10268 Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 

20 17 CFR 200.30–3(a)(12). 

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). 

5See NYSE Arca, Inc. (‘‘NYSEArca’’) Fee 

Schedule (assessing Market Makers $6,000 for up to 

175 option issues, an additional $5,000 for up to 

350 option issues, an additional $4,000 for up to 

1,000 option issues, and an additional $3,000 for all 

option issues traded on the Exchange). The 

Exchange notes that these fees are compounded, so 

Market Makers who trade in all option issues on the 

exchange are assessed $18,000 per month. See also 

Miami International Securities Exchange, LLC 

(‘‘MIAX’’) Fee Schedule (assessing Market Makers 

$7,000 for up to 10 classes or up to 20% of classes 

by volume, $12,000 for up to 40 classes or up to 

35% of classes by volume, $17,000 for up to 100 

classes or up to 50% or classes by volume, and 

$22,000 for over 100 classes or over 50% of classes 

by volume up to all classes listed on MIAX). 

6The Exchange notes the following Participant 

types on BOX: Public Customers, Professional 

Customers, Broker Dealers, and Market Makers. 

Pursuant to this proposal, Public Customers, 

Professional Customers, and Broker Dealers will 

continue to be charged the $1,500 Participant Fee 

detailed in Section VIII.B of the BOX Fee Schedule. 

7BOX notes that the structure of BOX is different 

from other options exchanges in the industry. 

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–NASDAQ–2022–015, and 

should be submitted on or before March 

16, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03760 Filed 2–22–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94264; File No. SR–BOX– 

2022–07] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fee 

Schedule on the BOX Options Market 

LLC Facility To Adopt Electronic 

Market Maker Trading Permit Fees 

February 16, 2022. 

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 February 

1, 2022, BOX Exchange LLC 

(‘‘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. 

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 on the 

BOX Options Market LLC (‘‘BOX’’) 

options 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 http://

boxexchange.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 

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 to establish a new 

monthly Participant Fee. Specifically, 

the Exchange proposes to adopt 

electronic Market Maker Trading Permit 

Fees as follows: (i) $4,000 per month for 

Market Maker Appointments in up to 

and including 10 classes; (ii) $6,000 per 

month for Market Maker Appointments 

in up to and including 40 classes; (iii) 

$8,000 per month for Market Maker 

Appointments in up to and including 

100 classes; and (iv) $10,000 per month 

for Market Maker Appointments for over 

100 classes. For the calculation of the 

monthly electronic Market Maker 

Trading Permit fees, the number of 

classes is defined as the greatest number 

of classes the Market Maker was 

appointed to quote in on any given day 

within the calendar month. The 

Exchange notes that the proposed 

electronic Market Maker Trading Permit 

fees are lower than fees assessed at 

competing options exchanges.5 The 

Exchange notes the current monthly 

Participant Fee of $1,500 per month will 

not apply to electronic Market Makers. 

Under this proposal, electronic Market 

Makers will pay the applicable monthly 

electronic Market Maker Trading Permit 

fee only. All other electronic 

Participants 6 will continue to pay the 

monthly Participant Fee in Section 

VIII.B of the BOX Fee Schedule. 

The Exchange believes that it is 

important to demonstrate that these fees 

are based on its costs and reasonable 

business needs that have grown 

substantially since the Exchange 

implemented the Participant Fee for all 

BOX Participants in 2016. The Exchange 

also believes the proposed electronic 

Market Maker Trading Permit Fees will 

allow BOX to offset expenses that BOX 

has and will incur, and that BOX is 

providing sufficient transparency (as 

described below) into how BOX 

determined to charge such fees. 

Accordingly, BOX is providing an 

analysis of its revenues, costs, and 

profitability associated with the 

proposed electronic Market Maker 

Trading Permit Fees. This analysis 

includes information regarding its 

methodology for determining the costs 

and revenues associated with providing 

access services to electronic Market 

Makers.7


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Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 10269 

Specifically, BOX Exchange LLC (‘‘Exchange’’) is a 

fully separate legal entity from BOX Options Market 

LLC, the equity options facility of the Exchange. All 

of the Exchange’s expenses support the regulatory 

function as the Exchange. Further, the Exchange 

fulfills the regulatory functions and responsibilities 

as a national securities exchange registered with the 

SEC under Section 6 of the Securities Exchange Act 

of 1934, and oversees the BOX Options Market. 

Exchange expenses are solely regulatory in nature 

because, due to the unique structure between the 

Exchange and the BOX Options Market facility, the 

Exchange expenses are separate from the BOX 

Options Market facility expenses and there can be 

no commingling of the funds. As such, the expenses 

discussed herein are solely those of BOX Options 

Market and not the Exchange. 

8For example, BOX previously noted that direct 

and indirect expenses described in a prior fee filing 

were contained in the following line items in BOX’s 

2018 Form 1: Technical and Operational, External 

IT Services, Data Processing & Communication, 

Depreciation, Personnel, Amortization, Rent of 

facilities, Office-related, Professional Services, 

Other. See Securities Exchange Act Release No. 

