Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23313 

8 15 U.S.C. 78s(b)(3)(A)(ii). 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

greater order flow. The Exchange further 

believes that the rebate currently in 

place for QCC and Solicitation orders is 

reasonable because it is designed to give 

Members who trade a minimum of 

200,000 qualifying contracts in QCC and 

Solicitation orders on the Exchange a 

benefit by way of a lower transaction 

fee. As noted above, once a Member 

reaches an established volume 

threshold, all of the trading activity in 

the specified order type by that Member 

will be subject to the corresponding 

rebate. 

The Exchange also believes that its 

rebate program for QCC and Solicitation 

orders is equitable because it would 

uniformly apply to all Members engaged 

in QCC and Solicitation trading in all 

option classes traded on the Exchange. 

The Exchange further believes that its 

fees and credits remain competitive 

with fees charged by other exchanges 

and therefore are reasonable and 

equitably allocated to those members 

that opt to direct orders to the Exchange 

rather than to a competing exchange. 

The QCC and Solicitation rebate 

program employed by the Exchange has 

proven to be an effective pricing 

mechanism and attractive to Exchange 

participants and their customers. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Exchange Act.8 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 Exchange 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 Exchange 

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 rulecomments@sec.gov. Please include File 

Number SR–ISE–2012–25 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–ISE–2012–25. 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 Web site (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 Web site 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 

a.m. and 3 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; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–ISE– 

2012–25 and should be submitted on or 

before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9283 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66793; File No. SR–ISE– 

2012–27] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend an Existing Fee Cap 

Program and Related Service Fee 

April 12, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on April 2, 

2012, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III 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 ISE is proposing to amend an 

existing fee cap program and a related 

service fee. The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.ise.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 

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 

mstockstill on DSK4VPTVN1PROD with NOTICES

23314 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

3See Securities Exchange Act Release No. 64274 

[sic] (April 8, 2011), 76 FR 20754 (April 13, 2012) 

(SR–ISE–2011–13). 

4See Securities Exchange Act Release No. 63955 

(February 24, 2011), 76 FR 11533 (March 2, 2011) 

(SR–ISE–2010–73). 

5Other account designations include Prop-firm 

(Member trading for its own account and clearing 

in the F range at OCC), Prop-cust (Member trading 

for its own account and clearing in the C range at 

OCC), BD-firm (Member trading on behalf of 

another registered broker/dealer clearing in the F 

range at OCC), BD-cust (Member trading on behalf 

of another registered broker/dealer clearing in the 

C range at OCC), FarMM (Member trading on behalf 

of another registered broker/dealer clearing in the 

M range at OCC). 

6Other exchanges employ exclusions to their fee 

cap programs. For example, at the Chicago Board 

Options Exchange, Inc. (‘‘CBOE’’), Automated 

Improvement Mechanism (‘‘AIM’’) execution fees 

do not count towards the fee cap employed by that 

exchange. See CBOE Fees Schedule, Section 1 

(Equity Options Fees). 

7The Exchange currently charges a surcharge that 

ranges between $0.02 per contract to $0.22 per 

contract on the following licensed products: BKX, 

MFX, MID, MSH, SML, UKX, RMN, RUI, RUT, 

MVR, NDX, MNX, FUM, HSX, POW, TNY, WMX 

and NXTQ. 

8Special orders are order types that involve a 

crossing transaction or an auction, where a 

broadcast is transmitted to Exchange members for 

potential participation and/or price improvement. 

9A Complex Order is defined in Exchange Rule 

722(a)(1) as any order involving the simultaneous 

purchase and/or sale of two or more different 

options series in the same underlying security, for 

the same account, in a ratio that is equal to or 

greater than one-to-three (.333) and less than or 

equal to three-to-one (3.00) and for the purpose of 

executing a particular investment strategy. 

10The current exclusion applies to options 

classes that are subject to Rebates and Fees for 

Adding and Removing Liquidity in Select Symbols 

(‘‘Select Symbols’’). 

11An order means a commitment to buy or sell 

securities as defined in Exchange Rule 715. 

12The CBOE fees are capped at $75,000. See 

CBOE Fees Schedule, Section 1 (Equity Options 

Fees). 

13PHLX Firms are subject to a maximum fee of 

$75,000. See PHLX Fee Schedule, Section II (Equity 

Options Fees). 

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 currently has a fee cap 

program that, subject to certain 

exclusions, is applicable across all 

products traded on ISE.3 The fee cap 

currently applies to transactions 

executed in a member’s proprietary 

account. The fee cap also applies to 

crossing transactions for the account of 

entities affiliated with a member. That 

is, the cap applies to a member’s 

crossing transactions even if the 

member executes crosses in the account 

of an affiliate, rather than the member’s 

own account. 

