86610 Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Notices 

17 17 CFR 240.19b–4(f)(6)(iii). 

18For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

19 15 U.S.C. 78s(b)(2)(B). 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Customers of the Floor Broker can include 

Public Customers, Broker Dealers and Market 

Makers. 

4See Cboe Rule 5.85(h) (previously, Cboe Rule 

6.54 Accommodation Liquidations (Cabinet 

Trades); see also Securities Exchange Release No. 

34–73974 (December 31, 2014) (Order Approving 

SR–CBOE–2014–93)(explaining under the [cabinet 

trade] procedures, bids and offers (whether opening 

or closing a position) at a price of $1 per option 

contract may be represented in the trading crowd 

by a Floor Broker . . . but must yield priority to all 

resting orders in the [ ] cabinet book (which resting 

to Rule 19b–4(f)(6)(iii),17 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

take effect immediately. The 

Commission believes that waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest because it will allow the rules 

discussed above to remain in effect 

during the temporary period during 

which the Trading Floor has not yet 

been reopened in full to DMMs because 

of health precautions related to the 

Covid-19 pandemic. Accordingly, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposal operative upon filing.18

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 19 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change 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 rule-comments@

sec.gov. Please include File Number SR– 

NYSE–2020–106 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 

Number SR–NYSE–2020–106. 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 the 

filing also will 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 

Number SR–NYSE–2020–106 and 

should be submitted on or before 

January 21, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2020–28893 Filed 12–29–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90792; File No. SR–BOX– 

2020–38] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing of 

Proposed Rule Change To Amend BOX 

Rule 7620 (Accommodation 

Transactions) 

December 23, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

10, 2020, BOX Exchange LLC 

(‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 7620 (Accommodation 

Transactions) to allow Floor Brokers to 

enter opening cabinet orders on behalf 

of customers and Floor Market Makers, 

and codify that cabinet trades will 

follow open outcry rules pursuant to 

Exchange Rule 7600. The text of the 

proposed rule change is available from 

the principal office of the Exchange, at 

the Commission’s Public Reference 

Room and also on the Exchange’s 

internet website at http://

boxoptions.com. 

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 

self-regulatory organization 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 self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

First, the proposed rule change is to 

amend Rule 7620 (Accommodation 

Transactions) to allow Floor Brokers to 

enter opening cabinet orders on behalf 

of customers 3 and Floor Market Makers. 

This is a competitive filing that is based 

on cabinet trading functionality at Cboe 

Exchange, Inc. (‘‘Cboe’’).4

Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Notices 86611 

cabinet book orders may be closing only); Securities 

Exchange Release No. 34–86994 (September 23, 

2019) (SR–CBOE–2019–058) (noting inadvertent 

removal of rule language and current proposal to 

clarify and explicitly state market participants may 

continue to place opening cabinet orders, so long 

as they yield to all closing cabinet orders 

represented by the trading crowd). 

5See Securities Exchange Release No. 34–85803 

(May 8, 2019) (Notice of filing and immediate 

effectiveness SR–BOX–2019–16). 

6See BOX Rule 7620(c), (d), and (e). 

7Although the Exchange anticipates that Market 

Makers would be the primary market participant 

involved in submitting opening cabinet trades, the 

Exchange proposes to offer the order type to all 

participants for competitive reasons. The Exchange 

notes that its competitors offer all participants the 

ability to submit opening cabinet orders, and 

therefore, the Exchange wishes to offer the same 

opportunities. See Securities Exchange Release No. 

34–86994 (September 17, 2019) (Notice of Filing 

and Immediate Effectiveness SR–CBOE–2019–058) 

(stating that ‘‘market participants may continue . . . 

to place opening cabinet orders, which must 

continue to yield to all closing cabinet orders 

represented by the trading crowd.’’); See also 

NYSEArca Rule 6.80–O(b)(3) (stating ‘‘[Cabinet] 

[o]rders may be placed for customer, firm and 

Market Maker accounts . . .’’). 

8Example assumes each contract covers 100 

shares of the underlying stock, therefore, 300 

contracts multiplied by 100 shares of the 

underlying stock is 30,000 shares. 

9Synthetic options are trading positions holding 

a number of securities that when taken together, 

emulate another position. See Synthetic Options, 

www.corporatefinanceinstitute.com, https://

corporatefinanceinstitute.com/resources/ 

knowledge/trading-investing/synthetic-options/. 

