Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Notices 26719 

15 15 U.S.C. 78s(b)(3)(A)(iii). 

16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

17 17 CFR 240.19b–4(f)(6). 

18 17 CFR 240.19b–4(f)(6)(iii). 

19For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 15 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.16

A proposed rule change filed under 

Rule 19b–4(f)(6) 17 normally does not 

become operative prior to 30 days after 

the date of the filing. However, Rule 

19b–4(f)(6)(iii) 18 permits the 

Commission to 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 proposed 

rule change may become effective and 

operative immediately upon filing. The 

Exchange states that waiver of the 

operative delay will allow the Exchange 

to correct the Nasdaq MRX Top Quote 

Feed and update its rules immediately 

regarding order and execution 

information offered on MRX. The 

Exchange further states that it believes 

the waiver will further the protection of 

investors and the public interest 

because it will provide greater 

transparency as to the Nasdaq MRX Top 

Quote Feed as well as trade detail 

available to market participants. 

Further, the Exchange states that 

memorializing TradeInfo will provide 

Members with greater information 

concerning a Member’s executions on 

MRX and make its availability 

transparent. The Commission believes 

that waiver of the 30-day operative 

delay is consistent with the protection 

of investors and the public interest. 

Therefore, the Commission hereby 

waives the 30-day operative delay and 

designates the proposed rule change as 

operative upon filing.19

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

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– 

MRX–2018–16 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–MRX–2018–16. 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–MRX–2018–16 and should 

be submitted on or before June 29, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–12318 Filed 6–7–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83367; File No. SR–BOX– 

2018–14] 

Self-Regulatory Organizations; BOX 

Options Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Adopt Rules Governing the Trading of 

Complex Qualified Contingent Cross 

and Complex Customer Cross Orders 

June 4, 2018. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on May 22, 

2018, BOX Options Exchange LLC (the 

‘‘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 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to adopt rules 

governing the trading of Complex 

Qualified Contingent Cross and 

Complex Customer Cross Orders. 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 


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3See https://boxoptions.com/assets/RC-2017-11- 

CC_QCC_cNBBO-July-10-Implementation-1.pdf. 

4See MIAX Rules 518(b)(5), 515(h)(3), 515(h)(4) 

and 518(b)(6). 

5See SR–BOX–2018–13. 

6Proposed Rule 7240(b)(4)(iii) is based on MIAX 

Rule 518(b)(5). 

7Proposed Rule 7110(c)(7) is based on MIAX Rule 

515(h)(3). 

8The term ‘‘cBBO’’ means the best net bid and 

offer price for a Complex Order Strategy based on 

the BBO on the BOX Book for the individual 

options components of such Strategy. See Rule 

7240(a)(1). 

9The term ‘‘Complex Order Book’’ means the 

electronic book of Complex Orders maintained by 

the BOX Trading Host. See Rule 7240(a)(8). 

10The term ‘‘cNBBO’’ means the best net bid and 

offer price for a Complex Order Strategy based on 

the NBBO for the individual options components of 

such Strategy. See Rule 7240(a)(3). 

11Rule 7140(b) prevents an Options Participant 

executing agency orders to increase its economic 

gain from trading against the order without first 

giving other trading interest on BOX an opportunity 

to trade with the agency order pursuant to Rule 

7150 (Price Improvement Period), Rule 7245 

(Complex Order Price Improvement Period) or Rule 

7270 (Block Trades). However, the Exchange 

recognizes that it may be possible for an Options 

Participant to establish a relationship with a 

Customer or other person (including affiliates) to 

deny agency orders the opportunity to interact on 

BOX and to realize similar economic benefits as it 

would achieve by executing agency orders as 

principal. It will be a violation of this Rule for an 

Options Participant to circumvent this Rule by 

providing an opportunity for a Customer or other 

person (including affiliates) to execute against 

agency orders handled by the Options Participant 

immediately upon their entry into the Trading Host. 

See IM–7140–1. 

12See MIAX Rules 515(h)(3) and 518(b)(5). 