88161 (February 11, 2020), 85 FR 8968 (February 

18, 2020) (SR–BOX–2020–03). Accordingly, the 

direct and indirect expenses described in this filing 

is attributed to the same line items for BOX’s 2021 

Form 1 Amendment, which will be filed in 2022. 

The Exchange notes that another exchange has 

utilized a similar presentation methodology in a 

recent filing and such filing was noticed and not 

suspended by the Commission when the exchange 

adopted Trading Permit fees. See Securities 

Exchange Act Release Nos. 91033 (February 1, 

2021), 86 FR 8455 (February 5, 2021) (SR– 

EMERALD–2021–03). See also SR–PEARL–2021– 

59. 

9 15 U.S.C. 78f(b)(4) and (5). 

10See Securities Exchange Act Release No. 79038 

(October 4, 2016), 81 FR 70214 (October 11, 2016) 

(SR–BOX–2016–47). 11See supra note 5. 

In order to determine BOX’s costs to 

provide the access services to electronic 

Market Makers, BOX conducted an 

extensive cost review in which BOX 

analyzed all expenses in BOX’s general 

expense ledger to determine whether 

each such expense relates to Market 

Maker access services, and, if such 

expense did so relate, what portion (or 

percentage) of such expense actually 

supports the access services. The sum of 

all such portions of expenses represents 

the total cost for BOX to provide the 

access services to electronic Market 

Makers. For the avoidance of doubt, no 

expense amount was allocated twice. 

In order to determine BOX’s projected 

revenues associated with the proposed 

Market Maker Permit Fees, BOX 

analyzed the number of Participants 

currently utilizing the Trading Permits, 

and, utilizing a recent monthly billing 

cycle representative of 2021 monthly 

revenue, extrapolated annualized 

revenue on a going-forward basis 

utilizing the proposed Market Maker 

Permit Fees discussed herein. BOX does 

not believe it is possible or appropriate 

to factor into its analysis future revenue 

growth or decline into its projections for 

purposes of these calculations, given the 

uncertainty of such projections due to 

the continually changing access needs 

of market participants and general 

market participant behavior. BOX does, 

however, believe that it is reasonable 

and appropriate to factor into its 

analysis future cost growth or decline 

for expenses related to providing access 

services associated with the proposed 

electronic Market Maker Trading Permit 

fees. The Exchange is presenting its 

revenue and expense associated with 

providing access services to electronic 

Market Makers in this filing in a manner 

that is consistent with how BOX 

presents its revenue and expense in its 

Audited Financial Statements. BOX’s 

most recent Audited Financial 

Statement is for 2020. However, since 

the revenues and expenses associated 

with the proposed electronic Market 

Maker Trading Permit fees were not in 

place in 2020, the Exchange believes its 

2020 Audited Financial Statement is not 

representative of its current total 

annualized revenue and costs associated 

with the proposed electronic Market 

Maker Trading Permit fees. Accordingly, 

BOX believes it is more appropriate to 

analyze the proposed electronic Market 

Maker Trading Permit fees utilizing its 

2021 revenue and costs, as described 

herein, which utilize the same 

presentation methodology as set forth in 

BOX’s previously-issued Audited 

Financial Statements.8 Based on the 

analysis discussed herein, the Exchange 

believes that the proposed electronic 

Market Maker Trading Permit fees are 

fair and reasonable because they will 

not result in excessive pricing or supracompetitive profit when comparing 

BOX’s total annual expense associated 

with providing the access services to 

electronic Market Makers versus the 

total projected annual revenue BOX will 

collect for providing those services. 

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. 

The Exchange established the current 

$1,500 monthly Participant Fee in 

October 2016 for all Participants 

regardless of account type.10 At the time 

BOX established this Participant Fee, 

BOX’s market share was 2.45% and the 

total volume of options contracts traded 

on BOX in September 2016 was 

8,737,707. The Exchange established 

this lower (when compared to other 

options exchanges in the industry) 

Participant fee in order to encourage 

market participants to become 

Participants of BOX and register as BOX 

Market Makers. Since 2016, BOX has 

grown its market share and membership 

base significantly. Specifically, in 

September 2021, BOX’s market share 

was 5.19% and the total volume of 

option contracts traded on BOX in 

September 2021 was 42,098,287. BOX 

recently reviewed its current Participant 

Fees detailed in Section VIII of the BOX 

Fee Schedule. In its review, BOX 

determined that Participant fees would 

need to be raised, and a flat fee for all 

Participant types is no longer 

appropriate. Specifically, BOX found 

that electronic Market Makers had been 

benefitting from a flat Participant Fee 

rate while (1) consuming the most 

bandwidth and resources of the 

network; (2) transacting the vast 

majority of the volume on BOX; and (3) 

requiring the high touch network 

support services provided by BOX and 

its staff. The Exchange notes that Broker 

Dealers, Professional Customers, and 

Public Customers take up significantly 

less BOX resources and costs as 

discussed further below. In its review, 

BOX found that since 2016, Market 

Makers have had the luxury of paying 

the same Participant Fees as other 

account types despite Market Makers 

consuming the most resources on the 

BOX system and contributing to 

increased costs for BOX. As such, the 

Exchange proposes to establish higher, 

separate electronic Trading Permit fees 

for Market Makers that are more aligned 

with the costs and resources that Market 

Makers continue to place on BOX and 

its systems. Additionally, the Exchange 

believes that the proposed change will 

better align BOX Participant Fees with 

rates charged by competing options 

exchanges in the industry for similar 

Trading Permits for such market 

participants. As such, BOX believes the 

proposed electronic Market Maker 

Trading Permit fees are reasonable in 

that they are lower than comparable fees 

at other options exchanges.11 Further, 

the Exchange believes that the proposal 

is reasonably designed to continue to 

compete with other options exchanges 

by incentivizing market participants to 

register as Market Makers on BOX in a 

manner than enables BOX to improve its 

overall competitiveness and strengthen 

market quality for all market 

participants. 