10The Exchange notes, although submitted as an 

‘‘opening’’ trade, this order is in effect ‘‘closing’’ 

synthetically for the Market Maker and transferring 

risk from that Market Maker’s books to another 

Market Maker more comfortable with that risk 

exposure. The Exchange also notes that this 

opening bid would be for a series that is not 

actively traded and therefore would be in line with 

the primary purposes of cabinet trading because the 

Market Maker could now trade in a series that is 

not actively traded in order to synthetically close 

their position and hedge unwanted portfolio risk. 

11See supra note 8. 

12See Cboe Rule 5.85(h). Cabinet orders on Cboe 

follow the order allocation and priority rules that 

are applicable to the execution of all orders in open 

outcry. 

13See BOX Rule 7600(i) (Priority on Split-Price 

Transactions Occurring in Open Outcry). 

As background, with respect to the 

proposed change, the Exchange adopted 

cabinet trading on the Exchange’s 

Trading Floor.5 Under the current BOX 

Rule 7620 (Accommodation 

Transactions), only closing cabinet 

transactions at a price of $1 per option 

contract for the account of a customer or 

Floor Market Maker are allowed. In 

addition, the rule specifies that opening 

orders are not cabinet orders, but 

opening orders in certain cases may be 

matched with a cabinet order.6 The 

Exchange now wishes to allow opening 

cabinet orders to further accommodate 

additional cabinet transactions on the 

Exchange Trading Floor. 

The Exchange first proposes to amend 

the definition of cabinet orders to 

include bids and offers (whether 

opening or closing) at a price of $1 per 

option contract for the account of a 

customer or Floor Market Maker. 

The Exchange expects the majority of 

opening cabinet orders to be submitted 

by Market Makers (e.g., Floor Market 

Makers or Away Market Makers), but 

intends to offer the potential benefits of 

these transactions to all participants.7

As liquidity providers, Market Makers 

play a vital role in the financial markets 

and help to facilitate market efficiency 

and price discovery. Market Makers 

engage in a course of dealings for their 

own account to assist with the 

maintenance of a fair and orderly 

market. Market Makers must 

consistently manage portfolio risk and 

seek opportunities to hedge their 

exposures in order to maintain a riskneutral position. Failure to rebalance 

portfolios and continuously hedge 

exposes Market Makers to undesirable 

risk. Therefore, permitting Market 

Makers to submit opening cabinet 

orders, while yielding priority to all 

closing cabinet orders, will enable 

Market Makers (or other market 

participants) to hedge away unwanted 

exposure and get back to a risk-neutral 

position. 

As an example of the proposed rule 

change, consider the following: 

Assume Market Maker (MM1) has the 

following positions: 

(Position 1): Long 300 put contracts on 

XYZ with a May 2020 expiration 

date, and a $105 strike price 

(Position 2): Short 300 put contracts on 

XYZ with a May 2020 expiration 

date, and a $100 strike price 

XYZ stock is currently at $50 per 

share. 

If MM1 then exercises Position 1 

(Long 105 puts). MM1’s positions are 

now: 

(Position 2): Short 300 put contracts on 

XYZ with a May 2020 expiration 

date, and a $100 strike price 

(Position 3): Short 30,000 8 Shares of 

XYZ stock (because MM1 exercised 

Position 1 and now has the right to 

sell 30,000 Shares of the underlying 

stock) 

With this change MM1’s current risk 

is XYZ’s stock price rising past $100 per 

share, a risk exposure that is 

theoretically unlimited. In the industry 

having these types of positions is called 

being ‘‘synthetically short’’.9 In order for 

MM1 to hedge the risk of the stock price 

going past $100 per share, MM1 would 

seek to offset the risk of his current 

Positions (2 and 3) by submitting an 

opening cabinet bid for 300 XYZ call 

contracts with a May 2020 expiration, at 

a $100 strike price (Position 4).10

MM1 would have the following 

positions: 

(Position 2): Short 300 put contracts on 

XYZ with a May 2020 expiration 

date, and a $100 strike price 

(Position 3): Short 30,000 11 Shares of 

XYZ stock 

(Position 4): Long 300 call contracts of 

XYZ with a May 2020 expiration at 

a $100 strike price 

After purchasing Position 4, MM1 

will have effectively paired off Positions 

2 and 3, and hedged against any 

previous risk of the XYZ stock price 

going over $100 per share. 

Next, the Exchange proposes to make 

numerous changes to Rule 7620 to 

reduce confusion and clarify certain 

terms and conditions. 