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 

The Exchange is proposing rules that 

will make existing functionality 

available to additional order types on 

BOX. Specifically, the Exchange is 

proposing rules to codify Complex 

Customer Cross Orders and Complex 

Qualified Contingent Cross (‘‘QCC’’) 

Orders on the Exchange.3 The Exchange 

notes that the proposed changes are 

similar to the rules of another 

exchange.4 In addition, the Exchange is 

proposing to expand certain Complex 

Order protections to the newly codified 

QCC Order and Complex Customer 

Cross Orders.5

Complex Customer Cross Orders 

First, the Exchange is proposing to 

add text related to Complex Customer 

Cross Orders. Proposed Rule 

7240(b)(4)(iii) defines a Complex 

Customer Cross Order as a type of 

Complex Order which is comprised of 

one Public Customer Complex Order to 

buy and one Public Customer Complex 

Order to sell (the same strategy) at the 

same price and for the same quantity.6

The Exchange uses the same crossing 

mechanism for the processing and 

execution of Complex Customer Cross 

Orders that is used for Customer Cross 

Orders in the regular market. 

Accordingly, proposed Rule 7110(c)(7) 

shall govern the trading of Complex 

Customer Cross Orders, as defined in 

Rule 7240(b)(4)(iii), on BOX. Proposed 

Rule 7110(c)(7) describes the execution 

price requirements that are specific to 

Complex Customer Cross Orders.7

Specifically, Complex Customer Cross 

Orders are automatically executed upon 

entry provided that the execution (i) is 

at least $0.01 better than (inside) the 

cBBO 8 and any Public Customer 

Complex Order on the Complex Order 

Book; 9 (ii) is at or better than any nonPublic Customer Complex Order on the 

Complex Order Book; and (iii) is at or 

between the cNBBO.10 The purpose of 

the requirement that the execution must 

be at least $0.01 better than the cBBO is 

to ensure that there is no interference 

between the regular and complex 

markets. The purpose of the 

requirement that the execution must be 

at least $0.01 better than any Public 

Customer Complex Order on the 

Complex Order Book is to ensure that 

the Complex Customer Cross Order does 

not trade in front of any resting Public 

Customer Complex Orders. The purpose 

of the requirement that the Complex 

Customer Cross Order be executed at or 

between the cNBBO is to ensure that net 

execution price is within the best net 

price available in the market and is in 

line with the requirement that simple 

Customer Cross Orders must execute at 

or within the NBBO. 

The system will reject a Complex 

Customer Cross Order if, at the time of 

receipt of the Complex Customer Cross 

Order, the strategy is subject to an 

ongoing auction (including COPIP, 

Facilitation, and Solicitation auctions) 

or there is an exposed order on the 

strategy pursuant to Rule 7240(b)(3)(B). 

The purpose of this provision is to 

maintain an orderly market by avoiding 

the execution of Complex Customer 

Cross Orders with components that are 

involved in other system functions that 

could affect the execution price of the 

Complex Customer Cross Order, and by 

avoiding concurrent processing on the 

Exchange involving the same strategy. 

Proposed Rule 7110(c)(7)(i) states that 

Complex Customer Cross Orders will be 

automatically cancelled if they cannot 

be executed. Proposed Rule 

7110(c)(7)(ii) provides that Complex 

Customer Cross Orders may only be 

entered in the minimum trading 

increments applicable to Complex 

Orders under Rule 7240(b)(1). 

As a regulatory matter, proposed Rule 

7110(c)(7)(iii) states that IM–7140–1 

applies to the entry and execution of 

Complex Customer Cross Orders.11

The following example illustrates the 

execution of a Complex Customer Cross 

Order: 

Example 1—Execution of a Complex 

Customer Cross Order 

BOX Leg A Book: 6.00–6.50 

BOX Leg B Book: 3.00–3.30 

Strategy: Buy A Call, Sell B Call 

The cNBBO is 2.70–3.20 

The cBBO is 3.00–3.20 

The Complex Order Book contains a Public 

Customer order to sell the strategy at 3.20. 

