Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 29987 

6Exchange Act Rule 3a71–2(a)(1)(i). 

7Exchange Act Rule 3a71–2(a)(1)(ii). 

8Exchange Act Rule 3a71–2(a)(2)(i). 

9 15 U.S.C. 78o–10. 

10See Cross-Border Application of Certain 

Security-Based Swap Requirements, Release No. 

34–87780 (Dec. 18, 2019) [85 FR 6270, 6345 (Feb. 

4, 2020)] (‘‘Cross-Border Amendments Release’’). In 

the Cross-Border Amendments Release, the 

Commission set the compliance date for registration 

and regulatory requirements for SBSDs and major 

security-based swap participants as 18 months after 

the effective date described therein; that effective 

date was 60 days after publication of the CrossBorder Amendments Release in the Federal 

Register. The Cross-Border Amendments Release 

was published in the Federal Register on Feb. 4, 

2020; 60 days after that date was Apr. 6, 2020. 

Eighteen months after Apr. 6, 2020, was Oct. 6, 

2021. 

11The first compliance date for Regulation SBSR 

with respect to a security-based swap asset class 

was the first Monday that was the later of: (1) Six 

months after the date on which the first securitybased swap data repository that can accept 

transaction reports in that asset class registers with 

the Commission; or (2) one month after the 

compliance date for registration and regulatory 

requirements for SBSDs and major security-based 

swap participants. See Cross-Border Amendments 

Release, 85 FR 6346. DTCC Data Repository (U.S.), 

LLC registered as a security-based swap data 

repository for credit and equity asset classes (i.e., 

the asset classes referenced in Exchange Act Rule 

3a71–2(a)(2)(iii)) on May 7, 2021. See SecurityBased Swap Data Repositories; DTCC Data 

Repository (U.S.), LLC; Order Approving 

Application for Registration as a Security-Based 

Swap Data Repository, Release No. 34–91798 (May 

7, 2021) [86 FR 26115 (May 12, 2021)]. Nov. 8, 

2021, was both the first Monday that was six 

months after May 7, 2021, and the first Monday that 

was one month after the Oct. 6, 2021, compliance 

date for registration and regulatory requirements for 

SBSDs and major security-based swap participants. 

See also SEC Approves Registration of First 

Security-Based Swap Data Repository; Sets the First 

Compliance Date for Regulation SBSR, Press 

Release No. 2021–80 (May 7, 2021), available at 

https://www.sec.gov/news/press-release/2021-80 

(‘‘Today’s SEC action sets Nov. 8, 2021, as the first 

compliance date for Regulation SBSR, which 

governs regulatory reporting and public 

dissemination of security-based swap 

transactions.’’). 

12See Exchange Act Rule 3a71–2A note. As 

appropriate, based on the availability of data and 

information, the report generally should assess 

whether any of the de minimis thresholds should 

be increased or decreased. See Exchange Act Rule 

3a71–2A(a)(1). The Commission intends to consider 

this report in reviewing the effect and application 

of the de minimis thresholds based on the evolution 

of the security-based swap market following the 

implementation of the registration and regulatory 

requirements of Exchange Act Section 15F; the 

report may also be informative as to potential 

changes to the rules further defining the term 

‘‘security-based swap dealer.’’ See Exchange Act 

Rule 3a71–2A note. The Commission directed staff 

also to report on the rules and interpretations 

further defining the Exchange Act’s definition of the 

term ‘‘major security-based swap participant,’’ to 

which the de minimis thresholds in Exchange Act 

Rule 3a71–2 do not apply. 

13See Exchange Act Rule 3a71–2A(b) through (c). 

14See Exchange Act Rule 3a71–2(a)(2)(ii)(A). 

15Exchange Act Rule 3a71–2(a)(2)(ii)(B). 

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). 

amount of no more than $3 billion, 

subject to a phase-in level of an 

aggregate gross notional amount of no 

more than $8 billion.6 For securitybased swaps that are not credit default 

swaps, the de minimis threshold is an 

aggregate gross notional amount of no 

more than $150 million, subject to a 

phase-in level of an aggregate gross 

notional amount of no more than $400 

million.7

The phase-in period for these de 

minimis security-based swap dealing 

activity thresholds is available until the 

‘‘phase-in termination date.’’ 8 The 

phase-in termination date, in turn, 

depends in part on the ‘‘data collection 

initiation date’’ established pursuant to 

Exchange Act Rule 3a71–2(a)(2)(iii). 