First, the Exchange proposes to add 

language to codify that Cabinet Orders 

may only be executed on the Exchange’s 

Trading Floor in open outcry pursuant 

to Rule 7600 series. This language is 

intended to clarify that cabinet orders 

may execute in open outcry like all 

other orders execute in open outcry, in 

accordance with the order allocation, 

priority, and execution rules applicable 

to Qualified Open Outcry (‘‘QOO’’) 

Orders. The Exchange notes, the 

proposed changes do not substantively 

alter the manner in which cabinet 

orders may trade currently. The 

Exchange believes clarifying that 

cabinet orders follow the same trading 

floor rules as all other open outcry 

orders will simplify the rules of cabinet 

orders for Participants, making the rules 

for cabinet transactions easier to follow 

and understand. The Exchange notes 

this part of the proposal is similar to 

Cboe’s cabinet order rule.12 In addition, 

as described in further detail below, 

Participants will no longer be required 

to conduct cabinet trades through a 

manual process which includes filling 

out and submitting forms to the 

Exchange. 

In addition, the Exchange believes the 

proposal, as discussed herein, would 

make clear that the split-price priority 

provisions within Rule 7600 series will 

apply to cabinet trades in open outcry.13

The Exchange believes that expressly 

including that split-price priority 

provisions will apply to open outcry 

cabinet trading would clarify to 

Participants that this functionality is 

available on the Exchange. The 

Exchange believes not offering splitprice functionality for cabinet orders 

unnecessarily limits the ability of 

market participants to manually trade 

cabinet orders on the floor. In addition, 

restricting split-pricing for cabinet 

trades would unreasonably restrict 

86612 Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Notices 

14See Securities and Exchange Act Release No. 

34–68128 (November 1, 2012), 77 FR 66888 

(November 7, 2012) (SR–NYSEMKT–2012–55) 

(noticed by the Commission for immediate 

effectiveness). NYSEMKT noted that ‘‘neither CBOE 

nor PHLX have a similar restriction [for split-price 

priority] on cabinet trades, and allow for split-price 

priority for cabinet trades on the trading floor.’’ 

NYSEMKT cited to the prevailing Cboe and Phlx 

rules at the time, (specifically CBOE Rules 6.54 and 

6.47 and PHLX Rule 1059) and emphasized that 

‘‘[s]plit-price priority [was] available for open outcry trading on both CBOE and PHLX, with no 

restriction for cabinet trades.’’ Cboe Rule 6.54 was 

modified to the current rule text and moved to Cboe 

Rule 5.12. See Securities and Exchange Act Release 

No. 86994 (September 17, 2019), 84 FR 49774 

(September 23, 2019) (SR–CBOE–2019–058). In 

Cboe’s SR–CBOE–2019–058 rule filing, Cboe noted 

the rule change would not ‘‘substantively alter the 

manner in which cabinet orders may trade,’’ and 

stated that cabinet orders would execute ‘‘in 

accordance with the order allocation, priority and 

execution rules . . . which is substantially similar 

to how cabinet trades currently function.’’ Cboe’s 

Cabinet Orders rule was subsequently relocated 

from Rule 5.12 to Rule 5.85(h), where it is currently 

located. See Securities and Exchange Act Release 

No. 87224 (October 4, 2019), 84 FR 54652 (October 

10, 2019) (SR–CBOE–2019–081). The Exchange 

believes split-price priority continues to be 

available for cabinet trading on Cboe’s trading floor. 

See also Phlx Options 8 Section 33. 

Accommodation Transactions and Options 8 

Section 25(a)(2) (split-price priority). Per Phlx 

rulebook, split-price priority ‘‘applies to the 

allocation of orders on the Trading Floor’’ and 

cabinet trading (accommodation transactions) are 

conducted only by Floor Brokers on Phlx’s trading 

floor. While the above exchanges do not explicitly 

state in their rule text that split-price functionality 

is available for cabinet orders, as detailed above, 

NYSE American/NYSEMKT amended its cabinet 

trading rule text to specifically allow for split-price 

priority for open outcry cabinet trades because 

other exchanges provide for this capability. 

15See supra note 4. 16See Cboe Rule 5.85(h) (stating that ‘‘[c]abinet 

orders may only execute after yielding priority to 

all closing cabinet orders represented by the trading 

crowd). 17BOX Rule 7580(e)(1) requires Floor Brokers to 

contemporaneously upon receipt of a single or 

double-sided orders, and prior to the announcement 

of such order in the trading crowd, record specific 

information of the order onto the Floor Broker’s 

order entry mechanism. 

