[Federal Register Volume 89, Number 214 (Tuesday, November 5, 2024)]
[Notices]
[Pages 87921-87924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25636]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101480; File No. SR-BOX-2024-25]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule for Trading on the BOX Options Market LLC Facility (``BOX'')

October 30, 2024
    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 October 15, 2024, BOX Exchange LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule to 
assess a $0.00 Complex Surcharge for certain Complex Order transactions 
on the BOX Options Market LLC (``BOX'') options

[[Page 87922]]

facility. 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 https://rules.boxexchange.com/rulefilings.

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 the Fee Schedule for trading on BOX 
to assess a $0.00 Complex Surcharge for certain Complex Order 
transactions.
    Currently, BOX assesses a Complex Surcharge of $0.12 per contract 
to any electronic non-Public Customer Complex Order that executes 
against an electronic Public Customer Complex Order.\5\
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    \5\ See BOX Fee Schedule Section VI.A (All Complex Orders).
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    The Exchange now proposes that a $0.00 per contract Complex 
Surcharge will be applied for transactions in SPY, QQQ, and IWM when 
the Public Customer Complex Order is entered by an affiliate or 
Appointed OFP.\6\ Section VI.A. of the Fee Schedule currently provides, 
in relevant part, ``A $0.12 per contract Complex Surcharge will be 
applied to any electronic non-Public Customer Complex Order that 
executes against an electronic Public Customer Complex Order.'' The 
Exchange now proposes to add text to Section VI.A. providing, ``The 
Complex Surcharge will not be applied for transactions in SPY, QQQ, and 
IWM when the Public Customer Complex Order is entered by an affiliate 
or Appointed OFP.''
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    \6\ For purposes of the Exchange Fee Schedule, the term 
``affiliate'' of a Participant shall mean any Participant under 75% 
common ownership or control of that Participant. An ``Appointed 
OFP'' is an OFP that has been designated by a BOX Market Maker. See 
BOX Fee Schedule Section IX.A (Aggregate Billing).
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    For example, currently, if a Public Customer submitted a SPY order 
to the Complex Order Book (making liquidity) that interacted with a 
Market Maker's SPY order (taking liquidity), the Market Maker would be 
charged $0.62.\7\ Under the proposal, if the Public Customer SPY order 
was entered by an affiliate or Appointed OFP of the Market Maker, then 
the Market Maker would only be charged the taker fee of $0.50 and not 
the $0.12 Complex Surcharge. The proposed change would effectively 
decrease the Complex Surcharge assessed in this case from $0.12 to 
$0.00.
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    \7\ A $0.50 fee plus the $0.12 Complex Surcharge.
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    The Exchange does not believe that the proposed rule change is 
novel as a similar discount structure currently exists at another 
exchange.\8\ Further, the Exchange believes that the proposal will 
encourage Participants to send increased SPY, QQQ, and IWM Complex 
Order flow to BOX because this proposal will decrease the cost of 
certain transactions. Specifically, Participants with an affiliate or 
an Appointed OFP will not be assessed the Complex Surcharge for 
transactions in SPY, QQQ, and IWM when the Public Customer Complex 
Order that they trade with is entered by their affiliate or Appointed 
OFP.
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    \8\ See Nasdaq ISE, LLC (``Nasdaq ISE'') Rules Options 7, 
Section 4, footnote 3 (Taker Fee discounted from $0.50 to $0.38 per 
contract when executed against Priority Customer Complex Orders in 
Select Symbols entered by an Affiliated Member or Affiliated Entity, 
