Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices 34813 

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

2 17 CFR 240.19b–4. 

3See BOX Rule 7300(a). 

4See BOX Rule 7300(b). 

5See BOX Rule 7300(c). 

6See id. A Legging Order is a Limit Order on the 

BOX Book that represents one side of a Complex 

Order that is to buy or sell an equal quantity of two 

options series resting on the Complex Order Book. 

7The Exchange notes, no system changes to 

existing functionality are being made pursuant to 

this proposal. Rather, this proposal is designed to 

reduce any potential investor confusion. 

8 15 U.S.C. 78f(b). 

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

10See Securities Exchange Release No. 34–74210 

(February 5, 2015), 80 FR 7663 (February 11, 2015) 

(SR–BOX–2014–28) (Commission Order Approving 

BOX Rule 7300). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92255; File No. SR–BOX– 

2021–16] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend BOX Rule 7300 

(Preferenced Orders) 

June 24, 2021. 

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 June 11, 

2021, BOX Exchange LLC (‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

BOX Rule 7300 (Preferenced Orders). 

The text of the proposed rule change is 

available from the principal office of the 

Exchange, at the Commission’s Public 

Reference Room and also on the 

Exchange’s internet website at http://

boxoptions.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

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

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend BOX Rule 7300 to 

provide greater clarification about the 

Exchange’s current allocation process 

for Preferenced Orders. Specifically, the 

Exchange proposes to add Rule 

7300(c)(4) (Remaining Preferred Market 

Maker Interest) to more accurately 

describe the Preferenced Order 

allocation methodology. The Exchange 

notes that the allocation as described by 

the proposed rule text is consistent with 

the Exchange’s current allocation 

methodology. 

As background, a Preferenced Order is 

any order (single leg or complex) 

submitted by a Participant to the 

Exchange for which a specific Market 

Maker is designated (a ‘‘Preferred 

Market Maker’’) to receive execution 

priority, with respect to a portion of the 

Preferenced Order.3 Except as described 

in further detail below, Preferenced 

Orders are treated the same as other 

orders submitted to the Exchange and 

executed in price/time priority 

according to the existing matching 

algorithm on the Exchange.4 For each 

price level at which all order quantities 

on the BOX Book are fully executable 

against a Preferenced Order on a single 

options series, all such orders at that 

price will be filled and the balance of 

the Preferenced Order, if any, will be 

executed, to the extent possible, against 

orders at the next best price level.5

However, at the final price level, where 

the remaining quantity of the 

Preferenced Order is insufficient to 

match the total quantity of orders on the 

BOX Book, the allocation algorithm for 

orders executable against the remaining 

quantity of the Preferenced Order will 

differ from the regular price/time 

priority algorithm by allocating 

executions in the following order: (1) To 

Public Customers, (2) a preferred 

percentage to the Preferred Market 

Maker (subject to certain conditions 

explained in Rule 7300), (3) to all 

remaining quotes and orders on single 

option series and (4) to any Legging 

Order.6

The Exchange’s proposal seeks to 

further clarify the allocation process.7

The current rule text does not specify 

what happens to the Preferred Market 

Maker’s remaining quote quantity that 

exceeds the size of their preferred 

percentage allocation pursuant to 

7300(c)(2). The Exchange notes although 

such an allocation rarely occurs, the 

Exchange believes this proposal will 

improve market participant’s 

understanding of the BOX trading 

system and will continue to conform 

with the Exchange’s existing rules to 

treat Legging Orders last in priority. 

Therefore, the Exchange is proposing 

additional rule text detailing that if after 

the allocation of all orders and quotes in 

7300(c)(1) through (3), there still 

remains an unallocated quantity of the 

Preferenced Order, the remaining 

quantity of the Preferenced Order will 

be allocated to any Preferred Market 

Maker quote size exceeding the 

preferred allocation percentage in 

7300(c)(2). Additionally, if at the end of 

the proposed Remaining Preferred 

Market Maker Interest allocation, any 

interest remains, the balance of the 

Preferenced Order will be allocated to 

Legging Orders, thereby maintaining 

their existing designation as last in 

priority. 