That rule provides that the data 

collection initiation date was the later of 

(1) the last compliance date for the 

registration and regulatory requirements 

for SBSDs and major security-based 

swap participants under Exchange Act 

Section 15F,9 and (2) the first date on 

which compliance with the trade-bytrade reporting rules for credit-related 

and equity-related security-based swaps 

to a registered security-based swap data 

repository is required. With respect to 

the first prong of Exchange Act Rule 

3a71–2(a)(2)(iii), the compliance date 

for registration and regulatory 

requirements for SBSDs and major 

security-based swap participants under 

Exchange Act Section 15F was October 

6, 2021.10 With respect to the second 

prong of Exchange Act Rule 3a71– 

2(a)(2)(iii), on May 7, 2021, DTCC Data 

Repository registered with the 

Commission, which definitively set 

November 8, 2021, as the first 

compliance date for Regulation SBSR’s 

requirements regarding reporting of 

credit-related and equity-related 

security-based swaps.11 Pursuant to 

Exchange Act Rule 3a71–2(a)(2)(iii), the 

data collection initiation date thus was 

November 8, 2021. 

The phase-in termination date is 

determined through a separate 

mechanism that depends in part on the 

data collection initiation date and also, 

as explained below, in part upon the 

timing of a Commission staff report 

addressing the rules and interpretations 

further defining the Exchange Act’s 

definition of the term ‘‘security-based 

swap dealer,’’ including the de minimis 

exception to that definition.12 The 

report must be published in the Federal 

Register for public comment no later 

than three years following the data 

collection initiation date, or November 

8, 2024, and could be published 

earlier.13 Nine months after the 

publication of the report, the 

Commission may by order either 

terminate the phase-in period for the de 

minimis thresholds or provide notice of 

its determination that it is necessary or 

appropriate in the public interest to 

propose through rulemaking an 

alternative to the $3 billion and $150 

million de minimis thresholds. The 

Commission’s order in either case shall 

establish the phase-in termination 

date.14 Alternatively, if the phase-in 

termination date has not been 

previously established in such an order, 

the phase-in termination date shall be 

five years after the data collection 

initiation date,15 or November 8, 2026. 

Commission Announcement 

The data collection initiation date 

referenced in Exchange Act Rules 3a71– 

2 and 3a71–2A was November 8, 2021. 

Absent additional Commission action 

establishing the phase-in termination 

date pursuant to Exchange Act Rule 

3a71–2(a)(2)(ii)(A), the phase-in 

termination date shall be November 8, 

2026. 

By the Commission. 

Dated: May 11, 2022. 

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2022–10511 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94894; File No. SR–BOX– 

2022–17] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fee 

Schedule on the BOX Options Market 

LLC Facility To Adopt Electronic 

Market Maker Trading Permit Fees 

May 11, 2022. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on April 27, 

2022, BOX Exchange LLC (‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Exchange filed the proposed rule 

change pursuant to Section 

19(b)(3)(A)(ii) of the Act,3 and Rule 

19b–4(f)(2) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 


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

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

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

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

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

option issues traded on the Exchange). The 

Exchange notes that these fees are compounded, so 

Market Makers who trade in all option issues on the 

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

Miami International Securities Exchange, LLC 

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

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

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

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

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

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

by volume up to all classes listed on MIAX). 

6The Exchange notes the following Participant 

types on BOX: Public Customers, Professional 

Customers, Broker Dealers, and Market Makers. 

Pursuant to this proposal, Public Customers, 

Professional Customers, and Broker Dealers will 

continue to be charged the $1,500 Participant Fee 

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

7The Exchange notes that the higher fees from the 

Original Filing were assessed for the month of 

January 2022, however the proposed fees were 

assessed for February 2022 and will continue to be 

assessed. 

8 15 U.S.C. 78f(b)(4) and (5). 