Under the fee cap program, the 

Exchange caps proprietary transaction 

fees in all products traded on ISE, in the 

aggregate, at $100,000 per month per 

member, with certain exclusions which 

are noted below. All proprietary 

transactions, including non-ISE market 

maker contracts that are part of a 

crossing transaction, are eligible 

towards the fee cap. Volume from 

regular and complex orders, as well as 

Facilitation Mechanism, Price 

Improvement Mechanism, Solicited 

Order Mechanism, Block Order 

Mechanism and Qualified Contingent 

Cross (‘‘QCC’’) orders,4 also counts 

towards the fee cap. 

In addition to the fee cap, ISE also 

currently has a service fee of $0.01 per 

side on all transactions that are eligible 

for the fee cap. The service fee applies 

once a member reaches the fee cap level 

and applies to every contract side 

included in and above the fee cap. A 

member who does not reach the 

monthly fee cap is not charged the 

service fee. Additionally, the service fee 

is not calculated in reaching the fee cap. 

Once the fee cap is reached, the service 

fee applies to both proprietary and other 

account designations 5 in all ISE 

products in addition to those 

transactions that were included in 

reaching the fee cap. The service fee, 

when charged for volume above the cap 

when no other transaction fees are 

collected, was instituted to defray the 

Exchange’s costs of providing services 

to members, which include trade 

matching and processing, post trade 

allocation, submission for clearing and 

customer service activities related to 

trading activity on the Exchange. 

In calculating the fee cap, the 

Exchange currently excludes the 

following:) 6 (1) Any surcharge fee 

charged by the Exchange on licensed 

products,7 (2) fees from Non-ISE Market 

Maker volume not related to an 

affiliated member’s crossing activity, (3) 

the fee for responses to special orders 8

in all products, (4) the maker and taker 

fees charged by the Exchange for 

complex orders 9 for certain option 

classes,10 and (5) the taker fees charged 

by the Exchange for regular orders 11 for 

the Select Symbols. 

The Exchange’s current fee cap is 

functionally similar to a ‘‘MultiplyListed Option Fee Cap’’ in place at the 

CBOE 12 and a ‘‘Firm Related Equity 

Option Cap’’ in place at NASDAQ OMX 

PHLX, Inc. (‘‘PHLX’’).13 Since its 

inception, the fee cap has served its 

intended purpose of attracting order 

flow to the Exchange. However, in 

response to the pricing competition 

prevalent across the options markets 

today, the Exchange now proposes to 

make changes to the current fee cap 

program that, once adopted, will allow 

members to continue to benefit from a 

fee cap while benefitting the Exchange 

by way of attracting increased and 

targeted order flow. 

Specifically, the Exchange proposes to 

make four changes to its current fee cap 

program. First, the Exchange proposes 

to lower the cap from $100,000 to 

$75,000 per member per month. The 

proposal to lower the cap amount will 

enable the Exchange to better compete 

with fee caps that are currently in place 

at other exchanges. For example, CBOE 

and PHLX both currently have their fee 

caps at $75,000 per month. 

Second, the Exchange proposes to 

limit the fee cap to only trades executed 

in the Exchange’s Facilitation 

Mechanism, Price Improvement 

Mechanism, Solicited Order Mechanism 

and Block Order Mechanism and to 

Qualified Contingent Cross (‘‘QCC’’) 

orders. These orders are generally 

known as crossing orders. For the sake 

of clarity, the Exchange proposes to 

define crossing orders in the footnotes 

applicable to the fee cap. The Exchange 

believes the proposal to limit the cap to 

these order types will simplify the 

Exchange’s fees and allow it to better 

compete for trading volume that 

contributes to fee caps at other 

exchanges. The Exchange also believes 

the proposal will make it easier for 

members to track their fee cap-eligible 

trading activity. To reflect change, the 

Exchange proposes to remove what was 

previously footnote 2 on page 17 of the 

Exchange’s Schedule of Fees and 

consolidate the rule text applicable to 

the fee cap program into a single 

footnote. As a result, footnote 1 on page 

16, footnote 9 on page 19 and footnote 

6 on page 21 now reflect that the fees 

are capped at $75,000 per member per 

month on all Firm Proprietary and NonISE Market Maker transactions that are 

part of a originating or contra side of a 

crossing order. 

