The Securities and Exchange Commission has issued a notice soliciting comments on a proposed rule change by Cboe EDGX Exchange, Inc. The filing, dated September 30, 2025, seeks to establish a Retail Price Improvement Program and adjust existing rules on non-displayed orders. Published in the Federal Register on January 21, 2026, this development aims to enhance retail investor access to better pricing while refining order execution mechanics. The proposal, amended three times with the latest on January 12, 2026, reflects efforts to attract retail order flow to the exchange amid competitive pressures from off-exchange venues. This move aligns with broader market trends prioritizing retail interests, as evidenced by similar programs on affiliated and competitor exchanges.
Background and Proposal Overview
Cboe EDGX, a national securities exchange, operates under the Securities Exchange Act of 1934. The proposed rule change targets Rule 11.21, currently focused on retail orders, by retitling it as the Retail Price Improvement Program. The program would allow retail member organizations to submit retail orders that could interact with non-displayed Retail Price Improvement Orders priced at least $0.001 better than the protected national best bid or offer for securities above $1.00. This structure mirrors retail liquidity programs on Cboe BYX Exchange, New York Stock Exchange, NYSE National, Nasdaq BX, and Investors Exchange, but introduces unique features like allowing retail orders with time-in-force instructions beyond immediate-or-cancel.
Key players include Cboe EDGX as the self-regulatory organization filing the proposal, and the SEC, which has extended review periods and instituted proceedings to evaluate approval. The exchange justifies the program by citing the dominance of off-exchange retail trading, noting that on-exchange volume has dropped from 71 percent to 49 percent since similar programs began. Historical context includes the SEC's emphasis on retail investor protections, as seen in its 2018-2022 strategic plan and 2022 proposals on tick sizes and order competition.
Key Components of the Retail Price Improvement Program
The proposal defines a Retail Price Improvement Order as non-displayed interest executable only against incoming retail orders, priced in $0.001 increments or as midpoint peg orders. Unlike counterparts on other exchanges, these orders post to the EDGX book upon entry and do not execute against resting retail orders, aiming to deepen liquidity pools. A Retail Liquidity Identifier would disseminate via data feeds when such orders offer qualifying price improvement, without revealing price or size.
Retail orders are categorized into Type 1, which must be immediate-or-cancel and interact only with price-improving liquidity, and Type 2, which can post, execute, or route per user instructions. Priority follows price-time rules, with examples in the filing illustrating executions at improved prices, such as a retail sell order matching an RPI buy at $10.025 against a $10.00-$10.05 national best bid and offer.
The proposal retains processes for retail member organization qualification and appeals, renaming the review panel to the RPI Panel for consistency with affiliate rules. It limits the program to securities priced at or above $1.00, with notifications via information circulars.
Modifications to Non-Displayed Order Rules
Separate from the program, the filing amends Rules 11.6(e)(2) and 11.10(a)(4) to clarify non-displayed order behavior. These orders execute against better-priced book interest upon entry, then post at locking prices if applicable, with executions at half-minimum variations in locked scenarios. The changes address information leakage concerns, allowing later-arriving orders to execute ahead in specific locked-book cases. Examples demonstrate outcomes, such as a midpoint peg order executing at $10.025 in a locked market.
Legal Precedents and Political Context
This proposal builds on SEC approvals for similar programs, including Cboe BYX's retail program in 2019 and its enhanced version in 2025. Precedents like NYSE Rule 7.44 emphasize retail benefits from segmented liquidity, reducing adverse selection for providers. Politically, the push aligns with regulatory focus on retail protections, though no direct executive orders are involved here. Perspectives vary: proponents see it as fostering on-exchange competition, while critics might argue it segments markets, potentially disadvantaging non-retail flow. The SEC's proceedings, initiated December 19, 2025, reflect scrutiny over alignment with fair access under Section 6(b)(5) of the Exchange Act.
Implications and Perspectives
Short-term, the program could increase EDGX's retail volume, offering investors sub-penny improvements and integrating with existing retail priority features. Long-term, it may pressure off-exchange venues, enhancing overall market transparency. Different views include retail advocates praising price improvements, institutional traders concerned about fragmentation, and regulators weighing competition burdens. The filing asserts no undue burden, promoting just and equitable trade principles.
In summary, this proposal represents Cboe EDGX's strategy to capture retail flow through innovative order types and clarified rules. Potential next steps include further SEC review, possible additional amendments, or approval by April 1, 2026. Ongoing debates may center on sub-penny pricing's impact and the balance between retail incentives and market unity, with public comments shaping the outcome.