18See supra note 6. 

19 15 U.S.C. 78f(b). 

20 15 U.S.C. 78f(b)(5). 

business by not making available certain 

prices which are available on other 

competing exchanges. Split-price 

priority for open outcry cabinet trades 

provides an extra incentive for market 

participants to both price improve and 

facilitate the efficient trading of options 

contracts that are worthless or not 

actively traded. The Exchange notes that 

at least one other competing options 

exchange (NYSE American LLC ‘‘NYSE 

American’’ f/k/a NYSE MKT LLC) 

amended their rule text to explicitly 

allow for split-price priority provisions 

to apply to cabinet trading.14 In the 

same manner, the Exchange now seeks 

to extend split-price priority to open 

outcry cabinet trades in order to have 

substantially similar rules to those of 

other exchanges with trading floors. The 

Exchange believes this will not only 

enable greater competition among 

competing exchanges that already offer 

this functionality, but also will align the 

Exchanges rules with competitors and 

thereby promotes efficiency and will 

help reduce any potential for investor 

confusion. The Exchange notes current 

Rule 7620 provides that cabinet trading 

shall be conducted in accordance with 

other Exchange rules except as 

otherwise provided within Rule 7620, 

which states, in part, that Exchange 

Rule 7050 (Minimum Trading 

Increments) shall not apply to orders 

placed in the cabinet. Accordingly, the 

Exchange believes there is no conflict 

between the Exchange’s current rules 

and the proposed rule change. 

The Exchange then proposes to 

specify that option classes participating 

in the Penny Interval Program, pursuant 

to Rule 7260, are not allowed as cabinet 

orders. Penny Interval classes may 

already trade in minimum increments of 

$0.01, therefore, the proposed change 

adds clarity to the rule text, and ensures 

that the cabinet order rule accounts for 

other Exchange Rules that provide for 

trading in penny classes. The Exchange 

notes the exclusion of penny classes is 

consistent with cabinet order rules on at 

least one other exchange.15

The Exchange then proposes to add 

language that Floor Brokers representing 

bids and offers for cabinet trades must 

first yield priority to all existing closing 

cabinet orders represented on the 

Trading Floor. The Exchange believes 

including this language makes clear that 

cabinet orders (whether opening or 

closing) must yield priority to any 

existing closing cabinet orders. For 

example, if a pre-existing closing 

cabinet order is being represented in the 

trading crowd, and another closing 

cabinet order is submitted, the preexisting closing cabinet order will take 

priority over the new closing cabinet 

order. The Exchange notes this priority 

process is followed on at least one other 

options exchange.16

Next, as noted above, the Exchange 

proposes to remove language in current 

subsection (b) which requires Floor 

Brokers to use designated transaction 

forms to record cabinet transactions and 

remove the language that states Rule 

7580(e)(1) does not apply to cabinet 

orders. The Exchange proposes to have 

cabinet orders systematized by Floor 

Brokers when they record the cabinet 

orders in their order entry mechanisms 

prior to representation on the 

Exchange’s Trading Floor for execution 

in open outcry. Specifically, cabinet 

orders, like all other QOO Orders, will 

be subject to the order recordation rule 

under BOX rule 7580(e)(1).17 The 

Exchange believes this will aid Floor 

Brokers in executing cabinet 

transactions more efficiently and help 

create an electronic audit trail for 

cabinet orders represented and executed 

by Floor Brokers on the Exchange’s 

Trading Floor. 

The Exchange then proposes to 

remove the specific scenarios laid out in 

current subsections (c) through (e). The 

Exchange believes not removing these 

examples, which describe the limited 

circumstances in which opening orders 

may be matched with a cabinet order 18

would create investor confusion as to 

the types of cabinet orders allowed on 

the BOX Trading Floor. As previously 

discussed, the Exchange’s current 

proposal would allow all cabinet trades 

(opening or closing) to occur via open 

outcry pursuant to Exchange Rule 7600 

series, therefore current subsections (c) 

through (e) would be unnecessary and 

potentially confusing. The Exchange is 

also proposing to remove the definition 

of ‘‘opening order’’ in the current rule 

because the Exchange no longer intends 

to limit the meaning of the term to 

contra-side opening orders as a response 

to customers. The Exchange’s proposal 

allows for initiating and contra-side 

opening orders. 