Third, as noted above, in calculating 

the fee cap, the Exchange currently 

excludes the maker and taker fees 

charged by the Exchange for complex 

orders for certain option classes and the 

taker fees charged by the Exchange for 

regular orders for the Select Symbols. 

The Exchange proposes to remove these 

exclusions as they are no longer 

applicable because this activity is not 

part of one of the crossing order 

transactions and in order to simplify the 

fee schedule text. As a result, the 

Exchange proposes to amend the text in 

footnote 9 on page 19 and footnote 6 on 

page 21 to reflect this change. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23315 

14 15 U.S.C. 78f(b). 

15 15 U.S.C. 78f(b)(4). 

16See supra notes 12 and 13. 

17For example, the customer fee is $0.00 per 

contract for products other than Second Market 

Options, Singly Listed Indexes, Singly Listed ETFs 

and FX Options. For Second Market Options, the 

customer fee is $0.05 per contract and for Singly 

Listed Options, Singly Listed ETFs and FX Options, 

the customer fee is $0.18 per contract. The 

Exchange also currently has an incentive plan in 

place for certain specific FX Options which has its 

own pricing. See ISE Schedule of Fees. 

18The Exchange currently has a sliding scale fee 

structure that ranges from $0.01 per contract to 

$0.18 per contract depending on the level of volume 

a Member trades on the Exchange in a month. 19 15 U.S.C. 78s(b)(3)(A)(ii). 

Finally, the Exchange proposes to 

make the current service fee of $0.01 per 

side incremental after a member reaches 

the fee cap. As noted above, the service 

fee currently applies once a member 

reaches the fee cap level and applies to 

every contract side included in and 

above the fee cap. The Exchange notes 

that since members pay a transaction fee 

for contracts executed up to the cap 

level, they are defraying the Exchange’s 

costs for providing services that include 

trade matching and processing, post 

trade allocation, submission for clearing 

and customer service activities related 

to their trading activity on the 

Exchange. ISE believes that the service 

fee need only be charged to incremental 

contracts where no transaction fee is 

assessed to offset the Exchange’s costs. 

The Exchange has designated this 

proposal to be operative on April 2, 

2012. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Schedule of Fees 

is consistent with Section 6(b) of the 

Act 14 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 15

in particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members and 

other persons using its facilities. 

The Exchange believes proposed 

amendment to the fee cap is reasonable 

because it will continue to potentially 

lower transaction fees for members 

providing liquidity on the Exchange. 

Members who reach the fee cap during 

a month will not have to pay regular 

transaction fees and thus will be able to 

lower their monthly fees. 

The Exchange believes that the fee 

cap is not unfairly discriminatory 

because all members, including non-ISE 

market makers, are eligible to reach the 

cap. The Exchange’s fee cap applies 

only to firm proprietary business, and 

not customer or market maker business, 

because the Exchange is specifically 

targeting this type of business as a 

competitive response to similar fee caps 

other exchanges have adopted,16 and 

thus to make it more attractive for 

members to send such business to the 

Exchange. The Exchange has adopted 

other incentive programs targeting other 

business areas: Lower fees (or no fees) 

for customer orders; 17 and tiered 

pricing that reduces rates for market 

makers based on the level of business 

they bring to the Exchange.18

The Exchange further believes the 

proposed changes to the fee cap 

program is equitable because it would 

uniformly apply to all members engaged 

in proprietary trading in option classes 

traded on the Exchange. As noted, ISE 

market makers currently receive the 

benefit of a fee reduction under a sliding 

scale fee structure applicable to nonSelect Symbols. 

The Exchange believes that the 

proposed change to the service fee is 

reasonable because it will also 

potentially lower transaction fees for 

members. Members who reach the fee 

cap during a month will pay the service 

fee instead of the regular transaction 

fees and thus will be able to lower their 

monthly fees. The Exchange believes 

that charging a service fee is also 

reasonable because it will allow the 

Exchange to recoup the costs incurred 

in providing certain services, which 

include trade matching and processing, 

post trade allocation, submission for 

clearing and customer service activities 

related to trading activity on the 

Exchange. The Exchange believes the 

proposed fee change will attract 

additional order flow to the Exchange 

and thereby will benefit all market 

participants. 

The Exchange believes the proposed 

change to the service fee is equitable 

and not unfairly discriminatory because 

it would apply uniformly to all 

members engaged in proprietary trading. 

The proposed change to the manner by 

which the service fee is charged is 

designed to give members who trade a 

lot on the Exchange a benefit by way of 

a lower transaction fee. 

