33402 Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 

16 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. 78c(a)(2). 

4See Securities Exchange Act Release No. 92017 

(May 25, 2021), 86 FR 29634 (June 2, 2021) (‘‘BSTX 

Rulebook Proposal’’). 

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– 

C2–2021–010 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–C2–2021–010. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–C2–2021–010 and should 

be submitted on or before July 15, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13284 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92206; File No. SR–BOX– 

2021–14] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing of 

Proposed Rule Change in Connection 

With the Proposed Commencement of 

Operations of Boston Security Token 

Exchange LLC (‘‘BSTX’’) 

June 17, 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 7, 

2021, BOX Exchange LLC (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is submitting this 

Proposed Rule Change to the 

Commission in connection with the 

establishment of Boston Security Token 

Exchange LLC (the ‘‘Company’’ or 

‘‘BSTX’’), as a facility, of the Exchange. 

In this Proposed Rule Change, the 

proposed Second Amended and 

Restated Limited Liability Company 

Agreement of the Company dated 

December 24, 2019 (the ‘‘LLC 

Agreement’’), is attached as Exhibit 5A 

hereto [sic]. 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 Exchange is submitting this 

Proposed Rule Change to the 

Commission in connection with the 

proposed establishment of BSTX as a 

facility of the Exchange, as that term is 

defined in Section 3(a)(2) of the Act.3

Pending trading rules filed as part of a 

separate rule filing pursuant to the rule 

filing process under Section 19 of the 

Act and approved by the Commission, 

BSTX will operate the BSTX Market.4

The Proposed Rule Change is to 

establish BSTX as a facility of the 

Exchange and, without trading rules 

approved by the Commission, will not 

permit BSTX to commence operations of 

the BSTX Market. However, the 

approval of the Proposed Rule Change, 

and BSTX as a facility of the Exchange, 

will trigger the regulatory oversight 

responsibilities of the Exchange with 

respect to BSTX. 

BSTX is controlled jointly by BOX 

Digital, a Delaware limited liability 

company and a subsidiary of BOX 

Holdings Group LLC, and tZERO Group, 

Inc., a Delaware corporation and an 

affiliate of Overstock.com, Inc. BSTX is 

an affiliate of the Exchange and, when 

approved as a facility of the Exchange, 

will be subject to regulatory oversight by 

the Exchange. In addition, the Exchange 

will enter into a facility agreement with 

BSTX (the ‘‘Facility Agreement’’) 

pursuant to which the Exchange will 

regulate the Company as a facility of the 

Exchange. The Exchange’s powers and 

authority under the Facility Agreement 

ensure that the Exchange has full 

regulatory control over BSTX, which is 

designed to prevent any owner of BSTX 

from exercising undue influence over 

the regulated activities of the Company. 

The Exchange will also provide certain 

business services to the Company such 

as providing human resources and office 

technology support pursuant to an 

administrative services agreement 

between the Exchange and BSTX. 

The LLC Agreement is the source of 

governance and operating authority for 

the Company and, therefore, functions 

in a similar manner as articles of 

incorporation and bylaws would 

function for a corporation. The 

Exchange submitted a separate filing to 

establish rules relating to trading on 


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5See BSTX Rulebook Proposal. 

6Currently, there is only one facility of the 

Exchange, BOX Options Market LLC. 

7See Securities Exchange Act Release No. 888934 

[sic] May 22, 2020, 85 FR 32085 May 28, 2020. 

8A BSTX Participant is a firm or organization that 

is registered with the Exchange pursuant to 

Exchange Rules for the purposes of participating on 

the BSTX Market as an order flow provider or 

market maker. See Section 1.1, LLC Agreement. 

9The Exchange notes, as further described in the 

Proposed Rule Change, that certain provisions of 

the BOX Holdings LLC and BOX Options LLC 

Agreements are not included in the LLC Agreement 

because they are not applicable. For example, 

certain provisions in the BOX Holdings LLC 

Agreement that are related to different voting 

classes of ownership are not present in the LLC 

Agreement because BSTX has only one voting class 

of ownership. See, e.g., Sections 4.1, 4.4, 4.13 and 

7 of the BOX Holdings LLC Agreement. 

10 15 U.S.C. 78f(b)(5). 

11 ‘‘Units’’ mean Class A Units and Class B Units. 

For the avoidance of doubt, the ownership or 

possession of Units shall not in and of itself entitle 

the owner or holder thereof to vote or consent to 

any action with respect to the Company (which 

rights shall be vested only in duly admitted 

Members of the Company), or to exercise any right 

of a Member of the Company under the LLC 

Agreement, the LLC Act, or other applicable law. 

See Section 1.1, LLC Agreement. 

12 ‘‘Class A Units’’ shall mean equal units of 

limited liability company interest in the Company, 

including an interest in the ownership and profits 

and losses of the Company and the right to receive 

distributions from the Company as set forth in the 

LLC Agreement. See Section 1.1, LLC Agreement. 

13 ‘‘Class B Units’’ shall be identical to Class A 

Units except that Class B Members shall not have 

the right to vote on any matter related to the 

Company as a result of holding Class B Units. See 

Section 1.1, LLC Agreement. 

14Pursuant to Section 2.5(b) of the LLC 

Agreement, upon the consummation of any sale or 

transfer of a majority of the Class A Units or a 

majority of the assets of the Company, directly or 

indirectly, to any party or group of related parties, 

including through a series of transactions, all then 

outstanding Class B Units shall automatically 

convert into an equal number of Class A units 

without the need of any action by any person. For 

the avoidance of doubt, a Class B Member’s Capital 

Account does not change as a result of the 

conversion of the Class B Units. 

15The Membership Record shall include the 

name and address of each Member and the number 

of Units of each class held by each Member. 

16See BOX Holdings LLC Agreement Sections 1.1 

and 2.5. 

BSTX.5 The Exchange also submitted a 

separate filing to introduce structural 

changes to the Exchange to 

accommodate regulation of BSTX in 

addition to the Exchange’s existing 

facility,6 which was approved.7 With 

the addition of BSTX as an Exchange 

facility, BSTX Participants 8 will have 

the same representation, rights and 

responsibilities as Participants on the 

Exchange’s other facility. 

The Exchange currently operates BOX 

Options Market LLC (‘‘BOX Options’’), 

which is a facility of the Exchange, as 

that term is defined in Section 3(a)(2) of 

the Act. The proposed LLC Agreement 

provisions are generally the same as the 

provisions of the BOX Options LLC 

Agreement or, where indicated herein, 

are the same as provisions of the BOX 

Holdings LLC Agreement.9 Currently, 

BOX Holdings has nine separate, 

unaffiliated owners. BOX Holdings 

owns 100% of BOX Options so BOX 

Holdings is essentially the alter ego of 

BOX Options. By contrast, the Company 

has two separate, unaffiliated voting 

owners, BOX Digital and tZERO, each of 

which owns 50% of the voting class of 

equity of the Company. Ownership 

diverges for BOX Options directly above 

BOX Holdings in its ownership 

structure and ownership diverges for the 

Company directly above the Company 

in its ownership structure. Therefore, as 

discussed below, when comparing 

various provisions in the LLC 

Agreement, some provisions are more 

appropriately compared with the BOX 

Holdings LLC Agreement, particularly 

with respect to ownership issues. The 

Exchange believes that governance 

consistent with established provisions 

that have already received Commission 

approval harmonizes rules and practices 

across the Exchange’s facilities, which 

may foster cooperation and coordination 

with persons engaged in regulating, 

clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 

consistent with Section 6(b)(5) of the 

Act.10

Structure of the Company 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to the structure of the 

Company, highlighting areas that vary 

in comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Ownership interests of the Company 

are represented by Units.11 The 

Company has two classes of Units: Class 

A Units 12 and Class B Units.13 Except 

as otherwise provided in the LLC 

Agreement, all Units are identical to 

each other and accord the holders 

thereof the same obligations, rights, and 

privileges as accorded to each other 

holder thereof.14 The duly admitted 

holders of Units are referred to as the 

members of the Company (‘‘Members’’). 

The Units represent equity interests in 

the Company and entitle the duly 

admitted holders thereof to participate 

in the Company’s allocations and 

distributions. Voting Class A Units are 

held 50/50 by BOX Digital and tZERO 

with each having an economic interest 

of over 45% in the Company. Nonvoting Class B Units are held by various 

employees and directors of the 

Company, each of whom holds less than 

5% economic interest in the Company. 

Pursuant to Section 1.1 of the LLC 

Agreement, a record of the Members is 

maintained by the Secretary of the 

Company and updated from time to 

time as necessary and as provided in the 

LLC Agreement (‘‘Membership 

Record’’).15 These provisions are 

substantially the same as those in the 

BOX Holdings LLC Agreement.16

BOX Digital is a subsidiary of BOX 

Holdings and an affiliate of the 

Exchange and, therefore, the Company 

will be an affiliate of the Exchange. BOX 

Holdings owns 98% of BOX Digital and 

2% of BOX Digital is held by Lisa Fall. 

BOX Holdings already owns one 

subsidiary that is an existing facility of 

the Exchange. The existing facility— 

BOX Options—operates a market for 

trading option contracts on U.S. 

equities. BOX Holdings is the parent 

company for both BOX Digital and BOX 

Options. BOX Holdings has nine 

separate, unaffiliated owners, including 

MX US 2, Inc., a wholly owned, indirect 

subsidiary of TMX Group Limited 

(‘‘TMX’’), which holds 42.62% of the 

outstanding units of BOX Holdings, and 

IB Exchange Corp., which holds 22.69% 

of the outstanding units of BOX 

Holdings. The other seven owners of 

BOX Holdings, Citadel Securities 

Principal Investments LLC, Citigroup 

Financial Products Inc., UBS Americas 

Inc., CSFB Next Fund Inc., LabMorgan 

Corp., Wolverine Trading, LLC and 

Aragon Solutions Ltd, each hold less 

than 15% of the outstanding units of 

BOX Holdings. 

