[Federal Register Volume 86, Number 179 (Monday, September 20, 2021)]
[Notices]
[Pages 52241-52243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20215]



[[Page 52241]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92980; File No. SR-BOX-2021-20]


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

September 14, 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 September 1, 2021, BOX Exchange LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Exchange filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule on 
the BOX Options Market LLC (``BOX'') options facility. While changes to 
the fee schedule pursuant to this proposal will be effective upon 
filing, the changes will become operative on September 1, 2021. The 
text of the proposed rule change is available from the principal office 
of the Exchange, at the Commission's Public Reference Room and also on 
the Exchange's internet website at http://boxexchange.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX 
to amend Section I.D.1. (QCC Rebate). Specifically, the Exchange 
proposes to remove the current flat rate rebates for QCC transactions 
and establish a QCC rebate tier structure.
    By way of background, a Qualified Contingent Cross (``QCC'') 
transaction is comprised of an originating order to buy or sell at 
least 1,000 contracts, or 10,000 mini-option contracts, that is 
identified as being part of a qualified contingent trade, coupled with 
a contra-side order or orders totaling an equal number of contracts.\5\ 
Currently, the Exchange assesses a fee of $0.17 per contract for Broker 
Dealers and Market Makers for all Agency Order, the originating order, 
and contra-side orders that are part of a QCC transaction.\6\ The 
Exchange currently applies a $0.14 per contract rebate to all QCC 
Agency Orders where at least one party to the QCC transaction is a 
Broker Dealer or Market Maker and a $0.22 per contract rebate to all 
QCC Agency Order when both parties to the QCC transaction are a Broker 
Dealer or Market Maker. The above rebates are paid to the Participant 
that entered the order into the BOX system.
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    \5\ See BOX Rule 7110(c)(6).
    \6\ Public Customers and Professional Customers are not assessed 
fees for QCC transactions on BOX. The Exchange notes that, under 
this proposal, the QCC transaction fees will remain the same.
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    The Exchange now proposes to remove the flat rate QCC rebates 
currently in place and establish a tiered rebate structure where the 
amount of the rebate will be based off of incrementally increasing 
volume thresholds of QCC transactions on BOX. The Exchange notes that 
the way in which the rebates will be applied to the QCC transactions 
remains the same as it is today. The QCC rebates will still be applied 
to the QCC Agency Order when both parties to the QCC transaction are a 
Broker Dealer or Market Maker. Also, the rebate will continue to be 
paid to the Participant that entered the order into the BOX system when 
at least one party to the QCC transaction is a Broker Dealer or Market 
Maker. Under this proposal, the per contract rebate for QCC 
transactions will now be applied according to the volume threshold tier 
achieved. Volume thresholds will be calculated on a monthly basis by 
totaling the Participant's QCC Agency Order volume on BOX. 
Specifically, the Exchange proposes the QCC Agency Order volume 
thresholds as follows:
    <bullet> To receive the rebate in Tier 1, a Participant must submit 
QCC Agency Orders totaling 0 to 1,499,999 contracts per month.
    <bullet> To receive the rebate in Tier 2, a Participant must submit 
QCC Agency Orders totaling 1,500,000 to 2,499,999 contracts per month.
    <bullet> To receive the rebate in Tier 3, a Participant must submit 
QCC Agency Orders totaling 2,500,000 to 3,499,999 contracts per month.
    <bullet> To receive the rebate in Tier 4, a Participant must submit 
QCC Agency Orders totaling 3,500,000 or more contracts per month.
    The proposed tiered rebate structure, including volume thresholds 
and applicable rebates, will be as follows:

------------------------------------------------------------------------
                        QCC Agency
        Tier         Order volume on    Rebate 1 (per     Rebate 2 (per
                     BOX (per month)      contract)         contract)
------------------------------------------------------------------------
1..................  0 to 1,499,999            ($0.14)           ($0.22)
                      contracts.
2..................  1,500,000 to              ($0.15)           ($0.23)
                      2,499,999
                      contracts.
3..................  2,500,000 to              ($0.15)           ($0.24)
                      3,499,999
                      contracts.
4..................  3,500,000+                ($0.15)           ($0.25)
                      contracts.
------------------------------------------------------------------------

    When only one side of the QCC transaction is a Broker Dealer or 
Market Maker, Rebate 1 will apply. When both parties to the QCC 
transaction are a Broker Dealer or Market Maker, Rebate 2 will apply. 
If the Participant qualifies for both rebates, only the larger rebate

[[Page 52242]]