9See Securities Exchange Act Release No. 79038 

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

(SR–BOX–2016–47). 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to amend the Fee Schedule to establish 

a new monthly Participant Fee on the 

BOX Options Market LLC (‘‘BOX’’) 

options facility. The text of the 

proposed rule change is available from 

the principal office of the Exchange, at 

the Commission’s Public Reference 

Room and also on the Exchange’s 

internet website at http://

boxexchange.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to establish a new 

monthly Participant Fee. Specifically, 

the Exchange proposes to adopt 

electronic Market Maker Trading Permit 

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

Market Maker Appointments in up to 

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

month for Market Maker Appointments 

in up to and including 40 classes; (iii) 

$8,000 per month for Market Maker 

Appointments in up to and including 

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

for Market Maker Appointments for over 

100 classes. For the calculation of the 

monthly electronic Market Maker 

Trading Permit fees, the number of 

classes is defined as the greatest number 

of classes the Market Maker was 

appointed to quote in on any given day 

within the calendar month. The 

Exchange notes that the proposed 

electronic Market Maker Trading Permit 

fees are lower than fees assessed at 

competing options exchanges.5 The 

Exchange notes the current monthly 

Participant Fee of $1,500 per month will 

not apply to electronic Market Makers. 

Under this proposal, electronic Market 

Makers will pay the applicable monthly 

electronic Market Maker Trading Permit 

fee only. All other electronic 

Participants 6 will continue to pay the 

monthly Participant Fee in Section I.B 

of the BOX Fee Schedule. 

The Exchange initially filed the 

proposed fee change on January 3, 2022 

(SR–BOX–2022–01) (the ‘‘Original 

Filing’’). BOX withdrew the Original 

Filing and submitted SR–BOX–2022–04 

(the ‘‘Second Proposed Rule Change’’). 

BOX withdrew the Second Proposed 

Rule Change and submitted the SR– 

BOX–2022–06 (the ‘‘Third Proposed 

Rule Change’’). On February 1, 2022, 

BOX withdrew the Third Proposed Rule 

Change and submitted SR–BOX–2022– 

07 (the ‘‘Fourth Proposed Rule Change’’) 

to lower the fees detailed in the past 

filings after industry feedback. On April 

5, 2022, BOX withdrew and submitted 

SR–BOX–2022–12 (the ‘‘Fifth Proposed 

Rule Change’’). On April 11, 2022, BOX 

withdrew and submitted SR–BOX– 

2022–15 (the ‘‘Sixth Proposed Rule 

Change’’). The Exchange is now 

withdrawing the Sixth Proposed Rule 

Change and submitting this filing (the 

‘‘Seventh Proposed Rule Change’’). 

The Exchange notes that the proposed 

electronic Market Maker Trading Permit 

fees have been effective, and thus paid 

by BOX Market Makers, since January 1, 

2022.7 The Exchange believes it is 

notable that during this time, there have 

been no comment letters submitted to 

the Commission arguing that the 

Exchange’s new fees are unreasonable. 

The Exchange also believes it’s 

significant and notable that, due to 

industry feedback received in January 

from BOX Market Makers, the Exchange 

withdrew its proposed fee change and 

refiled to decrease the proposed fees in 

response to the feedback. 

As discussed herein, the Exchange 

believes the proposed changes are 

consistent with the Act because they are 

reasonable, equitably allocated, and not 

unfairly discriminatory, and not an 

undue burden on competition, as they 

are supported by evidence (including 

data and analysis) and are constrained 

by significant competitive forces. The 

Exchange also believes the proposed 

fees are reasonable as they are in line 

with the amounts assessed to Market 

Makers by other exchanges for similar 

permits. Accordingly, the Exchange 

believes that the proposed fees are 

consistent with the Act. The proposed 

rule change is immediately effective 

upon filing with the Commission 

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

Act. 

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,8 in particular, in that 

it provides for the equitable allocation 

of reasonable dues, fees, and other 

charges among BOX Participants and 

other persons using its facilities and 

does not unfairly discriminate between 

customers, issuers, brokers or dealers. 

The Exchange established the $1,500 

monthly Participant Fee in October 

2016 for all Participants regardless of 

account type.9 At the time BOX 

established this Participant Fee, BOX’s 

market share was 2.45% and the total 

volume of options contracts traded on 

BOX in September 2016 was 8,737,707. 

The Exchange established this lower 

(when compared to other options 

exchanges in the industry) Participant 

Fee in order to encourage market 

participants to become Participants of 

BOX and register as BOX Market 

Makers. Since 2016, BOX has grown its 

market share and membership base 

significantly. Specifically, in September 

2021, BOX’s market share was 5.19% 

and the total volume of option contracts 

traded on BOX in September 2021 was 

42,098,287. BOX recently reviewed its 

current Participant Fees detailed in 

Section I of the BOX Fee Schedule. In 

its review, BOX determined that 


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10For example, in Section IV.A (Non-Auction 

Transactions) of the BOX Fee Schedule, Market 

Makers are assessed a lower fee than Broker Dealers 

and Professional Customers when their orders 

interact with Public Customers, Professional 

Customers, Broker Dealers, and Market Makers. 