Medici Ventures, L.P. (‘‘Medici’’), a 

Delaware limited partnership, owns 

44% of the outstanding shares of tZERO, 

Overstock.com, Inc. (‘‘Overstock’’), a 

publicly held corporation organized 

under the laws of the state of Delaware, 

owns 43% of the outstanding shares of 

tZERO, Joseph Cammarata holds 7.53% 

of the outstanding shares of tZERO, and 

each of the following owns less than 3% 

of the outstanding shares of tZERO: 

Todd Tobacco, Newer Ventures LLC, 

Schalk Steyn, Raj Karkara, Alec Wilkins, 

Dohi Ang, Brian Capuano, Trent Larson, 

Eric Fish, Kristen Anne Bagley, Kirstie 

Dougherty, SpeedRoute Technologies 

Inc., Tommy McSherry, Rob Collucci, 

John Gilchrist, John Paul DeVito, Jimmy 

Ambrose, Jason Heckler, Max Melmed, 

Alex Vlastakis, Olalekan Abebefe, 

Samson Arubuola, Ryan Mitchell, 

Zachary Wilezol, Anthony Bove, Ralph 

Daiuto, Rob Christiansen, Amanda 

Gervase, Derek Tobacco, Steve Bailey, 

and Dinosaur Financial. Pelion MV GP, 

L.L.C. (‘‘Medici GP’’), a Delaware 

limited liability company, serves as the 


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17A ‘‘Controlling Person’’ is defined as ‘‘a Person 

who, alone or together with any Related Persons of 

such Person, holds a Controlling Interest in a 

Member.’’ See Section 7.4(g)(v)(B), LLC Agreement. 

A ‘‘Controlling Interest’’ is defined as ‘‘the direct or 

indirect ownership of 25% or more of the total 

voting power of all equity securities of a Member 

(other than voting rights solely with respect to 

matters affecting the rights, preferences, or 

privileges of a particular class of equity securities), 

by any Person, alone or together with any Related 

Persons of such Person.’’ See Section 7.4(g)(v)(A), 

LLC Agreement. A ‘‘Related Person’’ is defined as 

‘‘with respect to any Person: (A) Any Affiliate of 

such Person; (B) any other Person with which such 

first Person has any agreement, arrangement or 

understanding (whether or not in writing) to act 

together for the purpose of acquiring, voting, 

holding or disposing of Units; (C) in the case of a 

Person that is a company, corporation or similar 

entity, any executive officer (as defined under Rule 

3b-7 under the [Act]) or director of such Person and, 

in the case of a Person that is a partnership or 

limited liability company, any general partner, 

managing member or manager of such Person, as 

applicable; (D) in the case of any BSTX Participant 

who is at the same time a broker-dealer, any Person 

that is associated with the BSTX Participant (as 

determined using the definition of ‘‘person 

associated with a member’’ as defined under 

Section 3(a)(21) of the [Act]); (E) in the case of a 

Person that is a natural person and a BSTX 

Participant, any broker or dealer that is also a BSTX 

Participant with which such Person is associated; 

(F) in the case of a Person that is a natural person, 

any relative or spouse of such Person, or any 

relative of such spouse who has the same home as 

such Person or who is a director or officer of the 

Exchange or any of its parents or subsidiaries; (G) 

in the case of a Person that is an executive officer 

(as defined under Rule 3b–7 under the [Act]) or a 

director of a company, corporation or similar entity, 

such company, corporation or entity, as applicable; 

and (H) in the case of a Person that is a general 

partner, managing member or manager of a 

partnership or limited liability company, such 

partnership or limited liability company, as 

applicable.’’ 

18LLC Agreement Section 7.4(h) is based on 

Section 7.4(h) of the BOX Holdings LLC Agreement. 

19 15 U.S.C. 78f(b)(1). 

20LLC Agreement Section 7.4(e) is based on 

Section 7.4(e) of the BOX Holdings LLC Agreement. 

21LLC Agreement Section 7.4(f) is based on 

Section 7.4(f) of the BOX Holdings LLC Agreement. 

22 15 U.S.C. 78f(b)(1). 

23See Securities Exchange Act Release No. 34– 

66871 (April 27, 2012) 77 FR 26323 (May 3, 2012) 

(Order granting approval of BOX Exchange). 

24 15 U.S.C. 78f(b)(1). 

25 15 U.S.C. 78f(b)(5). 

general partner of Medici and has the 

sole right to manage its affairs. Medici 

GP owns 1% of the partnership interests 

in Medici (along with a profits interest 

in Medici), and Overstock owns 99% of 

the partnership interests in Medici. 

Membership interests in Medici GP are 

held by the following, each of which 

holds less than 25% of Medici GP: 

Carine Clark, Susannah Duke, Steve 

Glover, Brad Hintze, Jeff Kearl, Trevor 

Lund, Matt Mosman, Erika Nash, Zain 

Rizavi, Laura Summerhays, The Blake G 

Modersitzki 2020 Irrevocable Trust 

(affiliated with Blake G. Modersitzki), 

The Capitola Trust (affiliated with Chad 

Packard), The GP Investment Trust 

(affiliated with Chris Cooper) and The 

Oaxaca Dynasty Trust (affiliated with 

Ben Lambert). Therefore, both tZERO 

and the Company are affiliates of 

Overstock, Medici and Medici GP. 

Pursuant to Section 7.4(g)(ii) of the 

LLC Agreement, any Controlling 

Person 17 is required to become a party 

to the LLC Agreement and abide by its 

provisions, to the same extent and as if 

they were Members. Related Persons 

that are otherwise Controlling Persons 

are not required to become parties to the 

LLC Agreement if they are only under 

common control of an upstream owner 

but are not in the upstream ownership 

chain above a Company owner because 

they will not have the ability to exert 

any control over the Company. BOX 

Holdings, Medici, Medici GP and 

Overstock are indirect owners of the 

Company. Medici GP owns 1% of the 

partnership interests and a profits 

interest in Medici and acts as Medici’s 

general partner. Overstock owns 43% of 

tZERO directly and 99% of Medici, 

which owns 44% of tZERO. As a result, 

Overstock owns, directly or indirectly, 

more than 80% of tZERO, which owns 

50% of the voting class of equity of 

BSTX. Overstock, Medici and Medici 

GP will be required to become parties to 

the Company’s LLC Agreement by 

executing an instrument of accession 

substantially in the form attached hereto 

as Exhibit 5B [sic] and abide by its 

provisions, to the same extent and as if 

they were Members, because they are 

Controlling Persons of the Company. 

Similarly, BOX Digital, BOX Holdings, 

MX US 2, Inc., MX US 1, Inc., Bourse 

de Montreal Inc., and TMX Group 

Limited will also each be required to 

become parties to the LLC Agreement by 

executing an instrument of accession 

and abide by its provisions to the same 

extent and as if they were Members 

because they are Controlling Persons of 

the Company. TMX Group Limited 

owns 100% of Bourse de Montreal Inc., 

which owns 100% of MX US 1, Inc., 

which owns 100% of MX US 2, Inc., 

which owns more than 40% of BOX 

Holdings. BOX Holdings owns 98% of 

BOX Digital, which owns 50% of the 

voting class of equity of BSTX. 

Any BSTX Participant that holds, 

directly or indirectly, more than 20% of 

the Company will have its voting power 

capped at 20% pursuant to Section 

7.4(h) of the LLC Agreement, a 

limitation designed to prevent a market 

participant from exerting undue 

influence on an Exchange facility.18

Related Persons will be grouped 

together when applying these limits. 

The Exchange believes the proposed 

voting cap provision is consistent with 

the Act, including Section 6(b)(1), 

which requires, in part, an exchange to 

be so organized and have the capacity 

to carry out the purposes of the Act.19

In particular, the voting cap is designed 

to minimize the ability of a BSTX 

Participant to improperly interfere with 

or restrict the ability of the Exchange to 

effectively carry out its regulatory 

oversight responsibilities under the Act. 

The SEC will be required to be 

notified if an owner exceeds 5%, 10% 

or 15% ownership in the Company 

pursuant to Section 7.4(e) of the LLC 

Agreement.20 Further, rule filings are 

required when an owner crosses above 

20% or any subsequent 5% increment, 

pursuant to Section 7.4(f) of the LLC 

Agreement.21 Related Persons are 

grouped together when applying these 

limits. These are the same provisions as 

are contained in the BOX Holdings LLC 

Agreement. The Exchange believes the 

proposed notification provisions are 

consistent with the Act, including 

Section 6(b)(1), which requires, in part, 

an exchange to be so organized and have 

the capacity to carry out the purposes of 

the Act.22 In particular, SEC notification 

of ownership interests exceeding certain 

percentage thresholds can help improve 

the Commission’s ability to effectively 

monitor and surveil for potential undue 

influence and control over the operation 

of the Exchange. 

The Exchange notes that existing 

ownership limits applicable to owners 

of the Exchange, the entity that will 

have regulatory oversight of BSTX, are 

not changing.23 The Exchange believes 

the existing ownership limits will help 

to ensure the independence of the 

Exchange’s regulatory oversight of BSTX 

and facilitate the ability of the Exchange 

to carry out its regulatory 

responsibilities and operate in a manner 

consistent with the Act, and are 

appropriate and consistent with the 

requirements of the Act, particularly 

with Section 6(b)(1), which requires, in 

part, an exchange be so organized and 

have the capacity to carry out the 

purposes of the Act.24

The Company does not have the same 

ownership as BOX Options or BOX 

Holdings; therefore, the Members of the 

Company differ from those of BOX 

Options and BOX Holdings. The 

Exchange believes that the structure of 

the Company will promote just and 

equitable principles of trade, and, in 

general, protect investors and the public 

interest, consistent with Section 6(b)(5) 

of the Act.25


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26See BOX Options LLC Agreement Section 2.3. 

27See BOX Options LLC Agreement Section 8.1. 

28 ‘‘Percentage Interests’’ are defined as ‘‘with 

respect to a Member, means the ratio of the number 

of Unit held by the Member to the total of all of 

the issued Units, expressed as a percentage and 

determined with respect to each class of Units 

whenever applicable.’’ See Section 1.1, LLC 

Agreement. 