The Exchange receives a Complex 

Customer Cross Order representing Public 

Customers on both sides for the simultaneous 

purchase and sale of the strategy at a price 

of 3.19. 

The order price is at least $0.01 better than 

(inside) the cBBO and the Public Customer 

Complex Order on the Complex Order Book. 

Additionally, the order price is at or between 

the cNBBO. Therefore, the Complex 

Customer Cross Order is automatically 

executed upon entry. 

The Exchange notes that the proposed 

rules for Complex Customer Cross 

Orders are based on the rules of another 

exchange with certain minor 

differences.12 First, the MIAX Rule 

requires the execution price to be better 

than the best net price of a complex 

order. The proposal requires the 

execution price to be better than any 

Public Customer Complex Orders on the 

Complex Order Book and no worse than 

the price of any non-Public Customer 

Complex Orders. The Exchange believes 

this difference is minor because the 

execution price must respect the orders 

on the Complex Order Book and not 

trade ahead of Public Customer Orders 

on the Complex Order Book, which is in 

line with regular Customer Cross 


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13BOX notes that it does not have either the 

Route Timer or liquidity refresh pause features on 

the Exchange. As such, BOX is not proposing to 

include these features under the Proposal. 

14See IM–7245–2. 

15A ‘‘qualified contingent trade’’ is a transaction 

consisting of two or more component orders, 

executed as agent or principal, where: (1) At least 

one component is an NMS Stock, as defined in Rule 

600 of Regulation NMS under the Exchange Act; (2) 

all components are effected with a product or price 

contingency that either has been agreed to by all the 

respective counterparties or arranged for by a 

broker-dealer as principal or agent; (3) the 

execution of one component is contingent upon the 

execution of all other components at or near the 

same time; (4) the specific relationship between the 

component orders (e.g., the spread between the 

prices of the component orders) is determined by 

the time the contingent order is placed; (5) the 

component orders bear a derivative relationship to 

one another, represent different classes of shares of 

the same issuer, or involve the securities of 

participants in mergers or with intentions to merge 

that have been announced or cancelled; and (6) the 

transaction is fully hedged (without regard to any 

prior existing position) as a result of other 

components of the contingent trade. See IM–7110– 

2. 

16Proposed Rule 7240(b)(4)(iv) is based on MIAX 

Rule 518(b)(6). 

17See Securities Exchange Act Release No. 80661 

(May 11, 2017), 82 FR 22682 (May 17, 2017) (SR– 

BOX–2017–14). The Exchange notes that regular 

QCC Orders on BOX are allowed to execute 

automatically on entry without exposure provided 

the execution: (i) Is not at the same price as a Public 

Customer Order on the BOX Book; and (2) is at or 

between the NBBO. 

18Proposed Rule 7110(c)(8) is based on MIAX 

Rule 515(h)(4). 

19See Securities Exchange Act Release No. 54389 

(August 31, 2006), 71 FR 52829 (September 7, 2006) 

(‘‘Original QCT Exemption’’). 

20The Exchange represents that QCTs will be 

subject to existing trading surveillance 

administered by the Financial Industry Regulatory 

Authority (‘‘FINRA’’) on behalf of the Exchange, 

which are designated to detect violations of 

Exchange rules and applicable federal securities 

laws. The Exchange believes the existing 

surveillance of QCTs is sufficient to ensure 

compliance with the proposed rule. 

Orders. Pursuant to Rule 7110(c)(5) a 

Customer Cross Order must execute at a 

price that is at or between the best bid 

and offer on BOX and is not at the same 

price as a Public Customer Order on the 

BOX Book. Additionally, the Exchange 

is proposing to have the execution price 

be within the cNBBO, which MIAX does 

not provide. The Exchange believes this 

difference is minor because the 

Exchange is simply ensuring that the 

execution price respect the best net 

prices available in the market. 

Additionally, similarly to the above, 

regular Complex Cross Orders may not 

trade through the NBBO. 