Lastly, the Exchange proposes a 

technical amendment to Rule 7300(c)(2) 

to include the word ‘‘Preferred’’ in order 

to more accurately describe the 

allocation to the Preferred Market 

Marker. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the Act,8

in general, and Section 6(b)(5) of the 

Act,9 in particular, in that it is designed 

to prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest. 

The Exchange’s proposal to amend 

Rule 7300 is consistent with the Act 

because it adds more context to the 

Exchange’s current Rulebook and 

coincides with the Exchange’s original 

proposal to give Legging Orders last 

priority under Rule 7300. Specifically, 

when the Exchange first adopted Rule 

7300 (Preferenced Order Rule) the 

Exchange explained that Legging Orders 

would be given last priority which 

preserved the established priority of 

Legging Orders since they had last 

priority under the then existing 

allocation algorithm.10 The Exchange 


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34814 Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices 

11See BOX Rule 7240(c)(3) (A Legging Order is 

executed only after all other executable orders and 

quotes at the same price are executed in full). 

12See Securities Exchange Release No. 34–69419 

(April 19, 2013), 78 FR 24449 (April 25, 2013) (SR– 

BOX–2013–01) (Commission Order Approving BOX 

Rule Change Relating to Complex Orders). 

13See BOX Rule 7150(g)(7) (Exchange’s Price 

Improvement Period auction allocates Legging 

Orders last in priority). 

14See id. 

15See ISE Rulebook Options 3, Section 7(k)(2) 

and Options 3, Section 10(c)(1)(E), respectively. 

16 ISE Rulebook Options 3, Section 10(c)(1)(E). 

17See BOX Rule 7240(c)(3) (Legging Orders). 

18 15 U.S.C. 78s(b)(3)(A). 

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

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

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

notes this is still true today.11 When the 

Exchange originally adopted Legging 

Orders it noted that Legging Orders 

would only execute after all other 

executable interest on the BOX Book at 

the same price was executed in full, and 

therefore would not negatively impact 

the regular market.12 The Exchange 

notes the current proposal continues to 

uphold this priority scheme by ensuring 

all interest on the BOX Book executes 

before Legging Orders. 

In addition, the Exchange believes the 

proposal brings greater clarity to its 

rules and helps foster coordination with 

persons engaged in facilitating 

transactions in securities because the 

proposal codifies how part of the 

trading system currently functions. The 

Exchange’s proposal, which more 

clearly explains how the system 

allocates Preferenced Orders, protects 

investors and the public interest 

because it adds specificity to the rules 

with respect to current system 

functionality. Specifically, the proposed 

change will further clarify the current 

rule to more specifically describe the 

order in which the system handles 

Preferenced Order allocation on BOX. 

The additional detail makes it clear that 

after the allocation of all orders and 

quotes in 7300(c)(1) through (3), there 

remains any unallocated quantity of the 

Preferenced Order, that remaining 

quantity will be allocated to any 

Preferred Market Maker quote size 

exceeding the preferred allocation 

percentage. The Exchange believes 

adding additional language detailing 

what happens to the remaining quantity 

of Preferred Market Maker quotes 

promotes transparency and reduces 

ambiguity within the Exchange’s Rules 

which ultimately benefits and protects 

investors. As noted above, this is not a 

change to how the Preferenced Order 

allocation currently operates, but merely 

a clarification of the allocation process. 

Furthermore, the Exchange notes the 

current proposal to treat Legging Orders 

last in priority is in line with another 

priority allocation scheme within its 

Rulebook.13 Specifically, under BOX 

Price Improvement Period (‘‘PIP’’) Rule 

7150, Legging Orders are subject to the 

same priority. BOX Rule 7150 provides 

that only after all other orders and 

quotes have been allocated, if there 

remains any unallocated quantity of a 

PIP Order, then an allocation to Legging 

Orders will be made.14 Therefore, the 

Exchange believes the current proposal 

provides consistency within its 

rulebook, reduces the potential for 

investor confusion, and meets investor 

expectations of treating Legging Orders 

last in priority for trade allocations. 