29The LSA defines a ‘‘Trigger Event’’ as meaning 

‘‘any of the following events: (a) A material breach 

by tZERO of any of its obligations under this LSA 

(being either a single event which is a material 

breach or a series of breaches which taken together 

are a material breach) which material breach or 

failure is not cured by tZERO within 90 days after 

Company gives written notice of such breach or 

failure to tZERO hereunder, except for Critical 

Functions in which case the cure period shall be 

10 days; (b) any bankruptcy, reorganization, debt 

arrangement, or other case or proceeding under any 

bankruptcy or insolvency Law or any non-frivolous 

dissolution or liquidation proceedings commenced 

by or against tZERO; and if such case or proceeding 

is not commenced by tZERO, it is acquiesced by 

tZERO in or remains undismissed for 30 days; (c) 

tZERO ceasing active operation of its business 

without a successor or discontinuing any of the 

Base Services; (d) tZERO becomes judicially 

declared insolvent or admits in writing its inability 

to pay its debts as they become due; or (e) tZERO 

applies for or consents to the appointment of a 

trustee, receiver or other custodian for tZERO, or 

makes a general assignment for the benefit of its 

creditors.’’ 

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

31See BOX Options LLC Agreement Sections 4.1, 

4.10, 4.12, and 3.2. 

Term and Termination 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to the term and 

termination of the Company, 

highlighting areas that vary in 

comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Pursuant to Section 2.3 of the LLC 

Agreement, the Company will have a 

perpetual legal existence unless it is 

sooner dissolved as a result of an event 

specified in the Delaware Limited 

Liability Company Act, as amended and 

in effect from time to time, and any 

successor statute (the ‘‘LLC Act’’) or by 

agreement of the Members. The term is 

the same as the provision in the BOX 

Options LLC Agreement,26 but also 

provides that the Company can be 

dissolved by agreement of the Members. 

In addition, Section 10.1 of the LLC 

Agreement provides that the Company 

shall be dissolved upon (i) the election 

to dissolve the Company made by the 

Board pursuant to Section 4.4(b)(v) of 

the LLC Agreement; (ii) the entry of a 

decree of judicial dissolution under 

§ 18–802 of the LLC Act; (iii) the 

resignation, expulsion, bankruptcy or 

dissolution of the last remaining 

Member, or the occurrence of any other 

event which terminates the continued 

membership of the last remaining 

Member in the Company, unless the 

business of the Company is continued 

without dissolution in accordance with 

the LLC Act; or (iv) the occurrence of 

any other event that causes the 

dissolution of a limited liability 

company under the LLC Act unless the 

Company is continued without 

dissolution in accordance with the LLC 

Act. The dissolution events are 

generally the same as those in the BOX 

Options LLC Agreement; 27 however, the 

Company may also be dissolved by the 

affirmative vote of Members holding a 

majority of all of the then outstanding 

Percentage Interests 28 (excluding any 

Percentage Interests held directly or 

indirectly by tZERO and its Affiliates 

from the numerator and the 

denominator for such calculation) taken 

within 180 calendar days after the 

occurrence of any ‘‘Trigger Event’’ as 

such term is defined in the IP License 

and Services Agreement entered into by 

and between tZERO and the Company 

(the ‘‘LSA’’) and described in more 

detail below.29 The Exchange believes 

that the addition of such dissolution 

events will promote just and equitable 

principles of trade, and, in general, 

protect investors and the public interest, 

consistent with Section 6(b)(5) of the 

Act.30

Upon the occurrence of any of the 

events set forth in Section 10.1(a) of the 

LLC Agreement, the Company will be 

dissolved and terminated in accordance 

with the provisions of Article 10 of the 

LLC Agreement. 

Governance of the Company 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to the governance of 

the Company, highlighting areas that 

vary in comparison to the BOX Options 

LLC Agreement and/or BOX Holdings 

LLC Agreement and provides the 

statutory basis for such variation. 

Section 4.1 of the LLC Agreement 

establishes a board of directors of the 

Company (the ‘‘Board of Directors’’ or 

the ‘‘Board’’) to manage the 

development, operations, business and 

affairs of the Company without the need 

for any approval of the Members or any 

other person. Section 4.10 of the LLC 

Agreement provides that, except and 

only to the extent expressly provided for 

in the LLC Agreement and the Related 

Agreements and as delegated by the 

Board of Directors to committees of the 

Board of Directors or to duly appointed 

Officers or agents of the Company, 

neither a Member nor any other Person 

other than the Board of Directors shall 

be an agent of the Company or have any 

right, power or authority to transact any 

business in the name of the Company or 

to act for or on behalf of or to bind the 

Company. Section 4.12(a) of the LLC 

Agreement provides that each of the 

Members and the Directors, Officers, 

employees and agents of the Company 

(a) shall give due regard to the 

preservation of the independence of the 

self-regulatory function of the Exchange 

and to its obligations to investors and 

the general public and shall not take any 

actions which would interfere with the 

effectuation of decisions by the board of 

directors of the Exchange relating to its 

regulatory functions (including 

disciplinary matters) or which would 

interfere with the Exchange’s ability to 

carry out its responsibilities under the 

Act; (b) comply with the federal 

securities laws and the rules and 

regulations promulgated thereunder; 

and (c) cooperate with the Exchange 

pursuant to its regulatory authority and 

with the SEC. Section 3.2 of the LLC 

Agreement provides that the Exchange 

will (a) act as the SEC-approved SRO for 

the BSTX Market, (b) have regulatory 

responsibility for the activities of the 

BSTX Market and provide regulatory 

services to the Company pursuant to the 

Facility Agreement. These are the same 

provisions that are contained in the 

BOX Options LLC Agreement.31 These 

provisions ensure that the Exchange has 

full regulatory control over BSTX, 

which is designed to prevent any owner 

of BSTX from exercising undue 

influence over the regulated activities of 

the Company. 

Section 4.1 of the LLC Agreement 

provides that the Board will consist of 

six (6) directors (each a ‘‘Director’’), 

comprised of two (2) Directors 

appointed by BOX Digital, two (2) 

Directors appointed by tZERO (together 

with the BOX Digital Directors, each a 

‘‘Member Director’’), one (1) Director 

(the ‘‘Independent Director’’) appointed 

by the unanimous vote of all of the then 

serving Member Directors, and one (1) 

non-voting Director (the ‘‘Regulatory 

Director’’) appointed by the Exchange. 

As long as the Company is a facility of 

the Exchange pursuant to Section 3(a)(2) 

of the Act, the Exchange will have the 

right to appoint a Regulatory Director to 

serve as a Director. The Regulatory 

Director must be a member of the senior 

management of the regulation staff of 

the Exchange. By comparison, the board 

of directors of BOX Options is the same 

as BOX Holdings because it is a whollyowned subsidiary of BOX Holdings. The 

remaining structure of the Board of 

Directors for the Company differs from 

that of BOX Holdings because the 

ownership of the Company differs from 

that of BOX Holdings, which has no 


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32 15 U.S.C. 78f(b)(5). 

33LLC Agreement Section 4.3 is based on Section 

4.3 of the BOX Options LLC Agreement. 34 15 U.S.C. 78f(b)(5). 

owners with 50% or greater ownership 

of its voting class of equity. The 

Company has an Independent Director 

to avoid either Member from controlling 

or creating deadlock on the Board. 

However, the presence of a Regulatory 

Director selected by the Exchange on the 

Board is identical to the longstanding 

practice at the Exchange’s other facility, 

BOX Options. The Exchange believes 

that the proposed board structure, and 

in particular, the inclusion of the 

proposed Independent Director and 

Regulatory Director, will promote just 

and equitable principles of trade, foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and 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, protect 

investors and the public interest, 

consistent with Section 6(b)(5) of the 

Act.32 Further, the Exchange believes 

that inclusion of the Regulatory Director 

on the BSTX Board would also be 

consistent with Section 6(b)(1) of the 

Act. This is because the Regulatory 

Director is required to be someone who 

is a member of the senior management 

of the regulation staff of the Exchange 

and is therefore a person who is 

knowledgeable of the rules of the 

Exchange and the regulations applicable 

to it and, in turn, is someone who 

would be well positioned to help ensure 

the Exchange, including in the 

operation of any facilities, continues to 

be so organized and has the capacity to 

carry out the purposes of the Act, 

including to prevent inequitable and 

unfair practices. 

Section 4.3 of the LLC Agreement 

provides that the Board will meet as 

often as it deems necessary, but at least 

four (4) times per year.33 Meetings of the 

Board or any committee thereof may be 

conducted in person or by telephone or 

in any other manner agreed to by the 

Board or, respectively, by the members 

of a committee. Any of the Directors or 

the Exchange may call a meeting of the 

Board upon fourteen (14) calendar days 

prior written notice. In any case where 

the convening of a meeting of Directors 

is a matter of urgency, notice of the 

meeting may be given not less than 

forty-eight (48) hours before the meeting 

is to be held. No notice of a meeting 

shall be necessary when all Directors are 

present. The attendance of at least a 

majority of all the Directors shall 

constitute a quorum for purposes of any 

meeting of the Board. Except as may 

otherwise be provided by the LLC 

Agreement, each of the Directors will be 

entitled to one vote on any action to be 

taken by the Board, except that the 

Regulatory Director shall not vote on 

any action to be taken by the Board or 

any committee, the CEO (if a Director) 

shall not be entitled to vote on matters 

relating to the CEO’s powers, 

compensation or performance, and a 

Director shall not be entitled to vote on 

any matter pertaining to that Director’s 

removal from office. A Director may 

vote the votes allocated to another 

Director (or group of Directors) pursuant 

to a written proxy. Except as otherwise 

provided by the LLC Agreement, any 

action to be taken by the Board shall be 

considered effective only if approved by 

at least a majority of the votes entitled 

to be voted on that action. Meetings of 

the Board may be attended by other 

representatives of the Members, the 

Exchange and other persons related to 

the Company as the Board may approve. 

Any action required or permitted to be 

taken at a meeting of the Board or any 

committee thereof may be taken without 

a meeting if written consents, setting 

forth the action so taken, are executed 

by the members of the Board or 

committee, as the case may be, 

representing the minimum number of 

votes that would be necessary to 

authorize or to take that action at a 

meeting at which all members of the 

Board or committee, as the case may be, 

permitted to vote were present and 

voted. The Board will determine 

procedures relating to the recording of 

minutes of its meetings. The Exchange 

believes that the proposed board 

structure will promote just and 

equitable principles of trade, foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and 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, protect 

investors and the public interest, 

consistent with Section 6(b)(5) of the 

Act.34

Pursuant to Section 4.4 of the LLC 

Agreement, no action with respect to 

any major action (each a ‘‘Major 

Action’’), will be effective unless 

approved by the Board, including the 

affirmative vote of all then serving 

Member Directors, in each case acting at 

a meeting. A vacancy on the Board will 

not prevent approval of a Major Action. 