will be applied to the Agency Order.\7\ The Exchange notes that a 
similar rebate structure and rebates for QCC transactions exist at 
another exchange.\8\
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    \7\ The Exchange again notes that this is how BOX currently 
assesses the flat rate rebates for QCC transactions.
    \8\ See Cboe EDGX Exchange, Inc. (``CboeEDGX'') Fee Schedule. 
The Exchange notes that the proposed volume thresholds are slightly 
higher than the volume thresholds at CboeEDGX. Also, the Exchange 
notes that the rebate amounts in Rebate 1 and Rebate 2 differ 
slightly from CboeEDGX. Despite the differences, the Exchange 
believes the proposed rebate structure and rebates discussed herein 
are reasonable as they provide an incremental incentive for 
Participants to strive for the higher tier levels, which provide 
increasingly higher rebates for incrementally more QCC volume 
achieved, which the Exchange believes is a reasonably designed 
incentive for Participants to grow their QCC order flow to receive 
the enhanced rebates. Further, the Exchange notes that the QCC 
transaction fees at BOX will remain unchanged at $0.17 for Broker 
Dealer and Market Maker Agency Orders and Contra Orders for QCC 
Transactions. The Exchange notes that CboeEDGX assesses $0.20 to 
Broker Dealers and Market Makers for Agency Orders and Contra Orders 
for QCC transactions. As such, the Exchange believes the proposed 
rebate structure and rebates is reasonable and appropriate.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5)of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among BOX Participants and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive or 
incentives to be insufficient. The Exchange is only one of several 
options venues to which market participants may direct their order 
flow, and it represents a small percentage of the overall market. The 
proposed changes reflect a competitive pricing structure designed to 
incentivize market participants to direct their QCC order flow, which 
the Exchange believes would enhance market quality to the benefit of 
all Participants.
    The Exchange believes the proposed changes to the QCC Rebate 
structure are reasonable because the proposed changes provide 
opportunities for Participants to receive higher rebates for 
incrementally increasing the Participant's Agency QCC Order volume. The 
Exchange again notes that a volume-based incentive structure exists at 
another exchange,\10\ and believes that the proposed tiers are 
reasonable, equitable, and non-discriminatory because they are open to 
all Participants on an equal basis.
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    \10\ See supra note 8.
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    The Exchange believes the proposed QCC Rebate tiers are a 
reasonable means to encourage Participants to increase their liquidity 
on the Exchange, particularly in connection with additional QCC Agency 
Order flow to the Exchange in order to benefit from the proposed 
enhanced rebates. The Exchange believes that the proposed tiers are 
reasonable in that they provide an ample number of opportunities for a 
Participant to receive an enhanced rebate for qualifying orders. The 
proposed tiers provide an incremental incentive for Participants to 
strive for higher tier levels, which provide increasingly higher 
rebates for incrementally more QCC Agency Order volume achieved, which 
the Exchange believes is a reasonably designed incentive for 
Participants to grow their QCC order flow to receive the enhanced 
rebates. Further, the Exchange believes the proposed rebate structure 
is reasonable, as the fees assessed for QCC transactions on BOX will 
remain the same.
    The Exchange believes the proposed enhanced rebates are reasonable 
and proportionate with the difficulty of the proposed volume threshold 
criteria and that the tiers continue to provide an incremental 
incentive for Participants to strive for higher tier levels, which 
provides increasingly higher rebates for satisfying increasingly more 
stringent criteria. As noted above, the Exchange also believes the 
proposal to adopt two alternative rebates (depending on the capacity of 
the parties to the transaction) is reasonable as this is how the 
Exchange currently assesses the flat rate rebates for QCC transactions 
today.
    Lastly, the Exchange believes that the proposed changes represent 
an equitable allocation of fees and is not unfairly discriminatory 
because all Broker Dealer and Market Makers will be eligible for the 
proposed tiers and corresponding enhanced rebates. Additionally, the 
enhanced rebates will apply uniformly to the Participants that reach 
the proposed tiers. Further, the Exchange believes that applying the 
proposed rebates where at least one party to the QCC transaction is a 
Broker Dealer or Market Maker is reasonable, equitable, and not 
unfairly discriminatory because Public Customers and Professional 
Customers are not assessed fees for these transactions and, in turn, do 
not need the incentive of the rebate. As such, the Exchange believes 
the proposed changes are equitable and not unfairly discriminatory 
because the rebates potentially apply to all Participants that enter 
the originating order (except for when both the Agency Order and the 
Contra Order are Public Customers or Professional Customers) and 
because it is intended to incentivize the sending of more QCC Order to 
the Exchange.

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. Rather, as discussed above, the 
Exchange believes that the proposed change would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives, and enhanced execution 
opportunities for all Participants. As a result, the Exchange believes 
that the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.
    The Exchange believes that the proposed rule change does not impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the Act. First, the Exchange notes that 
the proposed changes apply uniformly to similarly situated 
Participants. The Exchange believes that the proposed changes related 
to QCC transactions would not impose any burden on intramarket 
competition, but rather, serves to increase intramarket competition by 
incentivizing market participants, to direct their QCC orders to the 
Exchange, in turn providing for more opportunities to compete at 
improved prices. Additionally, the proposed rule change benefits all 
market participants as any overall increased liquidity that may result 
from the proposed tier incentives benefits all investors by offering 
additional flexibility for all investors to enjoy cost savings, 
supporting the quality of price discovery, promoting market 
transparency and improving investor protection.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Participants have numerous alternative venues they may participate on 
and direct their order flow, including 15 other options exchanges. 
Additionally,

[[Page 52243]]

the Exchange represents a small percentage of the overall market. Based 
on publicly available information, no single options exchange has more 
than 15% of the market share.\11\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchanges 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. As noted above, the Exchange believes that the 
proposed rebates under the QCC rebate tiers is comparable to that of 
another exchange offering QCC functionality.\12\ Moreover, the 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Specifically, in Regulation NMS, the 
Commission highlighted the importance of market forces in determining 
prices and SRO revenues and, also, recognized that current regulation 
of the market system ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' The fact that this market is 
competitive has also long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .''. Accordingly, the Exchange 
does not believe the proposed change discussed herein imposes any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
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    \11\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (August 16, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
    \12\ See supra note 8.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \13\ and Rule 19b-4(f)(2) 
thereunder,\14\ because it establishes or changes a due, or fee.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7"><span class="__cf_email__" data-cfemail="c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5">[email protected]</span></a>. Please include 
File Number SR-BOX-2021-20 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2021-20. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2021-20, and should be submitted on 
or before October 12, 2021.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20215 Filed 9-17-21; 8:45 am]
BILLING CODE 8011-01-P


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