The proposed fees are equitable and 

not unfairly discriminatory as the fees 

apply equally to all electronic Market 

Makers. As such, all similarly situated 


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12See e.g., NYSE Arca Options Fees and Charges, 

p.1 (assessing market makers $6,000 for up to 175 

option issues, an additional $5,000 for up to 350 

option issues, an additional $4,000 for up to 1,000 

option issues, an additional $3,000 for all option 

issues on the exchange, and an additional $1,000 

for the fifth trading permit and for each trading 

permit thereafter); NYSE American Options Fee 

Schedule, p. 23 (assessing market makers $8,000 for 

up to 60 plus the bottom 45% of option issues, an 

additional $6,000 for up to 150 plus the bottom 

45% of option issues, an additional $5,000 for up 

to 500 plus the bottom 45% of option issues, and 

additional $4,000 for up to 1,100 plus the bottom 

45% of option issues, an additional $3,000 for all 

issues traded on the exchange, and an additional 

$2,000 for 6th to 9th ATPs; plus an addition fee for 

premium products). See also Cboe BZX Options 

Exchange (‘‘BZX Options’’) assesses the Participant 

Fee, which is a membership fee, according to a 

member’s ADV. See Cboe BZX Options Exchange 

Fee Schedule under ‘‘Membership Fees’’. The 

Participant Fee is $500 if the member ADV is less 

than 5,000 contracts and $1,000 if the member ADV 

is equal to or greater than 5,000 contracts. 

13See Nasdaq Phlx LLC (‘‘Phlx’’) Fee Schedule, 

Section 8(B) detailing the tiered structure for 

Streaming Quote Trader (‘‘SQT’’) Fees. 

electronic Market Makers, with the same 

number of appointments, will be subject 

to the same electronic Market Maker 

Trading Permit fee. The Exchange also 

believes that assessing lower fees to 

electronic Market Makers that quote in 

fewer classes is reasonable and 

appropriate as it will allow BOX to 

retain and attract smaller-scale 

electronic Market Makers, which are an 

integral component of the options 

industry marketplace. Since these 

smaller electronic Market Makers utilize 

less bandwidth and capacity on the 

BOX network due to the lower number 

of quoted classes, the Exchange believes 

it is reasonable and appropriate to offer 

such electronic Market Makers a lower 

fee. The Exchange also notes that other 

options exchanges assess permit fees at 

different rates, based upon a member’s 

participation on that exchange,12 and, as 

such, this concept is not new or novel. 

Further, the Exchange believes the 

proposed tiered structure of the 

electronic Market Maker Trading Permit 

fees is reasonable and appropriate. 

Under the proposal, electronic Market 

Makers will be charged monthly fees 

based on the greatest number of classes 

quoted on any given trading day in a 

calendar month. Under the proposed fee 

structure, the fees increase as the 

number of classes quoted by a Market 

Maker increases. The Exchange believes 

this structure is reasonable because the 

BOX system requires increased 

performance and capacity in order to 

provide the opportunity for Market 

Makers to quote in a higher number of 

options classes on BOX. Specifically, 

the more classes that are actively quoted 

on BOX by a Market Maker requires 

increased memory for record retention, 

increased bandwidth for optimized 

performance, increased functionalities 

on each application layer, and increased 

optimization with regard to surveillance 

and monitoring of such classes quoted. 

As such, basing the Market Maker 

Trading Permit fee on the greatest 

number of classes quoted in on any 

given day in a calendar month is 

reasonable and appropriate when taking 

into account how the increased number 

of quoted classes directly impact the 

costs and resources for BOX. Further, 

the Exchange believes that the proposed 

tiered structure is equitable and not 

unfairly discriminatory as all similarly 

situated Market Makers will be charged 

the same fee. The Exchange notes that 

another options exchange in the 

industry calculates Market Maker 

Permit Fees in the same manner.13

The Exchange believes that its 

proposal is consistent with Section 

6(b)(4) of the Act because the proposed 

fees will not result in excessive or 

supra-competitive profit. The costs 

associated with providing access to 

Participants and non-Participants are 

extensive, have increased year-overyear, and are projected to increase yearover-year in the future. In particular, 

BOX has experienced a material 

increase in its costs in the last several 

years, in connection with projects to 

make its network environment more 

transparent and deterministic, based on 

customer demand. In order to provide 

this for BOX Participants and nonParticipants, in 2021 alone BOX has 

made significant capital expenditures 

(‘‘CapEx’’), incurred increased ongoing 

operational expenditures (‘‘OpEx’’), and 

undertaken additional engineering 

research and development (‘‘R&D’’) in 

the following areas: (i) Implementing an 

improved network design to ensure 

equalized cabling between Participants; 

(ii) introducing designated gateways for 

BOX Market Makers; and (iii) 

optimization of network and systems to 

better handle the increased quote and 

order flow seen through 2020 and 2021. 