No other Member votes are required for 

a Major Action. For purposes of the LLC 

Agreement, ‘‘Major Action’’ means any 

of the following: (i) A merger or 

consolidation of the Company with any 

other entity or the sale by the Company 

of any material portion of its assets; (ii) 

entry by the Company into any line of 

business other than the business 

outlined in Article 3 of the LLC 

Agreement; (iii) conversion of the 

Company from a Delaware limited 

liability company into any other type of 

entity; (iv) except as expressly 

contemplated by the LLC Agreement 

and then existing Related Agreements, 

entering into any agreement, 

commitment, or transaction with any 

Member or any of its Affiliates other 

than transactions or agreements upon 

commercially reasonable terms that are 

no less favorable to the Company than 

the Company would obtain in a 

comparable arms-length transaction or 

agreement with a third party; (v) to the 

fullest extent permitted by law, taking 

any action (except pursuant to a vote of 

the Members pursuant to Section 

10.1(a)(ii) of the LLC Agreement to 

effect the voluntary, or which would 

precipitate an involuntary, dissolution 

or winding up of the Company; (vi) 

operating the BSTX Market utilizing any 

other software system, other than the 

BSTX trading system, except as 

otherwise provided in the LSA or to the 

extent otherwise required by the 

Exchange to fulfill its regulatory 

functions or responsibilities or to 

oversee the BSTX Market as determined 

by the board of the Exchange; (vii) 

operating the BSTX Market utilizing any 

other regulatory services provider other 

than the Exchange, except as otherwise 

provided in the Facility Agreement or to 

the extent otherwise required by the 

Exchange to fulfill its regulatory 

functions or responsibilities or to 

oversee the BSTX Market as determined 

by the board of the Exchange; (viii) 

entering into any partnership, joint 

venture or other similar joint business 

undertaking; (ix) making any 

fundamental change in the market 

structure of the Company from that 

contemplated by the Members as of the 

date of the LLC Agreement, except to 

the extent otherwise required by the 

Exchange to fulfill its regulatory 

functions or responsibilities or to 

oversee the BSTX Market as determined 

by the board of the Exchange; (x) issuing 

any new Units pursuant to Section 7.6 

of the LLC Agreement or admitting 

additional or substitute Members 

pursuant to Section 7.1(b); (xi) altering 

the provisions for Board membership 

applicable to any Member, except to the 

extent otherwise required by the 

Exchange to fulfill its regulatory 


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35See Section 4.4 of the BOX Options LLC 

Agreement and Section 4.4 of the BOX Holdings 

LLC Agreement. 

36 15 U.S.C. 78f(b)(5). 

37 15 U.S.C. 78f(b)(1). 

38 15 U.S.C. 78f(b)(5). 

39 15 U.S.C. 78f(b)(1). 40See Section 4.1(d) of the BOX Options LLC 

Agreement. 41See Section 4.12(b) of the BOX Options LLC 

Agreement and Section 4.12(b) of the BOX Holdings 

LLC Agreement. 

functions or responsibilities or to 

oversee the BSTX Market as determined 

by the board of the Exchange; and (xii) 

altering the definition of or 

requirements for approving a Major 

Action, except to the extent otherwise 

required by the Exchange to fulfill its 

regulatory functions or responsibilities 

or to oversee the BSTX Market as 

determined by the board of the 

Exchange. The Major Action events are 

generally the same as those in the BOX 

Options LLC Agreement and BOX 

Holdings LLC Agreement 35 with the 

exception of deletions to references to 

BOX Options affiliates and owners and 

to include cross references to other 

provisions of the LLC Agreement; 

however, the Company’s LLC 

Agreement also provides that a Major 

Action also includes provisions (viii), 

(x), and (xi) as described above. The 

Exchange believes that such events 

should be deemed Major Actions for 

commercial fairness. The Exchange 

believes that deeming the above 

referenced events as Major Actions will 

promote just and equitable principles of 

trade, foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

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, protect investors and the public 

interest, consistent with Section 6(b)(5) 

of the Act.36

Pursuant to Section 4.1(b) of the LLC 

Agreement, a Member Director may be 

removed by the Member entitled to 

appoint that Member Director, with or 

without cause. The Independent 

Director may be removed by a majority 

vote of the then serving Member 

Directors, with or without cause. Any 

Member Director or Independent 

Director may be removed by the Board 

if the Board determines, in good faith, 

that the Director has violated any 

provision of the LLC Agreement or any 

federal or state securities law or that 

such action is necessary or appropriate 

in the public interest or for the 

protection of investors. A Director shall 

not participate in any vote regarding 

that Director’s removal. The Company 

shall promptly notify the Exchange in 

writing of the commencement or 

cessation of service of a Member 

Director or Independent Director. Like 

BOX Options, Directors may be removed 

by the Board for reasons related to 

protection of investors and the owners 

with rights to appoint a Member 

Director have power to remove and 

replace their respective designees. The 

removal provisions for the Company’s 

Independent Director differ from those 

of BOX Options and BOX Holdings 

because those entities do not have an 

Independent Director. The Exchange 

believes that the proposed removal 

provisions will promote just and 

equitable principles of trade, foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and 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, protect 

investors and the public interest, 

consistent with Section 6(b)(5) of the 

Act. Further, the Exchange believes that 

the ability for Member Directors and 

Independent Directors to be removed 

from the Board in the circumstances 

described above would be consistent 

with Section 6(b)(1) of the Act.37 This is 

because removal of such Directors who 

have violated the LLC Agreement or 

federal or state laws would help ensure 

that the Exchange, including in its 

operation of facilities, is so organized 

and has the capacity to be able to carry 

out the purposes of the Act, including 

the prevention of inequitable and unfair 

practices. 

Section 4.1(c) of the LLC Agreement 

provides that, if a vacancy is created on 

the Board as a result of the death, 

disability, retirement, resignation or 

removal (with or without cause) of a 

Member Director or otherwise there 

shall exist or occur any vacancy on the 

Board, the Member whose designee 

created the vacancy will fill that 

vacancy by written notice to the 

Company. Each Member shall promptly 

fill vacancies on the Board, and the 

Board shall consider the advisability of 

taking further action until the vacancies 

are filled. The vacancy provisions are 

not in the BOX Options LLC Agreement; 

however, the Exchange believes that 

providing for contingencies in the event 

of a vacancy are important to avoid 

business disruption and, therefore, this 

proposal will foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 

consistent with Section 6(b)(5) of the 

Act.38 Further, the Exchange believes 

that filling Director vacancies, as 

described above, would provide a 

predetermined and transparent manner 

for filling Director vacancies and 

therefore help avoid business 

disruptions at BSTX. The Exchange 

believes that this, in turn, would be 

consistent with Section 6(b)(1) of the 

Act 39 because it would help ensure that 

the Exchange, including in the 

operation of facilities, is so organized 

and has the capacity to be able carry out 

the purposes of the Act, including to 

remove impediments to and perfect the 

mechanisms of a national market system 

for securities. 

Section 4.1(d) of the LLC Agreement 

provides that the Regulatory Director 

may be removed (a) by the Exchange, 

with or without cause, (b) by the Board 

if the Board determines, in good faith, 

that the Regulatory Director has violated 

any provision of the LLC Agreement or 

any federal or state securities law, or (c) 

by the Board if the Board determines, in 

good faith, that the Regulatory Director 

does not meet the requirements of a 

Regulatory Director as set forth in the 

LLC Agreement. If the Regulatory 

Director ceases to serve for any reason, 

the Exchange shall appoint a new 

Regulatory Director in accordance with 

the requirements in the LLC Agreement. 

The removal provisions in the 

Company’s LLC Agreement are 

substantially the same as those in the 

BOX Options LLC Agreement.40

Section 4.12(b) of the LLC Agreement 

provides that the Company and its 

Members shall comply with the federal 

securities laws and the rules and 

regulations promulgated thereunder and 

shall cooperate with the SEC and the 

Exchange pursuant to and to the extent 

of their respective regulatory authority. 

The Directors, Officers, employees and 

agents of the Company, by virtue of 

their acceptance of such position, shall 

comply with the federal securities laws 

and the rules and regulations 

promulgated thereunder and shall be 

deemed to agree to cooperate with the 

SEC and the Exchange in respect of the 

SEC’s oversight responsibilities 

regarding the Exchange, and the 

Company shall take reasonable steps 

necessary to cause its Directors, 

Officers, employees and agents to so 

cooperate. These provisions in the LLC 

Agreement are the same as those in the 

BOX Options LLC Agreement and BOX 

Holdings LLC Agreement.41

Section 3.2(a)(ii) of the LLC 

Agreement provides that the Exchange 

shall receive notice of planned or 


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42See Section 3.2(a)(ii) of the BOX Options LLC 

Agreement. 

43See Section 3.2(a)(iii) of the BOX Options LLC 

Agreement. 

44 15 U.S.C. 78f(b)(1). 

45As discussed above, the Exchange will appoint 

a Regulatory Director who may, among other things, 

serve as a Director of any regulatory committee(s). 

Such individual will also have insight and access 

to important information related to the Company; 

for example, while the Regulatory Director may not 

serve as a Director on Board committees other than 

authorized regulatory committees, the Regulatory 

Director nevertheless shall (A) have the right to 

attend all meetings of the Board and committees 

thereof; (B) receive equivalent notice of meetings as 

other Directors; and (C) receive a copy of the 

meeting materials provided to other Directors, 

including agendas, action items and minutes for all 

meetings. (See LLC Agreement § 4.2(c).) 

46See Section 3.2(a)(iv) of the BOX Options LLC 

Agreement. 