The Exchange believes the proposed 

fee change will benefit market 

participants by potentially lowering 

their fees while allowing the Exchange 

to remain competitive with other 

exchanges that offer similar fee cap 

programs. For the reasons noted above, 

the Exchange believes that the proposed 

fees are fair, equitable and not unfairly 

discriminatory. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is 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 not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.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 

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 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 rulecomments@sec.gov. Please include File 

Number SR–ISE–2012–27 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–ISE–2012–27. 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 Web site (http://www.sec.gov/ 

mstockstill on DSK4VPTVN1PROD with NOTICES

23316 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

20 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). 

4See BOX Trading Rules, Chapter XII, Section 

5(a), providing in pertinent part, ‘‘[o]nly orders that 

are specifically designated by Options Participants 

as eligible for routing will be routed to an Away 

Exchange (‘‘Eligible Orders). 

5See Chapter V, Section 16(b)(iii), providing that 

where an order is received which is executable 

against the NBBO and there is not a quote on BOX 

that is equal to the NBBO, that the order is exposed 

on the BOX Book at the NBBO for a period of one 

second. If the order is not executed during the one 

second exposure period, then the order is either 

routed or cancelled. 

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 Web site 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 

a.m. and 3 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; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–ISE– 

2012–27 and should be submitted on or 

before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9285 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66792; File No. SR–BX– 

2012–025] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend 

Chapter V, Section 16 of the BOX 

Trading Rules 

April 12, 2012. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on April 3, 

2012, NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘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 Rule 19b–4(f)(6) under the 

Act,3 which renders the proposal 

effective upon filing with 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 

NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) proposes to amend Chapter 

V, Section 16 of the rules of the Boston 

Options Exchange (‘‘BOX’’) to address 

how BOX processes inbound orders 

when the BOX best price on the same 

side of the market locks, or is locked by 

the opposite side national best bid or 

offer (‘‘NBBO’’). 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 Web site at http:// 

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/, and on the 

Commission’s Web site at http:// 

www.sec.gov. 

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 purpose of the proposed rule 

change is to amend Chapter V, Section 

16 of the BOX Rules to address how 

inbound orders are processed when the 

BOX best price on the same side of the 

market locks, or is locked by the 

opposite side national best bid or offer 

(‘‘NBBO’’). Currently, Chapter V, 

Section 16(b) sets forth that inbound 

orders on BOX are filtered prior to their 

entry on the BOX Book to ensure such 

orders will not Trade-Through the 

NBBO in accordance with the Options 

Order Protection and Locked/Crossed 

Market Plan (the ‘‘Plan’’). The rule 

provides that all of the filtering rules 

described are independent of whether 

the NBBO is locked or crossed, except 

where the BOX best price on the same 

side of the market as the inbound order 

has crossed, or is crossed by the 

opposite side NBBO, the order will be 

routed, if eligible, or rejected 

immediately. The Exchange proposes to 

amend the rule so that, in addition, 

where the BOX best price on the same 

side of the market as the inbound order 

has locked, or is locked by, the opposite 

side NBBO, the order will also be 

routed, if eligible, or rejected 

immediately. As such, the BOX trading 

engine is systemically either routing to 

an Away Exchange 4 or immediately 

rejecting such an order. Immediately 

rejecting such an order, which is not 

eligible for routing, prevents that order 

from being exposed,5 and thereby 

removes the potential that such order 

could join the pre-existing locked 

market. 

The following two examples illustrate 

how the proposed rule change would 

apply to inbound orders when the BOX 

best price on the same side of the 

market locks the opposite side NBBO 

and the orders are not designated as 

Eligible Orders: Example 1: When the 

NBBO is $6.65 × $6.60 and the BOX best 

price is $6.60 × $6.80, BOX receives a 

public customer order to buy at $6.60. 

Such an order is rejected by the trading 

engine back to the order sender. 

Example 2: When the NBBO is × $4.00 

× $4.00 and the BOX best price is $4.00 

×$4.05, BOX receives a public customer 

order to buy at $4.00. Such an order is 

rejected by the trading engine. In the 

above examples, if the order was an 

Eligible Order, then the order will be 

routed to an Away Exchange. 

The BOX NBBO filtering process set 

forth in Chapter V, Section 16 continues 

to be designed in a manner to prevent 

a sell order from being executed on BOX 

at a price inferior to the best bid 

available at any Away Exchange; 

similarly, any order to buy would not be 

executed on BOX at a price worse than 

the best offer available at any Away 

Exchange. Finally, Section (b)(i) is being 

amended to reflect that the term ISO is 

defined in subsection (h) of Chapter XII 

mstockstill on DSK4VPTVN1PROD with NOTICES