The CapEx in 2021 was approximately 

$720,000 for BOX. This expense does 

not include the significant increase in 

employee time and other resources 

necessary to maintain and service this 

network, which expense is captured in 

the operating expense discussed below. 

These projects, which resulted in a 

material increase in expense to BOX, 

are, among other things, intended to 

enhance the overall trading experience 

at BOX, making it a venue that market 

participants want to access. 

Given these increased costs, BOX 

determined that access fees must be 

increased and believes the proposed 

electronic Market Maker Trading Permit 

fees are equitably allocated between 

other BOX Participants and Market 

Makers, when these fees are viewed in 

the context of the overall activity on 

BOX, as Market Makers: (1) Consume 

the most bandwidth and resources of 

the network; (2) transact the vast 

majority of the volume on BOX; and (3) 

require the high touch network support 

services provided by BOX and its staff, 

including more costly network 

monitoring, reporting and support 

services, resulting in a much higher cost 

to BOX. The proposed electronic Market 

Maker Trading Permit fees are equitably 

allocated in this regard because the 

majority of customer demand comes 

from Market Makers, whose transactions 

make up a majority of the volume on 

BOX. Accordingly, the Exchange 

believes it is reasonable, equitably 

allocated, and not unfairly 

discriminatory to recoup a portion of its 

costs associated with providing 

electronic Market Makers access 

services. BOX believes that the 

proposed electronic Market Maker 

Trading Permit fees are equitably 

allocated between other BOX 

Participants and Market Makers, as 

Market Makers consume the most 

bandwidth and resources of the network 

because only Market Makers submit 

quotes on BOX. Specifically, BOX notes 

that these market participants account 

for greater than 99% of message traffic 

over the network, while other nonMarket Maker market participants 

account for less than 1% of message 

traffic over the network. In BOX’s 

experience, most BOX Participants do 

not have a business need for the high 

performance network solutions required 

by Market Makers. BOX’s high 

performance network solutions and 

supporting infrastructure (including 

employee support), provides 

unparalleled system throughput and the 

capacity to handle approximately 3 

million quote messages per second. On 

an average day, BOX handles over 1.6 

billion total messages. Of those, Market 

Makers generate approximately 1.59 

billion messages, and other BOX 

Participants generate 9.5 million 

messages. However, in order to achieve 

consistent, premium network 

performance, BOX must build out and 

maintain a network that has the capacity 

to handle the message rate requirements 

of its most heavy network consumers. 

These billions of messages per day 

consume BOX’s resources and 

significantly contribute to the overall 

expense for storage and network 

transport capabilities. Given this 

difference in network utilization rate, 

the Exchange believes that it is 


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14BOX has not yet finalized its 2021 year end 

results. 

15The direct expenses detailed herein are 

contained in the following line items: Technical 

and Operational, External IT Services, Data 

Processing & Communication, and Depreciation. 

16This overall direct expense total includes all 

expenses related to space rental, power usage, 

connections, etc., at the Exchange’s data centers, 

trading technology support, software and hardware 

depreciation, and intermarket linkage and third 

party market data connectivity fees. 

reasonable, equitable, and not unfairly 

discriminatory that Market Makers pay 

for a higher portion of the access costs 

(compared to other Participant types) 

designed to be recovered via the 

proposed electronic Market Maker 

Trading Permit fees. 

In order to provide more detail and to 

quantify BOX’s costs associated with 

providing access to the BOX network in 

general, BOX notes that there are 

material costs associated with providing 

the infrastructure and headcount to 

fully-support access to BOX. BOX 

incurs technology expenses related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting associated with its network 

technology. While some of the expense 

is fixed, much of the expense is not 

fixed, and thus increases as the 

expenses associated with access services 

for electronic Market Makers increase. 

For example, new Market Makers to 

BOX may require the purchase of 

additional hardware to support those 

Participants as well as enhanced 

monitoring and reporting of customer 

performance that BOX provides. 

Further, as the total number of Market 

Makers increase, BOX may need to 

increase their data center footprint and 

consume more power, resulting in 

increased costs charged by their thirdparty data center provider. Accordingly, 

the cost to BOX to provide access to its 

Participants is not fixed. BOX believes 

the proposed electronic Market Maker 

Trading Permit fees are reasonable in 

order to offset a portion of the costs to 

BOX associated with providing access to 

Market Makers to its network 

infrastructure. 

BOX Market Makers have and 

continue to account for the vast majority 

of network capacity utilization and 

trading activity on BOX and thus 

account for the majority of expenses 

placed on BOX systems. Specifically, in 

2017 (the year after BOX established the 

flat Participant Fee), the total expense 

for providing access services for all 

Participant types was approximately 

$819,000. Broken down further, in 2017, 

the total expense for providing access 

services to non-Market Maker 

Participants was approximately 

$117,000 and the total expense for 

providing access services to Market 

Makers was approximately $702,000. 