47See Section 6.1 of the BOX Holdings LLC 

Agreement. 

proposed changes to the Company (but 

not including changes relating solely to 

one or more of the following: Marketing, 

administrative matters, personnel 

matters, social or team building events, 

meetings of the Members, 

communication with the Members, 

finance, location and timing of Board 

meetings, market research, real 

property, equipment, furnishings, 

personal property, intellectual property, 

insurance, contracts unrelated to the 

operation of the BSTX Market and de 

minimis items (‘‘Non-Market Matters’’) 

or the BSTX Market (including, but not 

limited to the BSTX trading system) 

which will require an affirmative 

approval by the Exchange prior to 

implementation, not inconsistent with 

the LLC Agreement. Planned changes 

include, without limitation: (a) Planned 

or proposed changes to the BSTX 

trading system; (b) the sale by the 

Company of any material portion of its 

assets; (c) taking any action to effect a 

voluntary, or which would precipitate 

an involuntary, dissolution or winding 

up of the Company; or (d) obtaining 

regulatory services from a regulatory 

services provider other than the 

Exchange. Procedures for requesting and 

approving changes shall be established 

by the mutual agreement of the 

Company and the Exchange. These 

provisions in the LLC Agreement are the 

same as those in the BOX Options LLC 

Agreement.42

Section 3.2(a)(iii) of the LLC 

Agreement provides that in the event 

that the Exchange, in its sole discretion, 

determines that the proposed or 

planned changes to the Company or the 

BSTX Market (including, but not limited 

to, the BSTX trading system) set forth in 

Section 3.2(a)(ii) of the LLC Agreement 

could cause a Regulatory Deficiency if 

implemented, the Exchange may direct 

the Company, subject to approval of the 

Exchange board of directors, to modify 

the proposal as necessary to ensure that 

it does not cause a Regulatory 

Deficiency. The Company will not 

implement the proposed change until it, 

and any required modifications, are 

approved by the Exchange board of 

directors. The costs of modifications 

undertaken shall be paid by the 

Company. These provisions in the LLC 

Agreement are the same as those in the 

BOX Options LLC Agreement.43 These 

provisions ensure the Exchange 

maintains full regulatory control and 

authority over BSTX while it operates as 

a facility of the Exchange. The Exchange 

believes this provision helps guarantee 

the Exchange’s ability to fulfill its 

regulatory responsibilities and operate 

in a manner consistent with the Act, in 

particular with Section 6(b)(1), which 

requires, in part, an exchange to be so 

organized and have the capacity to carry 

out the purposes of the Act.44

Section 3.2(a)(iv) of the LLC 

Agreement provides that in the event 

that the Exchange, in its sole discretion, 

determines that a Regulatory Deficiency 

exists or is planned, the Exchange may 

direct the Company, subject to approval 

of the Exchange board of directors, to 

undertake such modifications to the 

Company (but not to include NonMarket Matters) or the BSTX Market 

(including, but not limited to, the BSTX 

trading system), as are necessary or 

appropriate to eliminate or prevent the 

Regulatory Deficiency and allow the 

Exchange to perform and fulfill its 

regulatory responsibilities under the 

Act.45 The costs and modifications 

undertaken shall be paid by the 

Company. These provisions in the LLC 

Agreement are substantially the same as 

those in the BOX Options LLC 

Agreement, with the exception of a 

reference to an agreement that is not 

applicable to the Company.46

Regulatory Funds 

Pursuant to Section 9 of the Facility 

Agreement, the Company will agree that 

the Exchange has the right to receive all 

fees, fines and disgorgements imposed 

upon BSTX Participants with respect to 

the Company’s trading system 

(‘‘Regulatory Funds’’) and all market 

data fees, tape and other revenues 

(‘‘Non-regulatory Funds’’). All 

Regulatory Funds and Non-regulatory 

Funds collected by the Exchange with 

respect to the Company may be used by 

the Exchange for regulatory purposes, 

which will be determined in the sole 

discretion of the Exchange. To the 

extent the Company incurs costs and 

expenses for regulatory purposes, the 

Exchange may reimburse the Company 

using Regulatory Funds. In the event the 

Exchange, at any time, determines that 

it does not hold sufficient funds to meet 

all regulatory purposes, the Company 

will reimburse the Exchange for any 

such additional costs and expenses. All 

Regulatory Funds collected by the 

Exchange will be retained by the 

Exchange and not transferred to the 

Company. Non-regulatory funds 

collected by the Exchange may be 

transferred to the Company after the 

Exchange makes adequate provision for 

all regulatory purposes. These 

provisions ensure that the Exchange has 

full control over BSTX with respect to 

its regulated functions and is designed 

to prevent any owner of BSTX from 

exercising undue influence over the 

regulated activities of the Company. 

Capital Contributions and Distributions 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to capital 

contributions and distributions by the 

Company, highlighting areas that vary 

in comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Pursuant to Section 6.1 of the LLC 

Agreement, all capital contributions 

contributed to the Company by holders 

of Units shall be reflected on the books 

and records of the Company. No interest 

will be paid on any capital contribution 

to the Company. No Member will have 

any personal liability for the repayment 

of the capital contribution of any 

Member, and no Member will have any 

obligation to fund any deficit in its 

Capital Account. Each Member waived 

any right to partition the property of the 

Company or to commence an action 

seeking dissolution of the Company 

under the LLC Act. These provisions are 

substantially the same as those in the 

BOX Holdings LLC Agreement.47

Under Section 6.2 of the LLC 

Agreement, the Board, in its sole 

discretion, will determine the capital 

needs of the Company. If at any time the 

Board determines that additional capital 

is required in the interests of the 

Company, additional working capital 

shall be raised in such manner as 

determined by a vote of the Board, 

including the affirmative vote of at least 

one Member Director appointed by each 

Member, but the Board will not have the 

power to require the Members to make 

any additional capital contributions. 

These provisions in the LLC Agreement 

are substantially the same as those in 

the BOX Options LLC Agreement, with 

the exception of the requirement for at 


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48See Section 6.2 of the BOX Options LLC 

Agreement. 

49 15 U.S.C. 78f(b)(5). 

50See Section 7.1 of the BOX Options LLC 

Agreement and Section 8.2 of the BOX Holdings 

LLC Agreement. 

51See Section 10.2 of the BOX Holdings LLC 

Agreement. 

least one Member Director appointed by 

each Member to affirmatively vote on 

the manner to raise additional working 

capital.48 The Exchange believes that 

this added provision exists for purposes 

of commercial fairness and is necessary 

due to the ownership structure of the 

Company and that it will foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, consistent with Section 

6(b)(5) of the Act.49

Pursuant to Section 8.1 of the LLC 

Agreement, if at any time and from time 

to time the Board determines that the 

Company has cash that is not required 

for the operations of the Company, the 

payment of liabilities or expenses of the 

Company, or the setting aside of 

reserves to meet the anticipated cash 

needs of the Company (‘‘Distributable 

Cash’’), then the Company shall make 

cash distributions to its Members in the 

following manner and priority: First, the 

Company shall make tax distributions 

(‘‘Tax Distributions’’) to the Members to 

cover each Member’s estimated income 

tax for that period (or in the event that 

Distributable Cash is less than the total 

of all such Tax Amounts, the Company 

shall distribute the Distributable Cash in 

proportion to such Tax Amounts). All 

tax distributions to a Member will be 

treated as advances against any 

subsequent distributions to be made to 

that Member. Subsequent distributions 

made to the Member shall be adjusted 

so that when aggregated with all prior 

distributions to the Member pursuant to 

those provisions, and with all prior Tax 

Distributions to the Member, the 

amount distributed will be equal, as 

nearly as possible, to the aggregate 

amount that would have been 

distributable to that Member pursuant to 

the LLC Agreement if the LLC 

Agreement contained no provision for 

Tax Distributions; second, when, as and 

if declared by the Board, the Company 

shall make cash distributions to each of 

the Members pro rata in accordance 

with that Member’s respective 

Percentage Interest. Since the Company 

does not have the same ownership as 

BOX Options, the distribution 

provisions in the LLC Agreement differ 

from the BOX Options LLC Agreement 

and BOX Holdings LLC Agreement. 

These provisions relate to tax and 

accounting rules to which the Company 

is subject, due to its ownership 

structure. As such, these provisions are 

standard or not novel for a similarly 

situated commercial business registered 

as a limited liability company under the 

laws of the state of Delaware. 

Section 8.2 of the LLC Agreement 

provides that the Company, and the 

Board on behalf of the Company, shall 

not make a distribution to any Member 

on account of its ownership interest in 

the Company if, and to the extent, such 

distribution would violate the LLC Act 

or other applicable law. This provision 

in the LLC Agreement is the same as the 

provision in the BOX Options LLC 

Agreement and BOX Holdings LLC 

Agreement.50

Section 9.1 of the LLC Agreement 

provides that all profits, losses and 

credits of the Company (for both 

accounting and tax purposes) for each 

fiscal year shall be allocated to the 

Members from time to time (but no less 

often than once annually and before 

making any distribution to the 

Members) pro rata among the Members 

based on that Member’s respective 

Percentage Interest, subject to 

limitations, offsets, chargebacks, 

deductions and revaluations. Since the 

Company does not have the same 

ownership as BOX Options, the 

allocation of profits and losses 

provisions in the LLC Agreement differ 

from the BOX Options LLC Agreement. 

These provisions relate to tax and 

accounting rules to which the Company 

is subject, due to its ownership 

structure. As such, these provisions are 

standard or not novel for a similarly 

situated commercial business registered 

as a limited liability company under the 

laws of the state of Delaware. 

Under Section 9.9 of the LLC 

Agreement, any profits or losses 

resulting from a liquidation, merger or 

consolidation of the Company, the sale 

of substantially all the assets of the 

Company in one or a series of related 

transactions, or any similar event (and, 

if necessary, specific items of gross 

income, gain, loss or deduction incurred 

by the Company in the fiscal year of the 

transaction(s)) shall be allocated among 

the Members so that after those 

allocations and the allocations required 

pursuant to capital account adjustments, 

and immediately before the making of 

any liquidating distributions to the 

Members, the Members’ Capital 

Accounts equal, as nearly as possible, 

the amounts of the respective 

distributions to which they are entitled 

in a winding up. Since the Company 

does not have the same ownership as 

BOX Options, the termination and 

special allocation provisions in the LLC 

Agreement differ from the BOX Options 

LLC Agreement. These provisions relate 

to tax and accounting rules to which the 

Company is subject, due to its 

ownership structure. As such, these 

provisions are standard or not novel for 

a similarly situated commercial 

business registered as a limited liability 

company under the laws of the state of 

Delaware. 