Next, although both the proposed 

Rule and MIAX’s Rule require the 

execution to be at least $0.01 better than 

best price based on orders on the regular 

books, MIAX includes non-displayed 

trading interest when determining the 

best price based on the regular books, 

which the Exchange is not proposing 

because the Exchange does not have 

non-displayed interest. 

Lastly, MIAX rejects a Complex 

Customer Cross Order if, at the time of 

receipt, any component of the strategy is 

subject to a PRIME Auction, a Route 

Timer, or liquidity refresh pause. The 

Exchange is not proposing the same 

conditions.13 With respect to not 

rejecting when a component is subject 

to an auction, the Exchange notes that 

this approach is in line with the 

treatment of a COPIP when there is an 

ongoing PIP on a component of the 

Complex Order. Specifically, the 

Exchange will accept Complex Orders 

designated for the COPIP where there is 

a PIP on an individual component.14

Further, in order to ensure orderly 

markets involving multiple Complex 

Orders with common components, the 

Exchange is proposing additional 

circumstances in which a Complex 

Customer Cross Order will be rejected, 

specifically, when there is an exposed 

order on the strategy pursuant to rule 

7240(b)(4)(iii), or there is an ongoing 

Facilitation or Solicitation auction on 

the strategy. 

Complex QCC Orders 

Next, the Exchange is proposing to 

add text related to Complex QCC 

Orders. Pursuant to proposed Rule 

7240(b)(4)(iv), a Complex QCC Order is 

comprised of an originating Complex 

Order to buy or sell where each 

component is at least 1,000 contracts 

that is identified as being part of a 

qualified contingent trade 15 coupled 

with a contra-side Complex Order or 

orders totaling an equal number of 

contracts.16

The Exchange uses the same crossing 

mechanism for the processing and 

execution of Complex QCC Orders that 

is used for QCC Orders in the regular 

market.17 Accordingly, proposed Rule 

7110(c)(8) shall govern trading of 

Complex QCC Orders, as defined in 

Rule 7240(b)(4)(iv), on BOX. Proposed 

Rule 7110(c)(8) describes the execution 

price requirements that are specific for 

Complex QCC Orders.18 Specifically, 

Complex QCC Orders are automatically 

executed upon entry provided that the 

execution (i) is not at the same price as 

a Public Customer Complex Order; (ii) 

is at least $0.01 better than (inside) the 

cBBO; (iii) is at or better than any nonPublic Customer Complex on the 

Complex Order Book; and (iv) each 

option leg executes at or between the 

NBBO. The purpose of the requirement 

that the execution must be at least $0.01 

better than the cBBO is to ensure that 

there is no interference between the 

regular and complex markets. The 

purpose of the requirement that the 

execution must not be at the same price 

as any Public Customer Complex Order 

on the Complex Order Book is to ensure 

that the Complex Customer Cross Order 

does not trade in front of any resting 

Public Customer Complex Orders. The 

purpose of the requirement that the 

individual options legs of the Complex 

QCC Order be executed at or between 

the NBBO is to ensure that the 

execution price of each option leg is 

within the best price available in the 

market and is in line with the 

requirement that simple QCC Orders 

must execute at or within the NBBO. 

The system does not consider the 

NBBO price for the stock component 

because the Exchange does not execute 

the stock component; the Exchange 

executes the option components at a net 

price and ensures that, among other 

things, the execution price of (i) the 

strategy is at least $0.01 better than the 

cBBO; and (ii) each option leg is at or 

between the NBBO. 