They are also eligible for rebates under the Tiered 

Volume Rebate for Non-Auction Transactions in 

Section IV.A.1 of the BOX Fee Schedule. 

Additionally, Market Makers are assessed lower 

fees on opening or re-opening transactions than 

Professional Customers and Broker Dealers under 

Section IV.A.2 of the BOX Fee Schedule. 

11See supra note 5. 

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

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

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

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

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

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

for the fifth trading permit and for each trading 

permit thereafter); NYSE American Options Fee 

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

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

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

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

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

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

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

issues traded on the exchange, and an additional 

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

premium products). See also Cboe BZX Options 

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

Fee, which is a membership fee, according to a 

member’s ADV. See Cboe BZX Options Exchange 

Fee Schedule under ‘‘Membership Fees’’. The 

Participant Fee is $500 if the member ADV is less 

than 5000 contracts and $1,000 if the member ADV 

is equal to or greater than 5000 contracts. 

Participant Fees would need to be 

raised, and a flat fee for all Participant 

types is no longer appropriate. 

Specifically, BOX found that electronic 

Market Makers had been benefitting 

from a flat Participant Fee rate while (1) 

consuming the most bandwidth and 

resources of the network; (2) transacting 

the vast majority of the volume on BOX; 

and (3) requiring the high touch 

network support services provided by 

BOX and its staff. The Exchange notes 

that Broker Dealers, Professional 

Customers, and Public Customers take 

up significantly less BOX resources and 

costs as discussed further below. 

Further, BOX notes that Market Makers 

account for greater than 99% of message 

traffic over the network, while other 

non-Market Maker market participants 

account for less than 1% of message 

traffic over the network. In BOX’s 

experience, most BOX Participants do 

not have a business need for the high 

performance network solutions required 

by Market Makers. BOX’s high 

performance network solutions and 

supporting infrastructure (including 

employee support), provides 

unparalleled system throughput and the 

capacity to handle approximately 3 

million quote messages per second. On 

an average day, the BOX Trading Host 

handles over 1.6 billion total messages. 

Of those 1.6 billion daily messages, BOX 

Market Makers generate 1.59 billion of 

those messages, while other BOX 

Participants generate 9.5 million 

messages. Additionally, in order to 

achieve consistent, premium network 

performance, BOX must build out and 

maintain a network that has the capacity 

to handle the message rate requirements 

beyond those 1.6 billion daily messages. 

These billions of messages per day 

consume BOX’s resources and 

significantly contribute to the overall 

expense for storage and network 

transport capabilities. Given this 

difference in network utilization rate, 

the Exchange believes that it is 

reasonable, equitable, and not unfairly 

discriminatory that Market Makers 

begin to pay for a higher portion of the 

access costs (compared to other BOX 

Participant types). 

BOX notes that while Market Makers 

continue to account for a vast majority 

of the increased costs and resources 

placed on BOX and its systems (as 

discussed herein), Market Makers 

continue to be valuable market 

participants on the exchanges as the 

options market is a quote driven 

industry. BOX recognizes the value that 

Market Makers bring to the Exchange. In 

fact, BOX provides Market Makers 

volume-based discounts and rebates to 

incentivize Market Makers to direct 

order flow to the Exchange to obtain the 

benefit of the rebate, which will in turn 

benefit all market participants by 

increasing liquidity on the Exchange. 

Additionally, for certain transactions, 

BOX also assesses a lower fee for Market 

Makers compared to the fee for Broker 

Dealers or Professional Customers for 

the same reason.10 The proposed 

Trading Permit fees discussed herein are 

meant to strike a balance between 

offsetting the costs to which Market 

Makers place on BOX and continuing to 

incentivize Market Makers to access and 

make a market on BOX. 

In its review of Participant Fees, BOX 

found that since 2016, Market Makers 

have had the luxury of paying the same 

Participant Fees as other account types 

despite Market Makers consuming the 

most resources on the BOX system and 

contributing to increased costs for BOX. 