Pursuant to Section 10.2 of the LLC 

Agreement, the assets of the Company 

in winding up shall be applied or 

distributed as follows: First, to creditors 

of the Company, including Members 

who are creditors, to the extent 

otherwise permitted by law, whether by 

payment or the making of reasonable 

provisions for the payment thereof, and 

including any contingent, conditional 

and unmatured liabilities of the 

Company, taking into account the 

relative priorities thereof; second, to the 

Members and former Members in 

satisfaction of liabilities under the LLC 

Act for distributions to those Members 

and former Members; and third, to the 

Members in proportion to their 

respective Percentage Interests. A 

reasonable reserve for contingent, 

conditional and unmatured liabilities in 

connection with the winding up of the 

business of the Company shall be 

retained by the Company until the 

winding up is completed or the reserve 

is otherwise deemed no longer 

necessary by the liquidator. These 

provisions are substantially the same as 

those in the BOX Holdings LLC 

Agreement, with the exception of 

certain provisions that were not 

included in the LLC Agreement because 

they are inapplicable to the Company’s 

structure.51

Intellectual Property 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to intellectual 

property of the Company, highlighting 

areas that vary in comparison to the 

BOX Options LLC Agreement and/or 

BOX Holdings LLC Agreement and 

provides the statutory basis for such 

variation. 

Pursuant to Section 3.2(b) of the LLC 

Agreement, tZERO will provide to the 

Company the intellectual property 

license and services necessary to 

operate the BSTX trading system as set 

forth in the LSA and will make the 

necessary arrangements with any 

applicable third parties which will 

permit the Company to be an authorized 

sublicensee of any required third-party 

software necessary for Trading on the 


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52See Article 13 of the BOX Options LLC 

Agreement. 

53See Section 16.1 of the BOX Holdings LLC 

Agreement. 

54See Section 7.1 of the BOX Holdings LLC 

Agreement. 

55See Sections 7.2 and 7.3 of the BOX Holdings 

LLC Agreement. 

56 15 U.S.C. 78f(b)(5). 

BSTX trading system. The intellectual 

property provisions in the LLC 

Agreement are similar to those in the 

BOX Options LLC Agreement, but 

contain certain differences reflecting the 

license and services of tZERO pursuant 

to the LSA rather than the software and 

technology provided by MX pursuant to 

the TOSA in connection with the BOX 

Options LLC Agreement.52

Under the LSA, tZERO will provide 

the Company and the Exchange with a 

perpetual, fully paid up, royalty-free 

license to use its intellectual property 

comprising the BSTX trading system. In 

addition, the LSA provides that tZERO 

will provide services to the Company, 

including services related to 

implementing, administering, 

maintaining, supporting, hosting, 

developing, testing and securing the 

trading system. These services to be 

provided by tZERO relate to the 

specialized trading system operated by 

BSTX and are separate from any 

administrative or office technology 

services provided to BSTX by the 

Exchange discussed above. 

Pursuant to the LSA, tZERO retains its 

ownership of the BSTX trading system 

and tZERO’s trademarks and service 

marks; provided, however, that the 

Company will own deliverables, 

enhancements and other technology that 

are developed or created by tZERO for 

the Company, including any related 

documentation and intellectual 

property. 

Non-Competition 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to non-competition, 

highlighting areas that vary in 

comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Section 16.1 of the LLC Agreement 

provides that, for so long as it holds, 

directly or indirectly, a combined 

Percentage Interest in the Company of 

five percent (5%) or more, a Member 

will not hold or invest in more than five 

percent (5%) of, or participate in the 

creation and/or operation of, any U.S.- 

based market for the secondary trading 

of security tokens or in any person 

engaged in the creation and/or operation 

of any U.S.-based market for the 

secondary trading of security tokens. 

The non-competition provision is 

substantially the same as the noncompetition provision in the BOX 

Holdings LLC Agreement.53

Changes in Ownership of the Company 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to changes in 

ownership of the Company, highlighting 

areas that vary in comparison to the 

BOX Options LLC Agreement and/or 

BOX Holdings LLC Agreement and 

provides the statutory basis for such 

variation. 

Section 7.1(a) of the LLC Agreement 

provides that no person will directly or 

indirectly, whether voluntarily, 

involuntarily, by operation of law or 

otherwise, dispose of, sell, alienate, 

assign, exchange, participate, 

subparticipate, encumber, or otherwise 

transfer in any manner (each, a 

‘‘Transfer’’) its Units unless prior to that 

Transfer the transferee is approved by a 

vote of the Board. To be eligible for 

Board approval, a proposed transferee 

must be of high professional and 

financial standing, be able to carry out 

its duties as a Member hereunder, if 

admitted as a Member, and be under no 

regulatory or governmental bar or 

disqualification. Notwithstanding the 

foregoing, registration as a broker-dealer 

or self-regulatory organization is not 

required to be eligible for Board 

approval. However, the following will 

not be included in the definition of 

‘‘Transfer’’: Transfers among Members, 

transfers to any person directly or 

indirectly owning, controlling or 

holding with power to vote all of the 

outstanding voting securities of and 

equity or beneficial interests in that 

Member, or transfers to any person that 

is a wholly owned Affiliate of a 

transferring Member. A holder of Units 

will provide prior written notice to the 

Exchange of any proposed Transfer. Any 

Transfer which violates the Transfer 

restrictions in the LLC Agreement will 

be void and ineffectual and will not 

bind or be recognized by the Company. 

Section 7.1(b) of the LLC Agreement 

establishes that a person will be 

admitted to the Company as an 

additional or substitute Member of the 

Company only upon that person’s 

execution of a counterpart of the LLC 

Agreement to evidence its written 

acceptance of the terms and provisions 

of the LLC Agreement, and acceptance 

thereof by resolution of the Board, 

which acceptance may be given or 

withheld in the sole discretion of the 

Board; if that person is a transferee, its 

agreement in writing to its assumption 

of the obligations under the LLC 

Agreement of its assignor, and 

acceptance thereof by resolution of the 

Board; if that person is a transferee, a 

determination by the Board that the 

Transfer was permitted by the LLC 

Agreement; and approval of the Board. 

Whether or not a transferee who 

acquired any Units has accepted in 

writing the terms and provisions of the 

LLC Agreement and assumed in writing 

the obligations hereunder of its 

predecessor in interest, that transferee 

will be deemed, by the acquisition of 

those Units, to have agreed to be subject 

to and bound by all the obligations of 

the LLC Agreement with the same effect 

and to the same extent as any 

predecessor in interest of that transferee. 

Notwithstanding the foregoing, any 

Person to which the Company issues 

new Class B Units shall be 

automatically admitted as a Member 

upon such Person’s execution of a 

counterpart of this Agreement. Pursuant 

to Section 7.1(c) of the LLC Agreement, 

all costs incurred by the Company in 

connection with the admission of a 

substituted Member will be paid by the 

transferor Member. The transfer 

provisions in Section 7.1 of the LLC 

Agreement are not contained in the BOX 

Options LLC Agreement; however, the 

Exchange notes that the provisions of 

Section 7.1 are substantially based on 

provisions in the BOX Holdings Group 

LLC Agreement.54

Pursuant to Section 7.2 of the LLC 

Agreement, the Company will have a 

right of first refusal if a Member desires 

to Transfer its Units, and obtains a bona 

fide offer therefor from a third-party 

transferee. Further, Section 7.3 of the 

LLC Agreement provides that, if the 

Company does not elect to exercise its 

right of first refusal, the non-transferring 

Member(s) next have a right of first 

refusal. The provisions in Sections 7.2 

and 7.3 of the LLC Agreement are 

substantially based on provisions found 

in the BOX Holdings LLC Agreement, 

with certain variations to account for 

differences in corporate and ownership 

structure.55 The Exchange believes that 

such variations are necessary to ensure 

proper application of the LLC 

Agreement’s provisions to the Company, 

which serve to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, consistent with Section 6(b)(5) 

of the Act.56 Further, the Exchange 

believes that the variations in Sections 

7.2 and 7.3 of the LLC Agreement that 


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57 15 U.S.C. 78f(b)(1). 

58See supra note 16. 

59See Section 7.4 of the BOX Holdings LLC 

Agreement. 

60 15 U.S.C. 78f(b)(5). 

61 15 U.S.C. 78f(b)(1). 

tailor those provisions to the corporate 

and ownership structure of BSTX would 

help ensure that persons subject to the 

Exchange’s jurisdiction are able to 

navigate and more readily understand 

the LLC Agreement. The Exchange 

believes that this, in turn, would be 

consistent with Section 6(b)(1) of the 

Act 57 because it would help ensure that 

the Exchange, including in its operation 

of facilities, is so organized and has the 

capacity to be able to carry out the 

purposes of the Act. 

Pursuant to Section 7.4 of the LLC 

Agreement, no Transfer may occur if the 

Transfer could cause a termination of 

the Company, could cause a termination 

of the Company’s status as a partnership 

or cause the Company to be treated as 

a publicly traded partnership for federal 

income tax purposes, is prohibited by 

any securities laws, is prohibited by the 

LLC Agreement, or is to a minor or 

incompetent person. 

Section 7.4(e) of the LLC Agreement 

requires that a Member will provide the 

Company with written notice fourteen 

(14) days prior, and the Company will 

provide the Commission and the 

Exchange with written notice ten (10) 

days prior, to the closing date of any 

acquisition that results in that Member’s 

Percentage Interest, alone or together 

with any related person of that Member, 

meeting or crossing the threshold level 

of 5% or the successive 5% Percentage 

Interest levels of 10% and 15%. Any 

person that, either alone or together 

with its related persons, owns, directly 

or indirectly, of record or beneficially, 

five percent (5%) or more of the then 

outstanding Units will, immediately 

upon acquiring knowledge of its 

ownership of five percent (5%) or more 

of the then outstanding Units, give the 

Company written notice of that 

ownership. In addition, Section 7.4(f) of 

the LLC Agreement provides that any 

Transfer that results in the acquisition 

and holding by any person, alone or 

together with its related persons, of an 

aggregate Percentage Interest level 

which meets or crosses the threshold 

level of 20% or any successive 5% 

Percentage Interest level (i.e., 25%, 

30%, etc.) is also subject to the rule 

filing process pursuant to Section 19 of 

the Act. 