The Exchange believes the proposed 

Complex QCC pricing methodology 

aligns with the Qualified Contingent 

Trade (‘‘QCT’’) Exemption, as defined 

below. The parties to a contingent trade 

are focused on the spread or ratio 

between the transaction prices for each 

of the component instruments (i.e., the 

net price of the entire contingent trade), 

rather than on the absolute price of any 

single component. Pursuant to the 

requirements of the NMS QCT 

Exemption, the spread or ratio stands 

regardless of the market prices of the 

individual orders at their time of 

execution. As the Commission noted in 

the Original QCT Exemption, ‘‘the 

difficulty of maintaining a hedge, and 

the risk of falling out of hedge, could 

dissuade participants from engaging in 

contingent trades, or at least raise the 

cost of such trades.’’ Thus, the 

Commission found that, if each stock leg 

of a qualified contingent trade were 

required to meet the trade-through 

provisions of Rule 611 of Regulation 

NMS, such trades could become too 

risky and costly to be employed 

successfully and noted that the 

elimination or reduction of this trading 

strategy potentially could remove 

liquidity from the market.19 This is also 

true for QCC Orders in options, and thus 

the Exchange believes that its proposal 

is consistent with the Original QCT 

Exemption.20

The system will reject a Complex QCC 

Order if, at the time of receipt of the 

Complex QCC Order, the strategy is 

subject to an ongoing auction (including 

COPIP, Facilitation, and Solicitation 


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21See MIAX Rules 515(h)(4) and 518(b)(6). 

22See Rule 7240(b)(2)(1)(i). In addition, Complex 

Qualified Open Outcry Orders may be executed at 

a price without giving priority to equivalent bids or 

offers in the individual series legs on the initiating 

side, provided at least one options leg betters the 

corresponding bid or offer on the BOX Book by at 

least one minimum trading increment (i.e., one 

cent) as set forth in Rule 7240(b)(1). See 7600(c). 

23Assume for the example that the cBBO is 2.00– 

5.00. The 2.00 bid is comprised of the Public 

Customer Orders on the individual leg books and 

5.00 is a resting Complex Order. 

24As outlined in the proposal, this is consistent 

with how the system currently handles the 

interaction between Complex Orders and the 

individual leg Books. The Exchange notes that the 

same behavior occurs regardless of the account of 

the order on the individual leg Books. For example, 

if the orders on the leg Books were for the account 

of a broker-dealer, the execution price of the 

Complex QCC would still need to be $0.01 better 

than the cBBO. 

25The cBBO would now be 2.01–5.00. 

26BOX notes that it does not have either the 

Route Timer or liquidity refresh pause features on 

the Exchange. As such, BOX is not proposing to 

include these features under the Proposal. 

27See IM–7245–2. 

auctions) or there is an exposed order 

on the strategy pursuant to Rule 

7240(b)(3)(B). The purpose of this 

provision is to maintain an orderly 

market by avoiding the execution of 

Complex QCC Order with components 

that are involved in other system 

functions that could affect the execution 

price of the Complex QCC Order, and by 

avoiding concurrent processing on the 

Exchange involving the same strategy. 

Proposed Rule 7110(c)(8)(i) states that 

Complex QCC Orders will be 

automatically cancelled if they cannot 

be executed. Proposed Rule 

7110(c)(8)(ii) provides that Complex 

QCC Orders may only be entered in the 

minimum trading increments applicable 

to Complex Orders under Rule 

7240(b)(1). 

The following example illustrates the 

execution of a Complex QCC Order: 

Example 2—Execution of a Complex QCC 

Order 

BOX Leg A Book: 6.00–6.60 

BOX Leg B Book: 3.00–3.30 

Leg A NBBO: 6.00–6.60 

Leg B NBBO: 3.00–3.30 

Strategy: Buy A Call, Sell B Call 

The cBBO is 2.70–3.30 

The cNBBO is 2.70–3.30 

The Complex Order Book contains a 

broker-dealer order to sell the strategy at 

3.29. 

The Exchange receives a Complex 

QCC Order for the simultaneous 

purchase and sale of the strategy at a net 

price of 3.29, 1,000 times. Since the 

order can be executed at or between the 

NBBO for each leg of the strategy, is not 

at a worse price than the non-Public 

Customer Order on the Complex Order 

Book, is at least $0.01 better than the 

cBBO and the order size is met, the 

Complex QCC Order is automatically 

executed upon entry. 

The proposed rules governing 

Complex QCC Orders are based on the 

rules of another exchange with certain 

differences.21 First, MIAX requires the 

individual legs be executed not at the 

same price as a Priority Customer Order 

on the book. The Exchange does not 

propose to include this provision of 

MIAX’s rule as the BOX system handles 

Complex Orders differently. 