The Exchange has seen this disparity in 

access expenses between non-Market 

Makers and Market Makers year after 

year since the establishment of the 

Participant Fee in 2016. In 2018, the 

total expense for providing access 

services for all Participant types was 

approximately $763,000— 

approximately $109,000 allocated to 

non-Market Maker expenses and 

approximately $654,000 allocated to 

Market Maker expenses. In 2019, the 

total expense for providing access 

services for all Participant types was 

approximately $722,000— 

approximately $103,000 allocated to 

non-Market Maker expenses and 

approximately $619,000 allocated to 

Market Makers. In 2020, the total 

expense for providing access services 

for all Participant types was 

approximately $1.1 million— 

approximately $161,000 allocated to 

non-Market Maker expenses and 

approximately $971,000 allocated to 

Market Makers. Further, as discussed 

herein, BOX experienced a material 

increase in costs in 2021 and projects a 

similar material increase for 2022 due to 

projects to make its network 

environment more transparent and 

deterministic, and increased order flow 

seen throughout the industry. These 

increased costs are reflected in the 

expenses related to providing access 

services to all BOX Participants. 

Specifically, in 2021, the total expense 

for providing access services for all 

Participant types was approximately 

$1.29 million—approximately $190,000 

allocated to non-Market Maker expenses 

and approximately $1.1 million 

allocated to Market Makers. Further, in 

the projected expenses for 2022, the 

total projected expense for providing 

access services for all Participant types 

is approximately $1.89 million— 

approximately $270,000 allocated to 

non-Market Maker expenses and $1.62 

million allocated to Market Makers. As 

illustrated by these access expenses year 

over year, it is clear that BOX Market 

Makers account for the majority of 

expenses related to the provision of 

access services for BOX Participants. 

Accordingly, BOX believes that it is 

reasonable and appropriate to charge 

electronic Market Makers more than 

other BOX Participants for electronic 

Trading Permits to access the BOX 

network. 

BOX believes that the proposed 

Market Maker Fees are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total annual expense that BOX projects 

to incur in connection with providing 

these access services versus the total 

annual revenue that BOX projects it will 

collect in connection with the 

associated electronic Market Maker 

Trading Permit fees. 

As discussed herein, BOX conducted 

an extensive cost review in which BOX 

analyzed all expenses in BOX’s general 

expense ledger to determine whether 

each such expense relates to the access 

services for electronic Market Makers, 

and, if such expense did so relate, what 

portion (or percentage) of such expense 

actually supports those services, and 

thus bears a relationship that is, ‘‘in 

nature and closeness,’’ directly related 

to those services. While BOX undertook 

this review of its expenses from 2019 

through 2021, it focused on the 2021 

expenses as these are the most recent 

and clearly demonstrate why BOX 

determined that access fees needed to be 

raised for certain Participants. The sum 

of all such portions of expenses 

represents the total cost to BOX to 

provide Market Makers access to the 

BOX network. 

For 2021,14 the total annual expense 

for providing access services to Market 

Makers was approximately $1.1 million. 

The $1.1 million in projected total 

annual expense is comprised of direct 

and indirect expenses. For 2021, total 

direct expense, (which relates to the 

network infrastructure, associated data 

center processing equipment required to 

support various connections, network 

monitoring systems and associated 

software required to support the access 

services for Market Makers) was 

$770,749.15 It is important to note that 

BOX did not allocate the entirety of its 

overall direct expense in 2021 to 

providing access services for Market 

Makers. Specifically, the $770,749 

direct expense is only a portion of the 

overall direct expenses for access 

service incurred by BOX as overall 

direct expenses in 2021 totaled 

approximately $8.2 million.16 To 

reiterate, the Exchange did not allocate 

all of the direct expenses toward the 

cost of providing access services to 

Market Makers, only that portion which 

BOX identified as being specifically 

mapped to providing the access services 

to Market Makers, approximately 10% 

of the total direct expense for access 

services. The Exchange believes this 

allocation is reasonable because it 

represents BOX’s actual cost to provide 

access services to its Market Makers, 

and not any other service, as supported 

by its cost review. 

The indirect expense (which includes 

expenses related to employee 

compensation and benefits for full-time 


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10272 Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 

17The indirect expenses detailed herein are 

contained in the following line items in the BOX 

2021 Form 1: Personnel, Amortization, Rent of 

facilities, Office-related, Professional Services, 

Other expenses. 18With regard to their proposed access fees, 

MIAX Emerald allocated approximately 15% of the 

total employee compensation and benefits expense, 

approximately 15% of the total depreciation and 

amortization expense, and approximately 15% of 

the total occupancy expense. MIAX Pearl allocated 

approximately 6% of the total applicable employee 

compensation and benefits expense, approximately 

5% of the total applicable depreciation and 

amortization expense, and approximately 8% of the 

total applicable occupancy expense. As such, BOX 

believes its conservative allocation percentage is 

reasonable and appropriate. 

19The Exchange notes that these numbers are 

projections based on BOX’s projected 2022 budget 

expenditures. These costs are subject to change 

depending on the nature of the project or service, 

however BOX does not expect material changes to 

the projected expenses. 

