Cboe Exchange Allows Retail Members to Trade as Principals
Published Date: 6/10/2025
Notice
Summary
Cboe EDGX Exchange is updating its rules to let Retail Member Organizations (RMOs) enter retail orders as principals, meaning they can trade for themselves, not just for customers. RMOs must follow new rules and keep records proving they’re playing by the book. This change could speed up trading and improve transparency, with the new rules kicking in after approval.
Analyzed Economic Effects
5 provisions identified: 4 benefits, 1 costs, 0 mixed.
RMOs May Submit Retail Orders as Principal
The Exchange proposes to amend Rule 11.21(a)(2) so a Retail Member Organization (RMO) may enter a Retail Order onto EDGX in a principal capacity if it meets the conditions in new Rule 11.21(g). This change would let RMOs commit their own capital when handling retail orders rather than only acting as agent or riskless principal.
Retail Customers Can Receive Extra Price Improvement
If you are a retail customer, your RMO may now enter your order as principal on EDGX and give you post-execution price improvement in addition to any on-exchange improvement. The filing includes an example where a market order to sell 100 shares at $10.01 receives an exchange execution at $10.012 and the RMO may allocate a better price to the retail customer.
May Increase On-Exchange Retail Liquidity and Competition
The Exchange states that permitting RMOs to submit Retail Orders as principal may encourage more retail order flow to execute on-exchange, increasing on-exchange retail liquidity and competition among execution venues. The filing says this could deepen EDGX's retail liquidity pool and offer more price-improvement opportunities for retail customers.
RMOs Must Have Compliance Policies and Documentation
RMOs that choose to enter Retail Orders as principal must have policies and procedures reasonably designed to ensure compliance with proposed Rule 11.21(g), and must be able to produce documentation evidencing compliance upon request by the Exchange. The Exchange proposes amending Rule 11.21(b)(6) to codify this requirement.
Exchange Surveillance and Enforcement Remain in Place
The Exchange states its Regulatory and Surveillance teams will monitor principal retail orders to confirm they were entered on behalf of bona fide retail customers and that executed shares are fully allocated; the Exchange may disqualify an RMO that fails to meet Retail Order requirements. This surveillance applies whether orders are entered as principal or riskless principal.
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