Finally, the Exchange proposes to 

remove the requirement for Participants 

to submit a cabinet transaction form 

under Rule 7620(f). As previously 

noted, the Exchange is proposing to 

remove cabinet transaction forms in 

order to have cabinet orders be recorded 

and executed like all other QOO Orders 

on the Exchange’s Trading Floor. 

Therefore, Floor Brokers manually 

submitting cabinet transaction forms to 

the Exchange will no longer be 

necessary. The Exchange believes that 

harmonizing cabinet orders and QOO 

Orders will avoid any potential investor 

confusion by providing consistency in 

order and trade recordation on the 

Trading Floor. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the 

Act,19 in general, and Section 6(b)(5) of 

the Act,20 in particular the Exchange 

believes the proposed rule change 

promotes just and equitable principles 

of trade, and by supplying market 

participants with an additional risk 

management tool will remove 

impediments to and perfect the 

mechanism of a free and open market 

and national market system, and in 

general, protects investors and the 

Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Notices 86613 

21See supra note 6. 

22See supra note 4. 

23See supra note 14. 

24See supra note 4 and NYSEArca Rule 6.80– 

O(b)(5) (noting bids or offers on orders to open or 

close for the accounts of Market Makers, customers 

or firms may be made at $1 per option contract, but 

such orders must yield to all orders in the cabinet). 

25See supra note 4. 

public interest. Additionally, the 

Exchange believes the proposed rule 

change is consistent with Section 6(b)(5) 

requirement that the rules of an 

exchange not be designed to permit 

unfair discrimination between market 

participants because opening cabinet 

trades are available to all market 

participants and must respect the 

priority of closing cabinet orders. The 

Exchange believes opening cabinet 

trades would essentially function as an 

alternative means by which Participants 

could avoid unwanted position 

exposure. In addition, the Exchange 

notes that opening cabinet trades are not 

profitable for Participants, but can be 

used to change a Participant’s risk 

profile. The Exchange believes that the 

proposed change is in line with the 

primary purpose of cabinet trading 

because closing cabinet orders allow 

market participants to close worthless 

positions—that carry some form of 

diminutive risk—and opening cabinet 

trades will similarly enable Participants 

to submit orders in not actively traded 

series to effectively close out 

(synthetically) the risk of current 

positions. As such, the Exchange 

believes allowing market participants to 

execute both opening and closing 

cabinet positions is consistent with the 

Act. 

As stated above, the Exchange 

believes offering opening cabinet orders 

will allow Market Makers (and other 

market participants) to more effectively 

manage portfolio risk. The Exchange 

believes enhancing the abilities of 

market participants to reduce risk 

exposure will remove impediments to, 

and perfect the mechanisms of, a free 

and open market and a national market 

system by enabling market participants 

to better manage risk and continue to 

further participate in the market. 

The Exchange believes the proposed 

rule promotes just and equitable 

principles of trade by accepting opening 

cabinet orders, only if they yield 

priority to existing closing cabinet 

orders represented in the trading crowd. 

This order of precedence will ensure 

that cabinet orders remain available for 

all market participants wishing to effect 

closing transactions, but if no such 

orders exist, the Exchange will then 

allow for opening cabinet trades to 

execute. Additionally, the Exchange 

believes the proposed rule change is 

consistent with the requirement that the 

rules of an exchange not be designed to 

permit unfair discrimination between 

Participants. Specifically, the proposed 

rule change is not unfairly 

discriminatory because the priority 

process respects the primacy of closing 

cabinet orders which the Exchange 

anticipates would be executed by a 

broader range of market participants. 

The Exchange believes amending the 

rule text to remove the trading 

scenarios 21 in the current rule text that 

will no longer apply and stating that all 

cabinet orders will execute in open 

outcry pursuant to Rule 7600 fosters 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities. The Exchange 

believes clarifying that cabinet trades 

will follow the pre-existing rules of 

QOO Orders adds greater transparency 

and consistency to the Exchange’s 

Trading Floor rules. The Exchange 

believes that the proposed changes, 

overall, will make the cabinet trading 

rules easier to follow and understand. 