20Expenses for 2022 are based off of BOX 

projected expenses and budget. These expenses are 

subject to change. 

21As discussed above, the costs of these projects 

are included in the total direct expenses for access 

services, of which only a portion were allocated to 

the direct expenses associated with providing 

access services to Market Makers. 

22No expenses related to connectivity or ports 

were included in BOX’s overall expense calculation 

for purposes of this proposal. 

23The Exchange notes that other exchanges that 

recently amended access fees resulted in a 24% and 

10% profit margin, respectively. See Securities 

Exchange Act Release Nos. 93555 (November 10, 

2021), 86 FR 64254 (November 17, 2021) (SR– 

PEARL–2021–54) and 91033 (February 1, 2021), 86 

FR 8455 (February 5, 2021) (SR–EMERALD–2021– 

03). The Exchange notes that similar access fees are 

currently charged at these exchanges today. 

employees, legal expenses and other 

professional services, and office space 

and rent and other miscellaneous 

expenses) that BOX allocates to 

providing access services to electronic 

Market Makers in 2021 was 

approximately $370,435.17 BOX notes 

that the overall indirect expense in 2021 

totaled approximately $18.5 million. To 

reiterate, the Exchange did not allocate 

all of the indirect expenses incurred in 

2021 toward the cost of providing the 

access services to Market Makers. 

Specifically, BOX allocated 

approximately 2% of the total indirect 

expense incurred in 2021 to Market 

Maker access services. The Exchange 

notes that it took a conservative 

approach with regard to the allocation 

of indirect expenses related to providing 

access services to Market Makers. As 

such, this may result in BOX under 

allocating an expense to the provision of 

access services for Market Makers and 

such expenses may actually be higher or 

increase above what BOX utilizes 

within this proposal. The Exchange 

believes this allocation is reasonable 

and appropriate when compared to 

other exchanges’ allocations of similar 

indirect costs.18

Further, BOX analyzed projected 

expenses for 2022 with regard to 

providing access services to Market 

Makers. The projected total expense for 

providing access services to Market 

Makers in 2022 is approximately $1.6 

million.19 BOX notes that direct 

expenses associated with providing 

access services to Market Makers will 

increase 61%, while indirect expenses 

associated with providing access 

services to Market Makers are not 

projected to exceed 2021 costs.20 BOX 

expects significant increases in costs for 

space rental, power usage, connections, 

etc., at the Exchange’s data centers and 

trading technology support. These 

increased costs are attributed to projects 

including, but not limited to redesign 

and migration to an equalized cabling 

infrastructure, the optimization of order 

entry protocol, and upgrades to the 

trading servers and production network 

in connection with the increased order 

flow seen in 2020 and 2021 and 

expected in 2022.21

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision of access 

services (including connectivity for all 

BOX Participants and ports).22 The 

Exchange believes this is reasonable and 

in line, as BOX operates a technologybased business that differentiates itself 

from its competitors based on its trading 

systems that rely on access to a highperformance network, resulting in 

significant technology expense. The 

majority of BOX’s expense is 

technology-based. As such, the 

Exchange believes it is reasonable to 

allocate a portion of its total overall 

expense towards the proposed 

electronic Market Maker Trading Permit 

fees. 

Accordingly, based on the facts and 

circumstances presented above, the 

Exchange believes that the proposed 

electronic Market Maker Trading Permit 

Fees will not result in excessive pricing 

or supra-competitive profit. To 

illustrate, beginning January 1, 2022, on 

a fully annualized basis, BOX projects 

that its annualized revenue associated 

with the proposed electronic Market 

Maker Trading Permit Fees would be 

approximately $1.23 in 2022 based on a 

recent billing cycle. As noted above, 

BOX projects that its annualized 

expense for providing the access 

services to electronic Market Makers 

would be approximately $1.62 million 

in 2022. Accordingly, on a fullyannualized basis, the Exchange believes 

its total projected revenue from the 

proposed electronic Market Maker 

Trading Permit fees will not result in 

any profit for BOX, rather the projected 

revenue will only recoup a portion of 

the 2022 expense for providing access 

services to electronic Market Makers 

(approximately $1.23 million revenue 

minus approximately $1.62 million in 

expense = approximately $388,000 loss 

in 2022).23 The Exchange notes that the 

fee charged to each Market Maker for 

electronic Trading Permits may vary 

from month to month depending on the 

number of classes in which the Market 

Maker was appointed to quote on any 

given day within the calendar month. 

As such, the revenue projection is not 

a static number, with monthly Trading 

Permit fees likely to fluctuate month to 

month. 

For the avoidance of doubt, none of 

the expenses included herein relating to 

providing access services to electronic 

Market Makers relate to the provision of 

any other services offered by BOX. 

Stated differently, no expense amount 

on BOX was allocated more than once. 

The Exchange notes that, with respect to 

the BOX expenses included herein, 

those expenses only cover the BOX 

Options Market; expenses associated 

with the Exchange, BOX Exchange LLC, 

are accounted for separately and are not 

included within the scope of this filing. 

