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August 1, 2012

NYSE Claims Win On Retail Program

By Peter Chapman

NYSE Euronext won a major victory last month when the Securities and Exchange Commission approved the exchange operator's controversial proposal to compete for retail orders using hidden sub-penny quotes.

The so-called "Retail Liquidity Programs" is slated to launch at both the New York Stock Exchange and NYSE MKT on Aug. 1. The programs aim to confer better pricing on retail orders than is available at the national best bid or offer. "Providing price improvement for retail orders within an exchange environment affords individual investors new economic incentives and ensures greater transparency, liquidity and competition throughout the U.S. cash equities marketplace," Joe Mecane, an NYSE Euronext executive vice president, said in a statement.

Joe Mecane

In granting its approval, the SEC exempted the exchanges from Regulation NMS' sub-penny rule and agreed not to pursue the exchanges for violations of its bedrock Quote Rule. The regulator defended its decision by noting that the programs operate no differently than programs run by the major wholesalers.

In recent years, the SEC has expressed concern that too much retail flow was not reaching the public markets; rather it was being intercepted by wholesalers. The SEC noted the programs would be run as one-year pilots.

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