As such, the Exchange proposes to 

establish higher, separate electronic 

Trading Permit fees for Market Makers 

that are more aligned with the costs and 

resources that Market Makers continue 

to place on BOX and its systems. 

Additionally, the Exchange believes that 

the proposed change will better align 

BOX Participant Fees with rates charged 

by competing options exchanges in the 

industry for similar Trading Permits for 

such market participants. As such, BOX 

believes the proposed electronic Market 

Maker Trading Permit fees are 

reasonable in that they are lower than 

comparable fees at other options 

exchanges.11 Further, the Exchange 

believes that the proposal is reasonably 

designed to continue to compete with 

other options exchanges by 

incentivizing market participants to 

register as Market Makers on BOX in a 

manner than enables BOX to improve its 

overall competitiveness and strengthen 

market quality for all market 

participants. As stated above, the 

Exchange believes the proposed Market 

Maker Trading Permit fees are an 

appropriate balance between offsetting 

the costs to which Market Makers cost 

BOX and continuing to incentivize 

Market Makers to access and make a 

market on BOX. 

The proposed fees are equitable and 

not unfairly discriminatory as the fees 

apply equally to all electronic Market 

Makers. As such, all similarly situated 

electronic Market Makers, with the same 

number of appointments, will be subject 

to the same electronic Market Maker 

Trading Permit fee. The Exchange also 

believes that assessing lower fees to 

electronic Market Makers that quote in 

fewer classes is reasonable and 

appropriate as it will allow BOX to 

retain and attract smaller-scale 

electronic Market Makers, which are an 

integral component of the options 

industry marketplace. Since these 

smaller electronic Market Makers utilize 

less bandwidth and capacity on the 

BOX network due to the lower number 

of quoted classes, the Exchange believes 

it is reasonable and appropriate to offer 

such electronic Market Makers a lower 

fee. The Exchange also notes that other 

options exchanges assess permit fees at 

different rates, based upon a member’s 

participation on that exchange,12 and, as 

such, this concept is not new or novel. 

Further, the Exchange believes the 

proposed tiered structure of the 

electronic Market Maker Trading Permit 

fees is reasonable and appropriate. 

Under the proposal, electronic Market 

Makers will be charged monthly fees 

based on the greatest number of classes 

quoted on any given trading day in a 

calendar month. Under the proposed fee 

structure, the fees increase as the 

number of classes quoted by a Market 

Maker increases. The Exchange believes 

this structure is reasonable because the 

BOX system requires increased 

performance and capacity in order to 

provide the opportunity for Market 

Makers to quote in a higher number of 

options classes on BOX. Specifically, 

the more classes that are actively quoted 


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

Section 8(B) detailing the tiered structure for 

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

14BOX reviewed membership lists at Cboe 

Exchange Inc. (‘‘Cboe’’), Miami International 

Securities Exchange, LLC (‘‘MIAX’’), and BOX—all 

of which detail the firms registered as making 

makers on their respective exchanges. The Nasdaq 

and NYSE exchange groups do not provide this 

level of detail in their membership lists. As such, 

BOX has not included the Nasdaq and NYSE 

exchanges in this analysis. 

15See Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770, 74781 (December 

9, 2008) (‘‘2008 ArcaBook Approval Order’’) 

(approving proposed rule change to establish fees 

for a depth-of-book market data product). 

on BOX by a Market Maker requires 

increased memory for record retention, 

increased bandwidth for optimized 

performance, increased functionalities 

on each application layer, and increased 

optimization with regard to surveillance 

and monitoring of such classes quoted. 

As such, basing the Market Maker 

Trading Permit fee on the greatest 

number of classes quoted in on any 

given day in a calendar month is 

reasonable and appropriate when taking 

into account how the increased number 

of quoted classes directly impact the 

costs and resources required for BOX. 

Further, the Exchange believes that the 

proposed tiered structure is equitable 

and not unfairly discriminatory as all 

similarly situated Market Makers will be 

charged the same fee. The Exchange 

notes that another options exchange in 

the industry calculates Market Maker 

Permit Fees in the same manner.13

The Exchange notes that there is no 

regulatory requirement that market 

makers connect and access any one 

options exchange. Moreover, a Market 

Maker membership is not a requirement 

to participate on the Exchange and 

participation on an exchange is 

completely voluntary. BOX reviewed 

membership details at three options 

exchanges and found that there are 62 

market making firms across these three 

exchanges.14 Further, BOX found that 

42 of the 62 market making firms access 

only one of the three exchanges. 