The Exchange believes it is 

reasonable, equitable and not unfairly 

discriminatory to allocate the respective 

figures of each expense category 

described above towards the total cost to 

BOX of operating and supporting the 

network, including providing access 

services to electronic Market Makers 

because BOX performed a line-by-line 

item analysis of all the expenses of 

BOX, and has determined the expenses 

that directly relate to providing Market 

Makers access to BOX. Further, the 

Exchange notes that, without the 

specific direct and indirect items listed 

above, BOX would not be able to 

provide the access services to its Market 

Makers. Each of these expense items, 

including physical hardware, software, 

employee compensation and benefits, 

occupancy costs, and the depreciation 

and amortization of equipment, have 

been identified through a line-by-line 

item analysis to be integral to providing 

access services to its Market Makers. 

The proposed fees are intended to 

recover BOX’s costs of providing Market 

Makers access to the BOX network. 

Accordingly, the Exchange believes that 

the proposed electronic Market Maker 

Trading Permit fees are fair and 

reasonable because they do not result in 

excessive pricing or supra-competitive 

profit, when comparing the actual costs 

to BOX versus the projected annual 


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Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 10273 

24See supra note 5. 

25Prior to filing this proposal, the Exchange notes 

that BOX Market Makers were made aware of the 

proposed tier structure and fee change. BOX 

received feedback from these Market Makers and 

adjusted the fees accordingly based on their 

feedback. Market Makers are not required to quote 

on every options exchange. BOX Market Makers 

choose to quote and transact business on BOX 

because BOX is providing increased trading 

opportunities for these firms. 

revenue from the proposed electronic 

Market Maker Trading Permit fees. 

The Exchange believes that the 

proposed electronic Market Maker 

Trading Permit fees are reasonable, 

equitable, and not unfairly 

discriminatory because they are lower 

than comparable fees at other competing 

options exchanges.24 The proposed fees 

are fair and equitable and not 

unreasonably discriminatory because 

they apply equally to all Market Makers 

and access to BOX is offered on terms 

that are not unfairly discriminatory. 

BOX designed the fee rates in order to 

provide objective criteria for Market 

Makers of different sizes and business 

models that best matches their quoting 

activity on BOX. BOX believes that the 

proposed fee rates and criteria provide 

an objective and flexible framework that 

will encourage Market Makers to be 

appointed and quote in option classes 

while also equitably allocating the fees 

in a reasonable manner amongst Market 

Maker appointments to account for 

quoting and trading activity.25

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. In such an environment, BOX 

must continually adjust its fees for 

services and products, in addition to 

order flow, to remain competitive with 

other exchanges. BOX believes that the 

proposed changes reflect this 

competitive environment. 

Finally, the Exchange notes it is not 

aware of any reason why Market Makers 

could not simply drop their access to an 

exchange (or not initially access an 

exchange) if an exchange were to 

establish prices for its non-transaction 

fees that, in the determination of such 

Market Maker, did not make business or 

economic sense for such Market Maker 

to access such exchange. No options 

market participant—including Market 

Makers—are required by rule, 

regulation, or competitive forces to be a 

Participant of the Exchange. As 

evidence of the fact that market 

participants can and do drop their 

access to exchanges based on nontransaction fee pricing, R2G Services 

LLC (‘‘R2G’’) filed a comment letter after 

BOX’s proposed rule changes to 

increase its connectivity fees (SR–BOX– 

2018–24, SR–BOX–2018–37, and SR– 

BOX–2019–04). The R2G Letter stated, 

‘‘[w]hen BOX instituted a $10,000/ 

month price increase for connectivity; 

we had no choice but to terminate 

connectivity into them as well as 

terminate our market data relationship. 

The cost benefit analysis just didn’t 

make any sense for us at those new 

levels.’’ Accordingly, this example 

shows that if an exchange sets a certain 

fee for connectivity and/or other nontransaction fees for its relevant 

marketplace that are too high or deemed 

unreasonable by such market 

participant, market participants can 

choose to drop their access to such 

exchange if they so choose. 

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. 

Intra-Market Competition 

The Exchange believes that the 

proposed electronic Market Maker 

Trading Permit fees do not place certain 

market participants at a relative 

disadvantage to other market 

participants because the proposed fees 

do not favor certain categories of market 

participants in a manner that would 

impose a burden on competition; rather, 

the fee rates are designed in order to 

provide objective criteria for Market 

Makers of different sizes and business 

models that best matches their quoting 

activity on BOX. Further, the Exchange 

believes that the proposed electronic 

Market Maker Trading Permit fees will 

not impose a burden on intramarket 

competition because, when these fees 

are viewed in the context of the overall 

activity on BOX, Market Makers: (1) 

Consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on BOX; 

and (3) require the high touch network 

support services provided by BOX and 

its staff, including more costly network 

monitoring, reporting and support 

services, resulting in a much higher cost 

to BOX. The Exchange notes that the 

majority of customer demand comes 

from Market Makers, whose transactions 

make up a majority of the volume on 

BOX. Further, as discussed herein, other 

Participant types (Broker Dealers, 

Professional Customers, and Public 

Customers) take up significantly less 

BOX resources and costs. As such, the 

Exchange does not believe charging 

electronic Market Makers higher 

Trading Permit fees than other 

Participant types will impose a burden 

on intramarket competition. 