Specifically, Complex Orders on BOX 

are executed at a net debit or credit, and 

therefore it is understandable that the 

execution parameters would be 

controlled by the net price of the 

strategy rather than the individual legs. 

A Complex Order may execute as a net 

credit or debit with one other 

Participant; provided, the price of at 

least one leg of the Complex Order must 

trade at a price that is better than the 

corresponding bid or offer in the 

marketplace by at least one minimum 

trading increment (i.e., one cent) as set 

forth in Rule 7240(b)(1).22 As such, and 

to stay in line with how Complex 

Orders are handled on BOX, the 

Exchange is proposing that the net 

execution price of the Complex QCC 

Order be better than the cBBO. As 

discussed above, this is in line with the 

approach to Complex Orders in general 

on the Exchange. Further, the Exchange 

believes it is important to respect all 

interest in the regular Book and not only 

Public Customer interest, as is the case 

with MIAX, which is why the Exchange 

requires the Complex QCC Order to be 

better than the cBBO. 

To illustrate this, assume a Complex 

QCC Order at $2.01 is received by the 

system for strategy A+B. There is a 

Public Customer Order to buy leg A on 

the Book for $1.00 and a Public 

Customer Order to buy leg B on the 

Book for $1.00. Under the proposal, the 

Complex QCC Order would be accepted 

by the system because the execution 

price is at least $0.01 better than the 

cBBO.23 The Exchange does not believe 

that this result harms the resting Public 

Customer Orders.24 Specifically, given 

the execution price of $2.01, the sell 

side of the Complex QCC Order could 

not interact with the resting Public 

Customer Orders because there is no 

interest on the individual legs that, 

when combined, equal the execution 

price of $2.01. If, however, in addition 

to the Public Customer order to buy leg 

B at $1.00 there is a non-Public 

Customer order to buy leg B at $1.01, 

the Complex QCC Order at $2.01 would 

be rejected. This is because the 

execution price is no longer better than 

the cBBO.25 As such, the Public 

Customer Order on leg A is protected 

because there is interest on the 

individual leg Books that, when 

combined, equal the proposed execution 

price of the Complex QCC Order. 

Further, since the agreed upon price 

between market participants was $2.01, 

it would be detrimental to require the 

order to be executed at a worse price 

than is necessary. While the BOX 

proposal does not have the same price 

protection for Public Customers as 

MIAX Complex QCC rule, the Exchange 

believes the proposal, which provides a 

level of price protection to all 

Participants, remains consistent with 

the Act. 

The Exchange is proposing the 

additional requirements that the 

execution price is not at the same price 

as a Public Customer Complex Order 

and at or better than any non-Public 

Customer Complex Order on the 

Complex Order Book as compared to 

MIAX. The Exchange believes that these 

additional requirements are reasonable 

because the Exchange is respecting 

resting Complex Orders. 

Lastly, MIAX rejects a Complex QCC 

Order if, at the time of receipt, any 

component of the strategy is subject to 

a PRIME Auction, a Route Timer, or 

liquidity refresh pause. The Exchange is 

not proposing the same conditions.26

With respect to not rejecting when a 

component is subject to an auction, the 

Exchange notes that this approach is in 

line with the treatment of a COPIP when 

there is an ongoing PIP on a component 

of the Complex Order. Specifically, the 

Exchange will accept Complex Orders 

designated for the COPIP where there is 

a PIP on an individual component.27

Further, the Exchange notes that orders 

on the regular book are protected by the 

fact that the execution price must be at 

least $0.01 better than the cBBO. 

Additionally, in order to ensure orderly 

markets involving multiple Complex 

Orders with common components, the 

Exchange is proposing additional 

circumstances in which a Complex QCC 

Order will be rejected, specifically, 

when there is an exposed order on the 

strategy, or there is an ongoing 

Facilitation or Solicitation auction on 

the strategy. 