Under Section 7.4(g) of the LLC 

Agreement, unless it does not directly or 

indirectly hold any interest in a 

Member, a Controlling Person (as 

defined below) of a Member will be 

required to execute an amendment to 

the LLC Agreement upon establishing a 

Controlling Interest (as defined below) 

in any Member that, alone or together 

with any related persons of that 

Member, holds a Percentage Interest in 

the Company equal to or greater than 

20%. This amendment will be 

substantially in the form of the 

instrument of accession attached as 

Exhibit 5B hereto [sic] and provide that 

the Controlling Person will agree to 

become a party to the LLC Agreement 

and to abide by all of its provisions, to 

the same extent and as if they were 

Members. These amendments to the 

LLC Agreement will be subject to the 

rule filing process pursuant to Section 

19 of the Act. The rights and privileges, 

including all voting rights, of the 

Member in whom a Controlling Interest 

is held, directly or indirectly, under the 

LLC Agreement and the LLC Act will be 

suspended until the amendment has 

become effective pursuant to Section 19 

of the Act or the Controlling Person no 

longer holds, directly or indirectly, a 

Controlling Interest in the Member.58 As 

a result, any new Member or other 

direct or indirect owner of an equity 

interest in BSTX, whether by transfer of 

such equity interest from an existing 

owner or otherwise, will be subject to 

the same requirements as all other 

Members, namely that it will be 

required to execute an instrument of 

accession to the LLC Agreement and be 

subject to the rule filing process if the 

new Member holds, directly or 

indirectly, a Controlling Interest in 

BSTX. 

In accordance with Section 7.4(h) of 

the LLC Agreement, if a Member, or any 

related person of that Member, is 

approved by the Exchange as a BSTX 

Participant pursuant to the Exchange 

Rules, and that Member’s Percentage 

Interest is greater than 20%, alone or 

together with any Related Person of that 

Member, the voting rights of the 

Member and its appointed Member 

Directors will be limited to 20%; 

provided, however, that the Member’s 

full Percentage Interest will be counted 

for quorum purposes and the portion 

greater than 20% will be voted by the 

person presiding over quorum and vote 

matters in the same proportion as the 

Units held by the other Members are 

voted. The Exchange notes that Section 

7.4 of the Company’s LLC Agreement is 

identical in substance to provisions of 

the BOX Holdings LLC Agreement.59

In addition to the provisions 

discussed above, Section 5 of the LLC 

Agreement includes provisions that 

relate to changes in ownership of the 

Company. Because BOX Options is 

wholly-owned by BOX Holdings, the 

LLC Agreement differs from the BOX 

Options LLC Agreement. Under Section 

5.5 of the LLC Agreement, a Member 

will cease to be a Member of the 

Company upon the Bankruptcy or the 

involuntary dissolution of that Member. 

Further, Section 5.8 of the LLC 

Agreement allows the Board, by 

unanimous vote and after appropriate 

notice and opportunity for hearing, to 

suspend or terminate a Member’s voting 

privileges or membership in the 

Company for three potential reasons: (i) 

In the event the Board determines in 

good faith that such Member is subject 

to a ‘‘statutory disqualification,’’ as 

defined in Section 3(a)(39) of the Act; 

(ii) in the event the Board determines in 

good faith that such Member has 

violated a material provision of this 

Agreement, or any federal or state 

securities law; or (iii) in the event the 

Board determines in good faith that 

such action is necessary or appropriate 

in the public interest or for the 

protection of investors. The Exchange 

believes that limiting the ability to 

participate in the Company for Members 

who may act in contravention of legal or 

ethical standards may promote just and 

equitable principles of trade, and, in 

general, protects investors and the 

public interest, consistent with Section 

6(b)(5) of the Act.60 Further, the 

Exchange believes that the ability to 

suspend or terminate a Member’s voting 

privileges or membership in the 

Company as described above would be 

consistent with Section 6(b)(1) of the 

Act.61 This is because such measures in 

respect of Members who act in 

contravention of legal or ethical 

standards would help ensure that the 

Exchange, including in its operation of 

facilities, is so organized and has the 

capacity to be able to carry out the 

purposes of the Act, including the 

prevention of inequitable and unfair 

practices. 

Finally, the Exchange notes that 

Section 18.1 of the Company’s LLC 

Agreement provides that amendments to 

the LLC Agreement must be approved 

by the Board, including one Member 

Director appointed by each of BOX 

Digital and tZERO, and any amendment 

of a provision specific to any Class, 

Member, or the Exchange requires the 

consent of holders of a majority of the 

outstanding Units of such Class, or such 

Member or the Exchange (as applicable). 

In addition, the Company shall provide 

prompt notice to the Exchange of any 

amendment, modification, waiver or 

supplement to the Agreement formally 

presented to the Board for approval and 


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62A proposed rule change can also become 

effective by operation of law. See 15 U.S.C. 

78s(b)(2). 

63See Section 18.1 of the BOX Holdings LLC 

Agreement. 

64See Section 3.2 of the BOX Options LLC 

Agreement. 

65See Article 12 of the BOX Options LLC 

Agreement. 

66See Section 12.5 of the BOX Options LLC 

Agreement. 

67 15 U.S.C. 78f(b)(5). 

the Exchange shall review each such 

amendment, modification, waiver or 

supplement and, if such amendment is 

required, under Section 19 of the Act 

and the rules promulgated thereunder, 

to be filed with, or filed with and 

approved by, the SEC before such 

amendment may be effective, then such 

amendment shall not be effective until 

filed with, or filed with and approved 

by, the SEC, as the case may be.62 These 

provisions are similar to provisions in 

the BOX Holdings LLC Agreement but 

differ in details related to the different 

ownership structure of the Company.63

Regulation of the Company 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to regulation of the 

Company, highlighting areas that vary 

in comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Generally, Section 3.2 of the LLC 

Agreement, which is identical in 

substance to a provision in the BOX 

Options LLC Agreement, provides that 

the Exchange has authority to act as the 

SRO for the Company, will provide the 

regulatory framework for the BSTX 

Market and will have regulatory 

responsibility for the activities of the 

BSTX Market.64 In addition, the 

Exchange will provide regulatory 

services to the Company pursuant to the 

Facility Agreement. Nothing in the LLC 

Agreement shall be construed to prevent 

the Exchange from allowing the 

Company to perform activities that 

support the regulatory framework for 

the BSTX Market, subject to oversight 

by the Exchange. This provision ensures 

that the Exchange has full regulatory 

control over BSTX, which is designed to 

prevent any owner of BSTX from 

exercising undue influence over the 

regulated activities of the Company. 

Section 15 of the LLC Agreement 

deals with how the Company will 

govern the handling of confidential 

information, as it relates to the 

securities regulations and otherwise. All 

of the provisions in Section 15 of the 

LLC Agreement are substantively 

similar to provisions in the BOX 

Options LLC Agreement, except where 

noted below.65 Under Sections 15.1 and 

15.2(a) of the LLC Agreement, subject to 

certain exceptions set forth below, no 

Member will make any public 

disclosures concerning the LLC 

Agreement without the prior approval of 

the Company. Each Member and the 

Exchange may only use confidential 

information of the Company in 

connection with the activities 

contemplated by the LLC Agreement 

and other written agreements and 

pursuant to the Act and the rules and 

regulations thereunder. Furthermore, 

Section 15.4 of the LLC Agreement 

provides that representatives of the 

parties will meet to institute 

confidentiality procedures and discuss 

confidentiality and disclosure issues. 

Pursuant to Section 15.2(b) of the LLC 

Agreement, each of the Members and 

the Exchange may disclose confidential 

information of the Company only to its 

respective directors, officers, employees 

and agents who have a reasonable need 

to know the information. Also, such 

individuals may disclose confidential 

information of the Company to the 

extent required by applicable securities 

or other laws, a court or securities 

regulators, including the Commission 

and the Exchange. 

Section 15.3 of the LLC Agreement 

requires that each Member and the 

Exchange will hold all non-public 

information concerning the other 

Members or the Exchange in strict 

confidence, unless disclosure to an 

applicable regulatory authority is 

necessary or appropriate or unless 

compelled to disclose by judicial or 

administrative process or required by 

law. If a Member or the Exchange is 

compelled to disclose any Member 

Information in connection with any 

necessary regulatory approval or by 

judicial or administrative process, it 

will promptly notify the disclosing 

party to allow the disclosing party to 

seek a protective order. 

Pursuant to Section 15.5 of the LLC 

Agreement, nothing in the LLC 

Agreement will be interpreted as to 

limit or impede the rights of the 

Commission, pursuant to the federal 

securities laws and rules and 

regulations thereunder, and the 

Exchange to access and examine 

applicable confidential information 

pursuant to the federal securities laws 

and the rules and regulations 

thereunder, or to limit or impede the 

ability of any directors, officers, 

employees or agents of the Company 

and any directors, officers, employees or 

agents of the Members to disclose that 

confidential information to the 

Commission or the Exchange. This is 

substantially the same provision that is 

contained in the BOX Options LLC 

Agreement, except that it also provides 

that the SEC can access and examine 

Confidential Information, pursuant to 

the federal securities laws and rules and 

regulations thereunder.66

Under Section 15.6 of the LLC 

Agreement, confidential information of 

the Company or the Exchange 

pertaining to regulatory matters 

(including but not limited to 

disciplinary matters, trading data, 

trading practices and audit information) 

will not be made available to any 

persons other than to the Company’s 

Directors, officers, employees and 

agents that have a reasonable need to 

know the contents thereof; will be 

retained in confidence by the Company 

and the Directors, officers, employees 

and agents of the Company; and will not 

be used for any non-regulatory purpose. 

Nothing in the LLC Agreement will be 

interpreted as to limit or impede the 

rights of the Commission and the 

Exchange to access and examine that 

confidential information pursuant to the 

federal securities laws and the rules and 

regulations thereunder, or to limit or 

impede the ability of any Directors, 

officers, employees and agents of the 

Company to disclose that confidential 

information to the Commission or the 

Exchange. 

Finally, Section 18.8 of the LLC 

Agreement establishes that the 

Company will not operate as a facility 

of the Exchange until this rule filing is 

effective. Upon effectiveness, the 

Commission and the Exchange will then 

have regulatory oversight 

responsibilities with respect to the 

Company and references in the LLC 

Agreement to the Exchange, the 

Commission, any regulation or oversight 

of the Company by the Commission or 

the Exchange, and any participation in 

the affairs of the Company by the 

Commission or the Exchange, will take 

effect. The execution of the LLC 

Agreement by the Exchange will not be 

required until the approval is obtained, 

at which time the Exchange will become 

a party to the LLC Agreement. This 

provision is not included in the BOX 

Options LLC Agreement because it 

would not be applicable. By not 

operating the Company until this rule 

filing is effective, the Exchange believes 

it is fostering cooperation and 

coordination with persons engaged in 

regulating (e.g., the Commission), 

clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 

consistent with Section 6(b)(5) of the 

Act.67


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68See Section 11.1 of the BOX Holdings LLC 

Agreement. 