The Exchange believes that the tiered 

structure of the proposed electronic 

Market Maker Trading Permit fees will 

not impose a burden on intramarket 

competition because the tiered structure 

takes into account the number of classes 

quoted by each individual Market 

Maker. As discussed herein, the BOX 

system requires increased performance 

and capacity in order to provide the 

opportunity for each Market Maker to 

quote in a higher number of options 

classes on BOX. Specifically, the more 

classes that are actively quoted on BOX 

by a Market Maker requires increased 

memory for record retention, increased 

bandwidth for optimized performance, 

increased functionalities on each 

application layer, and increased 

optimization with regard to surveillance 

and monitoring of such classes quoted. 

As such, basing the Market Maker 

Trading Permit fee on the greatest 

number of classes quoted in on any 

given day in a calendar month is 

reasonable and appropriate when taking 

into account how the increased number 

of quoted classes directly impact the 

costs and resources for BOX. 

Inter-Market Competition 

The Exchange believes the proposed 

Market Maker Fees do not place an 

undue burden on competition on other 

SROs that is not necessary or 

appropriate. In particular, options 

market participants are not forced to 

become participants of all options 

exchanges. The Exchange notes that it 

has far less Participants as compared to 

the much greater number of participants 

at other options exchanges. There are a 

number of large market makers and 

broker-dealers that are participants of 

other options exchange but not 

Participants of BOX. The Exchange is 

also unaware of any assertion that its 

existing fee levels or the proposed 

electronic Market Maker Fees would 

somehow unduly impair its competition 

with other options exchanges. To the 

contrary, if the fees charged are deemed 

too high by market participants, they 

can simply discontinue their 

membership with BOX. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily favor one of the 

15 competing options venues if they 

deem fee levels at a particular venue to 

be excessive. Based on publiclyavailable information, and excluding 

index-based options, no single exchange 

has more than 16% market share. 

Therefore, no exchange possesses 

significant pricing power in the 

execution of multiply-listed equity and 


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10274 Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 

26See Options Volume by Exchange available at 

https://www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/Volume-byExchange. 

27 15 U.S.C. 78s(b)(3)(A)(ii). 

28 17 CFR 240.19b–4(f)(2). 29 17 CFR 200.30–3(a)(12). 

ETF options order flow. For the month 

of November 2021, BOX had a market 

share of approximately 5.58% of 

executed multiply-listed equity 

options 26 and BOX believes that the 

ever-shifting market share among 

exchanges from month to month 

demonstrates that market participants 

can discontinue or reduce use of certain 

categories of products, or shift order 

flow, in response to fee changes. In such 

an environment, BOX must continually 

adjust its fees and fee waivers to remain 

competitive with other exchanges and to 

attract order flow to the facility. 

Finally, the Exchange 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 credits to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment. 

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 27

and Rule 19b–4(f)(2) thereunder,28

because it establishes or changes a due, 

or fee. 

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 

• 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–2022–07 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2022–07. 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–2022–07, and should 

be submitted on or before March 16, 

2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03763 Filed 2–22–22; 8:45 am] 

BILLING CODE 8011–01–P 

SELECTIVE SERVICE SYSTEM 

Form To Be Submitted to the Office of 

Management and Budget for Extension 

of Clearance 

AGENCY: Selective Service System. 

ACTION: Notice. 

The following form will be submitted 

to the Office of Management and Budget 

(OMB) for extension of clearance 

without change in compliance with the 

Paperwork Reduction Act (44 U.S.C. 

chapter 35): 

SSS Form 750 

Title: Request for a Medical Exception 

to the COVID–19 Vaccination 

Requirement. 

Summary: Per Executive Order 14043, 

Requiring Coronavirus Disease 2019 

Vaccination for Federal Employees, and 

guidance from the Safer Federal 

Workforce Task Force, the Selective 

Service System (SSS) created and 

received emergency clearance for the 

Agency’s Request for a Medical 

Exception to the COVID–19 Vaccination 

Requirement form. This form is for SSS 

employees requesting a medical 

exception to the vaccine requirements. 

The current form is only valid for six 

months. In anticipation of future 

requests from its employees, the SSS is 

seeking an extension of this currently 

approved collection. 

Respondents: SSS employees and 

their personal medical providers. 

Frequency: Completion is a one-time 

occurrence. 

Burden: A burden of 30 minutes or 

less on the individual respondent. 

SUPPLEMENTARY INFORMATION: The 

vaccination requirement issued 

pursuant to E.O. 14043, is currently the 

subject of a nationwide injunction. 

While that injunction remains in place, 

Selective Service System will not 

process requests for a medical exception 

from the COVID–19 vaccination 

requirement pursuant to E.O. 14043. 

Selective Service System will also not 

request the submission of any medical 

information related to a request for an 

exception from the vaccination 

requirement pursuant to E.O. 14043 

while the injunction remains in place. 

But Selective Service System may 

nevertheless receive information 

regarding a medical exception. That is 

because, if Selective Service System 

were to receive a request for an 

exception from the COVID–19 

vaccination requirement pursuant to 

E.O. 14043 during the pendency of the 

injunction, Selective Service System 

will accept the request, hold it in 

abeyance, and notify the employee who 


khammond on DSKJM1Z7X2PROD with NOTICES