Lastly, the Exchange proposes to 

expand certain Complex Order 

protections to Complex QCC Orders and 

Complex Customer Cross Orders. 

Specifically, the Exchange proposes to 

amend Rule IM–7240–1(a)(5) and IM– 

7240(b)(5) to apply these price 

protection checks to Complex QCC 

Orders and Complex Customer Cross 


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Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Notices 26723 

28See Chicago Board Options Exchange, 

Incorporated (‘‘Cboe’’) Interpretations and Polices 

.08(c) and (g) to Rule 6.53C. 

29 15 U.S.C. 78f(b). 

30 15 U.S.C. 78f(b)(5). 

31See MIAX Rules 515(h)(3), 515(h)(4), 518(b)(5), 

and 518(b)(6). 

32See supra, note 4. 

Orders. The Exchange notes that another 

options exchange has similar price 

checks.28

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),29 in general, and Section 6(b)(5) 

of the Act,30 in particular, in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest. 

The proposal to amend Rules 7110 

and 7240 to codify rules covering 

Complex Customer Cross and Complex 

QCC Orders is consistent with Section 

6(b)(5) of the Act because this proposal 

promotes just and equitable principles 

of trade and protects investors and the 

public interest by providing increased 

opportunities for the execution of 

Complex Orders. The Exchange believes 

that the proposed Complex Customer 

Cross and Complex QCC Rules will 

benefit Participants and the marketplace 

as a whole by adopting rules that allow 

for the trading of these types of orders 

on the Exchange. The Exchange believes 

the proposed rules for Complex 

Customer Cross and Complex QCC 

Orders remove impediments to and 

perfects the mechanism of a free and 

open market and a national market 

system and will result in more efficient 

trading and enhance the likelihood of 

the Complex Orders executing at the 

best prices by providing additional 

order types resulting in potentially 

greater liquidity available for trading on 

the Exchange. 

The proposed rule change will 

provide rules that make existing 

functionality available to additional 

order types. Providing rules that make 

Customer Cross and QCC available for 

Complex Orders removes impediments 

to and perfects the mechanisms of a free 

and open market and a national market 

system because Participants will be 

given additional ways in which they can 

execute Complex Orders. 

The proposed rule change will protect 

investors and the public interest by 

assuring the existing priority and 

allocation rules applicable to the 

processing and execution of Customer 

Cross Orders, QCC Orders, and Complex 

Orders remains consistent with the 

processing and execution of these order 

types, unless otherwise specifically set 

forth in the rules. 

The Exchange further believes that the 

proposed methodology for the execution 

of Complex QCC Orders without 

consideration of the NBBO of the stock 

component is consistent with the QCT 

Exemption. As stated above, the QCT 

Exemption provides an exception for 

the stock leg of qualified contingent 

trades from trade-through requirements. 

Therefore, the system considers the 

NBBO of the options legs of the 

Complex QCC Order, and not the NBBO 

for the stock component, in calculating 

the pricing requirement for Complex 

QCC Orders. 

The system does not consider the 

NBBO price for the stock component 

because the Exchange does not execute 

the stock component; the Exchange 

executes the option components at a net 

price and ensures that the net execution 

price for the strategy (i) is at least $0.01 

better than the cBBO; (ii) is not at the 

same price as a Public Customer 

Complex Order; (iii) is at or better than 

any non-Public Customer Complex 

Order on the Complex Order Book; and 

(iv) each leg is at or between the NBBO. 

The Exchange believes that the 

proposal to reject a Complex Customer 

Cross or Complex QCC Order at the time 

of receipt of the order when the strategy 

is subject to an ongoing auction 

(including COPIP, Facilitation and 

Solicitation auctions), or there is an 

exposed order on the strategy, removes 

impediments to and perfects the 

mechanism of a free and open market by 

ensuring orderly markets involving 

multiple complex orders with common 

components. 

The proposed rule change to 

implement a debit/credit check for 

Complex QCC and Complex Customer 

Cross Orders is consistent with the Act. 