Additionally, BOX has identified 

numerous market makers that are 

members of other options exchanges, 

but not the Exchange. For example, BOX 

identified 47 market makers that are 

members of Cboe Exchange Inc. (an 

exchange that only lists options), but 

not the Exchange (which also lists only 

options). Not only is there not an actual 

regulatory requirement to connect to 

every options exchange, the Exchange 

believes there is also no ‘‘de facto’’ or 

practical requirement as well, as further 

evidenced by the market maker 

membership analysis of three options 

exchanges discussed above. Indeed, 

Market Makers choose if and how to 

access a particular exchange and 

because it is a choice, BOX must set 

reasonable pricing, otherwise 

prospective market makers would not 

connect and existing Market Makers 

would disconnect from the Exchange. 

As discussed above, BOX responded 

to Market Maker feedback to the 

proposed fees in January 2022 and due 

to this valuable feedback, BOX lowered 

the proposed fees. The Exchange 

believes that this reduction 

demonstrates that competitive 

constraints do not depend on showing 

that a Market Maker walked away, or 

threatened to walk away, from BOX due 

to a pricing change. Rather, the absence 

of negative feedback (in and of itself, 

and particularly when coupled with 

valuable feedback suggesting 

modifications or alternatives) is 

indicative that the proposed fees are, in 

fact, reasonable and consistent with 

BOX being subject to competitive forces 

in setting fees. Accordingly, the 

Exchange believes the Commission has 

a sufficient basis to determine that BOX 

was subject to significant competitive 

forces in setting the terms of its 

proposed fees. Moreover, the 

Commission has found that, if an 

exchange meets the burden of 

demonstrating it was subject to 

significant competitive forces in setting 

its fees, the Commission ‘‘will find that 

its fee rule is consistent with the Act 

unless ‘there is a substantial 

countervailing basis to find that the 

terms’ of the rule violate the Act or the 

rules thereunder.’’ 15 The Exchange is 

not aware of, nor has the Commission 

articulated, a substantial countervailing 

basis for finding the proposal violates 

the Act or the rules thereunder. 

In order to provide more detail and to 

quantify BOX’s costs associated with 

providing access to the BOX network in 

general, BOX notes that there are 

material costs associated with providing 

the infrastructure and headcount to 

fully-support access to BOX. BOX 

incurs technology expenses related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting associated with its network 

technology. While some of the expense 

is fixed, much of the expense is not 

fixed, and thus increases as the 

expenses associated with access services 

for electronic Market Makers increases. 

For example, new Market Makers to 

BOX may require the purchase of 

additional hardware to support those 

Participants as well as enhanced 

monitoring and reporting of customer 

performance that BOX provides. 

Further, as the total number of Market 

Makers increase, BOX may need to 

increase their data center footprint and 

consume more power, resulting in 

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

the cost to BOX to provide access to its 

electronic Market Makers is not fixed. 

BOX believes the proposed electronic 

Market Maker Trading Permit fees are 

reasonable in order to offset a portion of 

the costs to BOX associated with 

providing access to Market Makers to its 

network infrastructure. 

As discussed above, BOX Market 

Makers have and continue to account 

for the vast majority of network capacity 

utilization and trading activity on BOX 

and thus account for the majority of 

expenses placed on BOX systems. 

Specifically, in 2017 (the year after BOX 

established the flat Participant Fee), the 

total expense for providing access 

services for all Participant types was 

approximately $819,000. Broken down 

further, in 2017, the total expense for 

providing access services to non-Market 

Maker Participants was approximately 

$117,000 and the total expense for 

providing access services to Market 

Makers was approximately $702,000. 

The Exchange has seen this disparity in 

access expenses between non-Market 

Makers and Market Makers year after 

year since the establishment of the 

Participant Fee in 2016. In 2018, the 

total expense for providing access 

services for all Participant types was 

approximately $763,000— 

approximately $109,000 allocated to 

non-Market Maker expenses and 

approximately $654,000 allocated to 

Market Maker expenses. In 2019, the 

total expense for providing access 

services for all Participant types was 

approximately $722,000— 

approximately $103,000 allocated to 

non-Market Maker expenses and 

approximately $619,000 allocated to 

Market Makers. In 2020, the total 

expense for providing access services 

for all Participant types was 

approximately $1.1 million— 

approximately $161,000 allocated to 

non-Market Maker expenses and 

approximately $971,000 allocated to 

Market Makers. Further, as discussed 

herein, BOX experienced a material 

increase in costs in 2021 and projects a 

similar material increase for 2022 due to 

projects to make its network 

environment more transparent and 

deterministic, and increased order flow 

seen throughout the industry. 

