An examination of the NYSE's retail liquidity program
The NYSE's Retail Liquidity Program (RLP) is a novel, restricted-access venue, in which orders cannot originate from a trading algorithm or any other computer methodology, designed to attract retail orders by offering price improvement. The mean price improvement in the RLP is about $0.0038 per share. RLP trades occur on 50.2 % of days, and on these days, the spread is one-cent 42 % of the time compared with a little less than 33 % of the time for other days. Greater tick-size constraint leads to more RLP trades, and the quoted spread is lower on days with RLP trading. Thus, the RLP sorting mechanism appears to reduce lit market liquidity suppliers' adverse selection concerns and enables them to provide better sub-penny prices to retail traders on lit markets.
Quarterly Review of Economics and Finance
Jain, P., Linna, J., & McInish, T. (2021). An examination of the NYSE's retail liquidity program. Quarterly Review of Economics and Finance, 80, 367-373. https://doi.org/10.1016/j.qref.2021.03.009