The Exchange believes removing the 

requirement for Participants to submit 

manual cabinet transaction forms, and 

instead have Floor Brokers follow the 

electronic order recordation rule of the 

Exchange will reduce the administrative 

burden on Floor Brokers and therefore 

removes impediments to and perfects 

the mechanisms of a free and open 

market. Also, because cabinet trades 

will be reported and processed like all 

other open outcry trades, market 

participants will not be impacted nor 

have to take on any additional reporting 

or processing burden. In addition, the 

Exchange believes that the proposal is 

designed to prevent fraudulent and 

manipulative acts and practices because 

having an electronic audit trail of all 

cabinet orders will provide a complete 

and accurate record of cabinet 

transactions and better facilitate 

regulatory oversight. The Exchange 

notes at least one other options 

exchange systematizes cabinet orders 

and allows cabinet orders to execute 

pursuant to open outcry rules.22

The Exchange believes allowing for 

split-pricing priority provisions 

(pursuant to Rule 7600) to apply to 

cabinet trades promotes just and 

equitable principles of trade, and 

removes impediments to and perfects 

the mechanisms of a free and open 

market and national market system 

because it will align the Exchange’s 

Rules with the rules and trading 

practices of other options exchanges 

that currently conduct cabinet trading 

on their respective trading floors.23 The 

Exchange believes providing market 

participants the ability to have splitprice priority when trading cabinet 

orders will help facilitate the trading of 

options positions that are worthless or 

not actively traded. The Exchange 

believes the proposal is consistent with 

the protection of investors and the 

public interest because allowing for 

split-price priority for cabinet trading 

should lead to more aggressive quoting 

by Floor Participants, which in turn 

may lead to better executions for all 

market participants. Specifically, a 

Floor Participant might be willing to 

trade at a better price for a portion of an 

order if they were assured of trading 

with the balance of the order at the next 

best price increment. As a result, Floor 

Brokers representing orders in the 

trading crowd might receive betterpriced executions. 

Lastly, the Exchange believes 

permitting opening cabinet transactions 

that yield priority to existing closing 

cabinet orders aligns the Exchange’s 

rule with at least two other exchanges 

with trading floors.24 Therefore, the 

Exchange believes this proposal offers 

more consistency with floor trading 

across market centers which helps avoid 

potential investor confusion, thereby 

removing impediments to and 

perfecting the mechanisms of a free and 

open national market system and 

protecting investors and the public 

interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. As indicated 

above, the Exchange notes that the rule 

is being proposed as a competitive 

response to the rules of another 

exchange.25 The Exchange believes that 

allowing for additional liquidations at 

$1 per option contract would allow 

market participants to better manage 

risk and hedge unwanted exposure. The 

Exchange believes this promotes 

competition amongst exchanges because 

market participants will have an 

additional venue in which they can 

execute opening cabinet order 

transactions. In addition, the Exchange 

believes allowing opening cabinet 

executions from Market Makers will 

provide Market Makers with an 

additional risk management tool while 

trading on BOX, and encourage them to 

direct more general order flow to the 

Exchange, which may ultimately benefit 

all Participants. Furthermore, the 

Exchange does not believe that the 

proposed rule change will impose any 

86614 Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Notices 

26See supra note 14. 27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

burden on intramarket competition 

because the proposal simply offers an 

additional way for all market 

participants to synthetically liquidate 

unwanted risk exposure, and respects 

the priority of closing cabinet orders. In 

addition, the Exchange does not believe 

the proposed rule change will impose 

any burden on intramarket competition 

because the proposed cabinet orders 

will be available to all market 

participants to execute in open outcry in 

the same manner as they are able to 

execute any other QOO Orders. 

Furthermore, the Exchange believes that 

allowing for split-pricing priority to 

apply to cabinet trades is procompetitive as it will allow the 

Exchange to offer its Participants pricing 

abilities which are currently available 

on competing exchanges 26 As such, the 

Exchange does not believe that the 

proposed rule change will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

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 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 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the 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 proposed rule 

change 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 rule-comments@

sec.gov. Please include File Number SR– 

BOX–2020–38 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 

Number SR–BOX–2020–38. 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 also will 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 

Number SR–BOX–2020–38 and should 

be submitted on or before January 21, 

2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2020–28890 Filed 12–29–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90774; File No. SR– 

NASDAQ–2020–092] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Extend 

the Expiration Date of the Temporary 

Amendments Set Forth in SR– 

NASDAQ–2020–076 Concerning Video 

Conference Hearings 

December 22, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on December 17, 2020, The Nasdaq 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under paragraph (f)(6) of Rule 

19b–4 under the Act,3 which renders 

the proposal effective upon receipt of 

this filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to extend the 

expiration date of the temporary 

amendments in SR–NASDAQ–2020–076 

from December 31, 2020 to April 30, 

2021. The proposed rule change would 

not make any changes to the text of the 

Exchange rules. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, 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