulation to the Importation of Live Animals: Guidance for Industry.''
Received comments will be placed in the docket and, except for those
submitted as ``Confidential Submissions,'' publicly viewable at https://www.regulations.gov or at the Dockets Management Staff between 9 a.m.
and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and contact information to be made publicly available, you
can provide this information on the cover sheet and not in the body of
your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with 21 CFR 10.20 and other
applicable disclosure law. For more information about FDA's posting of
comments to public dockets, see 80 FR 56469, September 18, 2015, or
access the information at: https://www.gpo.gov/fdsys/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852.
    You may submit comments on any guidance at any time (see 21 CFR
10.115(g)(5)).
    Submit written requests for single copies of the guidance to the
Office of Food Safety, Center for Food Safety and Applied Nutrition,
Food and Drug Administration, 5001 Campus Dr., College Park, MD 20740.
Send two self-addressed adhesive labels to assist that office in
processing your requests. See the SUPPLEMENTARY INFORMATION section for
electronic access to the guidance document.

FOR FURTHER INFORMATION CONTACT: Sharon Mayl, Office of Foods and
Veterinary Medicine, Food and Drug Administration, 10903 New Hampshire
Ave., Silver Spring, MD 20993,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    We are announcing the availability of a guidance for industry
entitled ``Application of the Foreign Supplier Verification Program
Regulation to the Importation of Live Animals: Guidance for Industry.''
We are issuing this guidance consistent with our good guidance
practices (GGP) regulation (21 CFR 10.115). We are implementing this
guidance without prior public comment because we have determined that
prior public participation is not feasible or appropriate (Sec.
10.115(g)(2)). We made this determination because the guidance presents
a less burdensome policy consistent with the public health. Although
this guidance is immediately in effect, it remains subject to comment
in accordance with FDA's GGP regulation. The guidance represents the
current thinking of FDA on this topic. It does not establish any rights
for any person and is not binding on FDA or the public. You can use an
alternative approach if it satisfies the requirements of the applicable
statutes and regulations. This guidance is not subject to Executive
Order 12866.
    Many live animals are imported into the United States for
consumption as food. Most imported live animals (e.g., cattle and
swine) that are for use as food are slaughtered under mandatory
inspection by USDA's Food Safety and Inspection Service (FSIS) and are
processed at USDA-regulated establishments subject to USDA-administered
Hazard Analysis Critical Control Point (HACCP) requirements. The
slaughter and processing of other live animals (e.g., farmed bison,
boar, and elk) is under FDA's jurisdiction and is subject to FDA's
current good manufacturing practice and, unless an exemption applies,
preventive controls requirements (21 CFR part 117). Some animals under
FDA jurisdiction (``FDA animals'') are slaughtered under voluntary
inspection by USDA-FSIS.
    The importation into the United States of live animals for food use
is subject to certain supplier verification requirements established in
the FDA Food Safety Modernization Act (FSMA) (Pub. L. 111-353). FSMA
amended the Federal Food, Drug, and Cosmetic Act (FD&C Act) to add,
among other food safety requirements, provisions requiring verification
of the safety of food imported from foreign suppliers. Section 805(c)
of the FD&C Act (21 U.S.C. 384(c)) directs FDA to issue regulations on
the content of FSVPs. We issued the FSVP final rule on November 27,
2015 (80 FR 74225).
    The FSVP regulation requires food importers to develop, maintain,
and follow an FSVP that provides adequate assurances that the foreign
supplier uses processes and procedures that provide the same level of
public health protection as those required under the preventive
controls or produce safety provisions of FSMA (if applicable) and
regulations implementing those provisions, as well as assurances that
the imported food is not adulterated and that human food is not
misbranded with respect to allergen labeling (21 CFR 1.502(a)).
    The food resulting from the slaughter and processing of certain
live animals cannot be consumed without slaughter and processing at
establishments subject to USDA-administered HACCP requirements (or
equivalent state programs). In light of the role of another Federal
agency with regard to these animals, FDA intends to exercise
enforcement discretion with respect to the FSVP regulation for
importers of live animals that are imported for slaughter and
processing at USDA-regulated establishments subject to USDA-
administered HACCP requirements, or imported for slaughter and
processing under state requirements that are at least equivalent to the
requirements for USDA-regulated establishments, including designated
feeder animals. This means that we will not expect FSVP importers of
live animals that are slaughtered and processed at USDA-inspected
establishments subject to USDA-administered HACCP requirements (or
State-inspected establishments subject to equivalent requirements) to
meet any of the FSVP requirements.

II. Paperwork Reduction Act of 1995

    This guidance refers to previously approved collections of
information found in FDA regulations. These collections of information
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The
collections of information in part 1, subpart L, have been approved
under OMB control number 0910-0752.

III. Electronic Access

    Persons with access to the internet may obtain the document at
either https://www.fda.gov/FoodGuidances or

https://www.regulations.gov. Use the FDA website listed in the previous
sentence to find the most current version of the guidance.

    Dated: March 19, 2018.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2018-05843 Filed 3-21-18; 8:45 am]
 BILLING CODE 4164-01-P