With the use of debit/credit checks, the 

Exchange can further assist with the 

maintenance of a fair and orderly 

market by mitigating the potential risks 

associated with Complex Orders trading 

at prices that are inconsistent with their 

strategies (which may result in 

executions at prices that are extreme 

and potentially erroneous), which 

ultimately protects investors. This 

proposed implementation of the debit/ 

credit check promotes just and equitable 

principles of trade, as it is based on the 

same general option and volatility 

pricing principles which the Exchange 

understands are used by market 

participants in their option pricing 

models. 

Additionally, the Exchange also 

believes that calculating a maximum 

price for true butterfly spreads, vertical 

spreads, and box spreads will assist 

with the maintenance of fair and orderly 

markets by helping to mitigate the 

potential risks associated with Complex 

QCC and Complex Customer Cross 

Orders trading at extreme and 

potentially erroneous prices that are 

inconsistent with particular Complex 

Order strategies. Further, the Exchange 

notes that the maximum price is 

designed to mitigate the potential risks 

of executions at prices that are not 

within an acceptable price range, as a 

means to help mitigate the potential 

risks associated with Complex Orders 

trading at prices that are inconsistent 

with their strategies, in addition to the 

debit/credit check. As such, the 

proposed rule change is designed to 

protect investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change to provide 

rules governing the trading of Complex 

Customer Cross and Complex QCC 

Orders will impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. In this regard and 

as indicated above, the Exchange notes 

that the rule is being proposed as a 

competitive response to the rules of 

another exchange.31 Additionally, the 

proposed rule change is intended to 

promote competition by adding rules for 

new order types that enable Participants 

to execute Complex Orders on the 

Exchange. The Exchange believes that 

this enhances inter-market competition 

by enabling the Exchange to compete for 

this type of order flow with other 

exchanges that have similar rules and 

functionalities in place. 

Further, the Exchange does not 

believe that the proposed Complex 

Order protections will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. In this regard and 

as indicated above, the Exchange notes 

that the rule change is being proposed 

as a competitive response to the rules of 

another exchange.32 Additionally, the 

Exchange believes the proposed rule 

change is beneficial to Participants as it 

will provide increased protections that 

will prevent the execution of certain 

Complex Orders that were entered in 


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26724 Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Notices 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

error. The Exchange believes the 

proposal is pro-competitive and should 

serve to attract additional Complex 

Orders to the Exchange. Further, the 

Exchange does not believe the proposed 

change will not impose a burden on 

intramarket competition because it is 

available to all Participants. 

For the reasons stated, 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, and the Exchange 

believes the proposed change will, in 

fact, enhance competition. 

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–2018–14 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2018–14. 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–2018–14, and should 

be submitted on or before June 29, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–12319 Filed 6–7–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83370; File No. SR–ISE– 

2018–48] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend and 

Reorganize Chapter V of the ISE 

Schedule of Fees 

June 4, 2018. 

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 May 22, 

2018, Nasdaq ISE, LLC (‘‘ISE’’ 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 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 amend and 

reorganize Chapter V of the ISE 

Schedule of Fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://ise.cchwallstreet.com/, 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 

places specified in Item IV below. The 

Exchange 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 

The Exchange proposes to amend 

Chapter V of the ISE Schedule of Fees 

to: (i) Eliminate the Table of Contents; 

(ii) retitle Section V, currently titled 

‘‘Trading Application;’’ (iii) retitle Parts 

A, B and C of Chapter V which are 

currently titled ‘‘Installation,’’ 

‘‘Software License & Maintenance’’ and 

‘‘Reserved’’ respectively; and (iv) 

eliminate the Part D title, ‘‘INET Port 

Fees’’ and amend and reorganize the 

current port fees. Each change will be 

described in more detail below. The 

Exchange believes that the proposed 

amendments to the Schedule of Fees 

will provide more clarity as to the 

current fees. The Exchange notes that no 

fee changes are being introduced with 

this rule change. The Exchange is 

simply reorganizing its rules to conform 

to other Nasdaq affiliate markets by 

aligning the location and description of 

its rules on each market. 


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