excluding Complex Orders executed in the Facilitation Mechanism, 
Solicited Order Mechanism, and Price Improvement Mechanism). The 
Exchange believes that Nasdaq ISE's taker fee discount structure is 
similar to the proposal in that it applies to a subset of symbols 
entered by affiliated or assigned firms. The Exchange notes that 
while ISE offers a discounted fee, the Exchange is proposing to not 
apply a surcharge, which similarly results in a decreased fee.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among BOX Participants and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers. Specifically, the Exchange's proposal to not apply the 
Complex Surcharge for transactions in SPY, QQQ, and IWM when the Public 
Customer Complex Order is entered by an affiliate or Appointed OFP is 
reasonable because this discount will incentivize BOX Participants to 
send their SPY, IWM, and QQQ order flow to BOX which would increase 
Complex Order liquidity and benefit all market participants (including 
those market participants that are not currently affiliates and/or opt 
not to become an Appointed OFP) by providing more trading opportunities 
and tighter spreads in SPY, QQQ, and IWM.
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    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that this proposal is reasonable, equitable, 
and not unfairly discriminatory as it is consistent with the discount 
structure at another exchange.\10\ Specifically, ISE currently provides 
a taker fee discount in Select Symbols \11\ when entered against 
Priority Customer \12\ Complex Orders \13\ by an Affiliated Member \14\ 
or Affiliated Entity.\15\ The Exchange believes that its proposal is 
similar to the discount structure in place at Nasdaq ISE in that it is 
proposing to apply a Complex Surcharge of $0.00 (an effective $0.12 
discount) to certain transactions in a subset of symbols when the 
Public Customer Complex Order is entered by an affiliate or Appointed 
OFP.\16\
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    \10\ See supra note 8.
    \11\ The Nasdaq ISE Options Pricing Schedule defines ``Select 
Symbols'' as options overlying all symbols listed on the Nasdaq ISE 
that are in the Penny Interval Program. See Nasdaq ISE Rules Options 
7, Section 1(c).
    \12\ The Nasdaq ISE Options Pricing Schedule provides that a 
``Priority Customer'' is a person or entity that is not a broker/
dealer in securities, and does not place more than 390 orders in 
listed options per day on average during a calendar month for its 
own beneficial account(s), as defined in Nasdaq ISE Options 1, 
Section 1(a)(37). See Nasdaq ISE Rules Options 7, Section 1(c).
    \13\ The Nasdaq ISE Options Pricing Schedule defines a ``Complex 
Order'' as any order involving the simultaneous purchase and/or sale 
of two or more different options series in the same underlying 
security, as provided in Nasdaq ISE Options 3, Section 14, as well 
as Stock-Option Orders. See Nasdaq ISE Rules Options 7, Section 
1(c).
    \14\ The Nasdaq ISE Options Pricing Schedule defines an 
``Affiliated Member'' as a Member that shares at least 75% common 
ownership with a particular Member as reflected on the Member's Form 
BD, Schedule A. See Nasdaq ISE Rules Options 7, Section 1(c).
    \15\ The Nasdaq ISE Options Pricing Schedule provides that an 
``Affiliated Entity'' is a relationship between an Appointed Market 
Maker and an Appointed OFP for purposes of qualifying for certain 
pricing specified in the Schedule of Fees. See Nasdaq ISE Rules 
Options 7, Section 1(c).
    \16\ See supra note 8. The Exchange further notes that it is 
proposing to not apply the Complex Surcharge to transactions in SPY, 
QQQ, and IWM, while the Nasdaq ISE discount is applicable to all 
options within their Penny Interval Program.
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    The Exchange further believes that this proposal is reasonable, 
equitable, and not unfairly discriminatory because all non-Public 
Customers would not be assessed a Complex Surcharge for transactions in 
SPY, QQQ, and IWM when executing against a Public