Additionally, the Exchange notes at 

least one other exchange also designates 

Legging Orders for last priority and 

explicitly holds that Legging Orders are 

last in priority for one of its execution 

algorithms.15 Specifically, similar to the 

Exchange’s current Legging Orders Rule 

7240(c), Nasdaq ISE, LLC (‘‘ISE’’) 

Options 3, Section 7(k)(2) maintains that 

legging orders are executed only after all 

other executable orders (including any 

non-displayed size) and quotes at the 

same price are executed in full. Further, 

under ISE’s Size Pro-Rata Execution 

Algorithm, ISE holds that only after all 

other remaining interest has been fully 

executed will Legging Orders be 

allocated.16 Therefore, the Exchange 

believes the proposal further aligns its 

rulebook with at least one other 

exchange within the industry and 

thereby fosters cooperation and 

coordination with persons engaged in 

facilitating transactions in securities. 

The Exchange believes its current 

proposal is in line with the original 

intent behind the allocation 

methodology for BOX Rule 7300 and 

conforms to the Exchange’s established 

priority of giving Legging Orders last 

priority. The Exchange continues to 

believe that providing priority for single 

option orders or quotes over Legging 

Orders is reasonable as it preserves the 

established priority of single option 

orders when executing with Complex 

Orders. In addition, the Exchange notes 

that the Exchange’s Legging Order rule 

explicitly states ‘‘[a] Legging Order is 

executed only after all other executable 

orders and quotes at the same price are 

executed in full.’’ 17 Therefore, the 

Exchange believes the proposal 

contributes to harmonizing the 

Exchange’s Rulebook and will help 

avoid investor confusion when 

executing orders on the Exchange. 

Lastly, the proposed non-substantive 

addition of the word ‘‘Preferred’’ in Rule 

7300(c)(2) is a more precise description 

which better articulates the current 

allocation process. The Exchange 

believes this technical amendment will 

improve the rules readability, promote 

consistent terminology in the rule and 

thereby further protect investors and the 

public interest because it makes the rule 

easier for Participants to comprehend. 

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. As indicated 

above, no system changes to existing 

functionality/priority are being made 

pursuant to this proposal; rather, this 

proposal is designed to reduce any 

potential investor confusion as to the 

allocation methodology for Preferenced 

Orders presently available on the 

Exchange. Therefore, the proposed 

changes are designed to enhance clarity 

and consistency in the Exchange’s 

Rulebook. Furthermore, the Exchange 

believes the proposed rule change will 

not impose any unnecessary burden on 

competition because it coincides with 

the Exchange’s existing rules and 

allocation methodologies by treating 

Legging Orders last in priority. 

As such, the Exchange does not 

believe that the proposed rule change 

will impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, it has become effective 

pursuant to Section 19(b)(3)(A) of the 

Act 18 and Rule 19b–4(f)(6) 

thereunder.19


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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices 34815 

20 17 CFR 240.19b–4(f)(6). 

21 17 CFR 240.19b–4(f)(6)(iii). 

22For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 23 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 20 normally does not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b– 

4(f)(6)(iii) 21 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has asked the Commission to 

waive the 30-day operative delay so that 

the proposed rule change may become 

operative immediately upon filing. The 

Exchange states that waiver of the 

operative delay would be consistent 

with the protection of investors and the 

public interest because it would enable 

the Exchange to clarify its rule text 

without delay while continuing to 

maintain the Exchange’s existing rules 

designating Legging Orders for last 

priority. For this reason, and because 

the proposed rule change does not raise 

any novel regulatory issues, the 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. Accordingly, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposed rule change as operative upon 

filing.22

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 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2021–16 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2021–16. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. 

The Commission will post all 

comments on the Commission’s internet 

website (http://www.sec.gov/rules/ 

sro.shtml). Copies of the submission, all 

subsequent amendments, all written 

statements with respect to the proposed 

rule change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, on official business 

days between the hours of 10:00 a.m. 

and 3:00 p.m., located at 100 F Street 

NE, Washington, DC 20549. 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–2021–16 and should 

be submitted on or before July 21, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13915 Filed 6–29–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92256; File No. SR– 

NASDAQ–2021–045] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Modify Certain Pricing Limitations for 

Companies Listing in Connection With 

a Direct Listing Primary Offering 

June 24, 2021. 

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 June 11, 

2021, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify 

certain pricing limitations for 

companies listing in connection with a 

Direct Listing primary offering in which 

the company will sell shares itself in the 

opening auction on the first day of 

trading on Nasdaq. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

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. 


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