69See Section 14.6 of the BOX Options LLC 

Agreement. 

70See Section 14.6(c) of the BOX Options LLC 

Agreement. 

71 15 U.S.C. 78f(b)(5). 

72 15 U.S.C. 78f(b)(1). 

73See Section 18.1 of the BOX Holdings LLC 

Agreement. 

Regulatory Jurisdiction Over Members 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to regulatory 

jurisdiction over Members by the 

Company, highlighting areas that vary 

in comparison to the BOX Options LLC 

Agreement and/or BOX Holdings LLC 

Agreement and provides the statutory 

basis for such variation. 

Pursuant to Section 11.1 of the LLC 

Agreement, which is similar in 

substance to a provision in the BOX 

Holdings LLC Agreement, the Board 

will cause to be entered in appropriate 

books, kept at the Company’s principal 

place of business, all transactions of or 

relating to the Company.68 Each 

Member will have the right to inspect 

and copy those books and records, 

excluding regulatory and disciplinary 

information. The Board will not have 

the right to keep confidential from the 

Members any information that the Board 

would otherwise be permitted to keep 

confidential pursuant to § 18–305(c) of 

the LLC Act, except for information 

required by law or by agreement with 

any third party to be kept confidential. 

The Company’s independent auditor 

will be an independent public 

accounting firm selected by the Board. 

To the extent related to the operation or 

administration of the Exchange or the 

BSTX Market, all books and records of 

the Company and its Members will be 

maintained at a location within the 

United States, the books, records, 

premises, directors, officers, employees 

and agents of the Company and its 

Members will be deemed to be the 

books, records, premises, directors, 

officers, employees and agents of the 

Exchange for the purposes of, and 

subject to oversight pursuant to, the Act, 

and the books and records of the 

Company and its Members will be 

subject at all times to inspection and 

copying by the Commission and the 

Exchange. 

Under Section 18.6(a) of the LLC 

Agreement, to the extent they are related 

to Company activities, the books, 

records, premises, officers, directors, 

agents, and employees of the Member 

will be deemed to be the books, records, 

premises, officers, directors, agents, and 

employees of the Exchange for the 

purpose of and subject to oversight 

pursuant to the Act. Further, pursuant 

to Section 18.6(b) of the LLC Agreement, 

the Company, the Members and the 

officers, directors, employees and agents 

of each, by virtue of their acceptance of 

those positions, will be deemed to 

irrevocably submit to the jurisdiction of 

the U.S. federal courts, the Commission 

and the Exchange for purposes of any 

suit, action or proceeding pursuant to 

U.S. federal securities laws, the rules or 

regulations thereunder, arising out of, or 

relating to, activities of the Exchange 

and the Company, and Delaware state 

courts for any matter relating to the 

organization or internal affairs of the 

Company, and will be deemed to waive, 

and agree not to assert by way of 

motion, as a defense or otherwise in any 

suit, action or proceeding, any claims 

that they are not personally subject to 

the jurisdiction of the U.S. federal 

courts, the Commission, the Exchange 

or Delaware state courts, as applicable, 

that the suit, action or proceeding is an 

inconvenient forum or that the venue of 

the suit, action or proceeding is 

improper, or that the subject matter 

hereof may not be enforced in or by 

those courts or agencies. The Company, 

the Members and the officers, directors, 

employees and agents of each, by virtue 

of their acceptance of those positions, 

also agree that they will maintain an 

agent in the United States for the service 

of process of a claim arising out of, or 

relating to, the activities of the Exchange 

and the Company. These provisions are 

substantially similar to provisions of the 

BOX Options LLC Agreement.69

Pursuant to Section 18.6(c) of the LLC 

Agreement, with respect to obligations 

under the LLC Agreement related to 

confidentiality regulation, jurisdiction 

and books and records, the Company, 

the Exchange, and each Member will 

ensure that directors, officers and 

employees of the Company, the 

Exchange, and each Member consent in 

writing to the applicability of the 

applicable provisions to the extent 

related to the operation or 

administration of the Exchange or the 

BSTX Market. This provision is 

substantially the same as the provision 

contained in the BOX Options LLC 

Agreement, with the exception of the 

deletion of a reference to privacy rules 

in Canada, which are not applicable to 

the current Members of the Company.70

The Exchange believes that allowing 

only applicable laws to be referenced in 

the LLC Agreement helps to ensure that 

proper legal standards apply to the 

Company, which may foster cooperation 

and coordination with persons engaged 

in regulating transactions in securities, 

consistent with Section 6(b)(5) of the 

Act.71 Further, the Exchange believes 

that basing the provisions described 

above on the BOX Options LLC 

Agreement but omitting terms that are 

not applicable would help ensure that 

persons subject to the Exchange’s 

jurisdiction are able to navigate and 

more readily understand the LLC 

Agreement. The Exchange believes that 

this, in turn, would be consistent with 

Section 6(b)(1) of the Act 72 because it 

would help ensure that the Exchange, 

including in its operation of facilities, is 

so organized and has the capacity to be 

able to carry out the purposes of the Act. 

Amendments to LLC Agreement 

In the discussion below, the Exchange 

describes provisions in the LLC 

Agreement related to amendments to the 

LLC Agreement, highlighting areas that 

vary in comparison to the BOX Options 

LLC Agreement and/or BOX Holdings 

LLC Agreement and provides the 

statutory basis for such variation. 

Section 18.1 of the LLC Agreement, 

which is substantially similar to a 

provision in the BOX Holdings LLC 

Agreement,73 provides that the LLC 

Agreement may only be amended by an 

agreement in writing approved by the 

Board, including at least one Member 

Director appointed by each Member, 

without the consent of any Member or 

other person. In addition, any terms 

specific to any Class, or Member or to 

the Exchange may not be altered or 

adversely affect that Member or the 

Exchange without the prior written 

consent of holders of a majority of the 

outstanding Units of such Class, or such 

Member or the Exchange as applicable. 

The Company will provide prompt 

notice to the Exchange of any 

amendment, modification, waiver or 

supplement to the LLC Agreement 

formally presented to the Board for 

approval and the Exchange will review 

each amendment, modification, waiver 

or supplement and, if that amendment 

is required, under Section 19 of the Act 

and the rules promulgated thereunder, 

to be filed with, or filed with and 

approved by, the Commission before 

that amendment may be effective, then 

that amendment will not be effective 

until filed with, or filed with and 

approved by, the Commission, as the 

case may be. If the Exchange ceases to 

be the SRO authority of the Company, 

the Exchange will no longer be a party 

to the LLC Agreement and thereafter the 

provisions of the LLC Agreement will 

not apply to the Exchange except for the 

provisions referenced in Section 18.12, 

which will survive. 


khammond on DSKJM1Z7X2PROD with NOTICES
33414 Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 

74See LLC Agreement Sections 2.1, 2.2, 2.4, 2.5, 

2.6, 2.7, 3.1, 4.2, 4.5, 4.6, 4.7, 4.8, 4.9, 4.11, 5.1, 5.2, 

5.3, 5.4, 5.6, 5.7, 6.3, 6.4, 6.5, 7.5, 7.6, 7.7, 8.3, 9.2, 

9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 10.3, 10.4, 11.2, 11.3, 11.4, 

11.5, 11.6, 12, 13.1, 14, 16.2, 17, 18.2, 18.3, 18.4, 

18.5, 18.7, 18.9, 18.10, 18.11, and 18.12. 

75 15 U.S.C. 78f(b)(1). 

76 15 U.S.C. 78f(b). 

77 15 U.S.C. 78f(b)(5). 

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

79 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Additional Provisions 

As previously mentioned, BSTX is a 

Delaware limited liability company. As 

such, the LLC Agreement contains 

numerous provisions that are standard 

or not novel for a similarly situated 

commercial business registered as a 

limited liability company under the 

laws of the state of Delaware.74 The 

Exchange believes that these provisions 

are consistent with Section 6(b)(1) of the 

Act 75 because they are consistent with 

corporate governance practices, 

generally, and they would help ensure 

that the Exchange, including in its 

operation of facilities, is so organized 

and has the capacity to be able to carry 

out the purposes of the Act. 

2. Statutory Basis 

In addition to the sections above that 

discuss variations from the BOX 

Options LLC Agreement and/or BOX 

Holdings LLC Agreement and their 

associated statutory bases, the Exchange 

believes that the proposal is consistent 

with the requirements of Section 6(b) of 

the Act,76 in general, and furthers the 

objectives of Section 6(b)(1),77 in 

particular, in that it enables the 

Exchange to be so organized so as to 

have the capacity to be able to carry out 

the purposes of the Act and to comply, 

and to enforce compliance by its 

exchange members and persons 

associated with its exchange members, 

with the provisions of the Act, the rules 

and regulations thereunder, and the 

rules of the Exchange. The Exchange 

also believes that this filing furthers the 

objectives of Section 6(b)(5) of the Act 78

in that it is designed to facilitate 

transactions in securities, 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 regulating, clearing, settling, 

processing information with respect to, 

and 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. 

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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2021–14 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–2021–14. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. 

The Commission will post all 

comments on the Commission’s internet 

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

sro.shtml). Copies of the submission, all 

subsequent amendments, all written 

statements with respect to the proposed 

rule change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of 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–BOX–2021–14 and should 

be submitted on or before July 15, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.79

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13246 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92213; File No. SR–NSCC– 

2021–002] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of Partial 

Amendment No. 1 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by Partial 

Amendment No. 1, To Amend the 

Supplemental Liquidity Deposit 

Requirements 

June 21, 2021. 

I. Introduction 

On March 5, 2021, National Securities 

Clearing Corporation (‘‘NSCC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–NSCC–2021–002 

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

Securities Exchange Act of 1934 

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

amend its supplemental liquidity 


khammond on DSKJM1Z7X2PROD with NOTICES