[[Page 87923]]

Customer Complex Order that was entered by an affiliate or Appointed 
OFP. Additionally, the criteria for not applying the Complex Surcharge 
for transactions in SPY, QQQ, and IWM that execute against Public 
Customer Complex Orders that were entered by an affiliate or Appointed 
OFP would be uniformly applied for all Participants.
    The Exchange also believes that offering Participants the 
opportunity to not be assessed the Complex Surcharge for transactions 
in SPY, QQQ, and IWM when they execute against Public Customer Complex 
Orders that were entered by an affiliate or Appointed OFP is equitable 
and not unfairly discriminatory as it relates to Participants who are 
not affiliates or Appointed OFPs because any Participant may enter into 
such a relationship for the purpose of aggregating volume executed on 
the Exchange.
    The Exchange believes further that discounting the Complex 
Surcharge when the Public Customer Complex Order is entered by an 
affiliate or Appointed OFP is reasonable because the discount is 
designed to increase SPY, QQQ, and IWM order flow to BOX, which would 
benefit all market participants.
    The Exchange believes its proposal to establish different pricing 
for SPY, QQQ, and IWM Complex Order in this case is reasonable, 
equitable, and not unfairly discriminatory because pricing by symbol is 
a common practice on many U.S. options exchanges as a means to 
incentivize order flow to be sent to an exchange for execution in the 
most actively traded options classes. The Exchange notes that separate 
fees and rebates for SPY, QQQ, and IWM and currently assessed for non-
auction electronic transactions and Complex Orders.\17\ The Exchange 
notes further that other exchanges design fee structures to compete 
specifically for volume in these (and other high volume) symbols.\18\ 
SPY, QQQ, and IWM are among the most actively traded options \19\ and 
therefore the Exchange believes that not assessing the Complex 
Surcharge on qualifying Complex Orders for these classes is appropriate 
to more effectively attract order flow to BOX. The Exchange further 
believes that assessing different pricing for SPY, QQQ and IWM, as 
compared to other symbols, is reasonable because SPY, QQQ and IWM are 
highly liquid symbols, have higher volumes, and other exchanges design 
fee structures to specifically compete for executions in these symbols. 
The Exchange believes that creating a separate category within the fee 
structure for these classes is appropriate to more effectively attract 
order flow to BOX in these classes.
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    \17\ See BOX Fee Schedule Sections IV.A (Electronic Transaction 
Fees) and VI (Complex Order Transaction Fees).
    \18\ See e.g., Cboe C2 Exchange, Inc. Options Fee Schedule 
(``Transaction Fees'' applicable to SPY, QQQ, and IWM among 9 other 
symbols); MIAX PEARL, LLC Options Fee Schedule (``Transaction 
Rebates/Fees'' for Priority Customer SPY, QQQ, and IWM Taker).
    \19\ See https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options (providing a daily list of the most 
active options by type).
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    The Exchange believes the proposal will create an incentive for 
Participants to bring Complex Orders in SPY, QQQ, and IWM to BOX. The 
Exchange believes that if the proposed incentive is effective, then an 
ensuing increase in trading activity on BOX will improve the quality of 
the market to the benefit of all market participants. Further, to the 
extent this proposal attracts new Participant volume to BOX, all market 
participants will benefit through increased liquidity and more trading 
opportunities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    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.
    The proposal does not impose an undue burden on intermarket 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice of where to transact its business. The Exchange notes 
that it operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
the Exchange must continually adjust its fees and rebates to remain 
competitive with other exchanges. Because competitors are free to 
modify their own fees and rebates in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    The Exchange believes that the proposed discount will encourage 
market participants to send greater amounts of Complex Orders in SPY, 
QQQ, and IWM to BOX for execution in order to take advantage of the 
proposed discount and lower their costs. The Exchange believes that the 
additional liquidity in SPY, QQQ, and IWM will enhance the quality of 
BOX's Complex Order market and increase related trading opportunities 
on BOX. Accordingly, the Exchange believes that the proposed changes 
may increase intermarket and intra-market competition by incentivizing 
Participants to direct their SPY, QQQ, and IWM orders to the Exchange, 
thereby increasing the volume of contracts traded on BOX and enhancing 
the quality of the market in these classes. Enhanced market quality and 
increased transaction volume that result from the anticipated increase 
in SPY, QQQ, and IWM order flow directed to BOX would benefit all 
market participants and improve competition on BOX in SPY, QQQ, and 
IWM.
    The Exchange further believes that its proposal will not place any 
category of market participant at a competitive disadvantage and 
therefore does not impose an undue burden on intra-market competition 
because all non-Public Customers would be assessed a Complex Surcharge 
of $0.00 for transactions in SPY, QQQ, and IWM when executing against a 
Public Customer Complex Order that was entered by an affiliate or 
Appointed OFP. Additionally, the criteria for applying a Complex 
Surcharge of $0.00 for transactions in SPY, QQQ, and IWM that execute 
against Public Customer Complex Orders that were entered by an 
affiliate or Appointed OFP would be uniformly applied for all 
Participants.
    Additionally, offering Participants the opportunity to not be 
assessed the Complex Surcharge for transactions in SPY, QQQ, and IWM 
that execute against Public Customer Complex Orders that were entered 
by an affiliate or Appointed OFP does not impose an undue burden on 
competition as it relates to Participants who are not affiliates or 
Appointed OFPs because any Participant may enter into such a 
relationship for the purpose of aggregating volume executed on BOX . 
Finally, the criteria for assessing a Complex Surcharge of $0.00 would 
be uniformly applied to all Participants.
    The Exchange again notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues. 
In such an environment, the Exchange must continually review, and 
consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons discussed above, the Exchange believes 
that the proposed change reflects this competitive environment.

[[Page 87924]]

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \20\ and Rule 19b-4(f)(2) 
thereunder,\21\ because it establishes or changes a due, or fee.
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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further 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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#dba9aeb7bef6b8b4b6b6beb5afa89ba8beb8f5bcb4ad"><span class="__cf_email__" data-cfemail="ea989f868fc7898587878f849e99aa998f89c48d859c">[email protected]</span></a>. Please include 
file number SR-BOX-2024-25 on the subject line.

Paper Comments

    <bullet> 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-2024-25. 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 website (https://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 
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. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BOX-2024-25 and should be 
submitted on or before November 26, 2024.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25636 Filed 11-4-24; 8:45 am]
BILLING CODE 8011-01-P


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