Specifically, in 2021, the total expense 

for providing access services for all 

Participant types was approximately 

$1.29 million—approximately $190,000 

allocated to non-Market Maker expenses 


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Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 29991 

16See supra note 5. 17The Exchange presumes that the fees of other 

exchanges are reasonable, as required by the 

Exchange Act in the absence of any suspension or 

disapproval order by the Commission providing 

otherwise. 18Prior to filing the Original Proposal, the 

Exchange notes that BOX Market Makers were made 

aware of the proposed tier structure and fee change. 

BOX received feedback from Market Makers and 

adjusted the fees accordingly based on their 

feedback. Market Makers are not required to quote 

on every options exchange. BOX Market Makers 

choose to quote and transact business on BOX 

because BOX is providing increased trading 

opportunities for these firms. 

19The Exchange notes that the Participant is also 

currently an Order Flow Provider on BOX. 

and approximately $1.1 million 

allocated to Market Makers. Further, in 

the projected expenses for 2022, the 

total projected expense for providing 

access services for all Participant types 

is approximately $1.89 million— 

approximately $270,000 allocated to 

non-Market Maker expenses and $1.62 

million allocated to Market Makers. As 

illustrated by these access expenses year 

over year, it is clear that BOX Market 

Makers account for the majority of 

expenses related to the provision of 

access services for BOX Participants. 

Accordingly, BOX believes that it is 

reasonable and appropriate to charge 

electronic Market Makers more than 

other BOX Participants for electronic 

Trading Permits to access the BOX 

network. 

The Exchange believes that the 

proposed electronic Market Maker 

Trading Permit fees are reasonable, 

equitable, and not unfairly 

discriminatory. The Exchange believes 

that the reasonableness of its proposed 

fees is demonstrated by the very fact 

that such fees are in line with, and in 

some cases lower than, the costs of 

similar access fees at other exchanges.16

The Exchange notes these fees were 

similarly filed with the Commission and 

neither suspended nor disapproved.17

The proposed fees are fair and equitable 

and not unfairly discriminatory because 

they apply equally to all Market Makers 

and access to BOX is offered on terms 

that are not unfairly discriminatory. 

BOX designed the fee rates in order to 

provide objective criteria for Market 

Makers of different sizes and business 

models that best matches their quoting 

activity on BOX. BOX believes that the 

proposed fee rates and criteria provide 

an objective and flexible framework that 

will encourage Market Makers to be 

appointed and quote in option classes 

while also equitably allocating the fees 

in a reasonable manner amongst Market 

Maker appointments to account for 

quoting and trading activity.18

The Exchange again notes that it 

operates in a highly competitive market 

in which market makers can readily 

favor competing venues if they deem fee 

levels at a particular venue to be 

excessive. In such an environment, BOX 

must continually adjust its fees for 

services and products, in addition to 

order flow, to remain competitive with 

other exchanges. BOX believes that the 

proposed changes reflect this 

competitive environment. 

The Exchange again notes it is not 

aware of any reason why Market Makers 

could not simply drop their access to an 

exchange (or not initially access an 

exchange) if an exchange were to 

establish prices for its non-transaction 

fees that, in the determination of such 

Market Maker, did not make business or 

economic sense for such Market Maker 

to access such exchange. The Exchange 

again notes that no market makers are 

required by rule, regulation, or 

competitive forces to be a Market Maker 

on the Exchange. 

Furthermore, the Exchange wishes to 

highlight that one Market Maker 

modified their access to BOX since the 

implementation of the proposed fee 

change. This Market Maker was 

approved as an electronic Market Maker 

in 2017 but never underwent the 

process of provisioning itself to access 

the BOX systems.19 After the Market 

Maker reviewed the notice the Exchange 

issued describing the proposed fees, the 

Market Maker informed the Exchange 

that it would terminate its Market Maker 

status on BOX as it had no intention to 

provision itself for access. The Exchange 

believes this further demonstrates 

competition within the market for 

exchange access, which as a result 

constrains fees the Exchange may charge 

for that access. The Exchange believes 

the fact that this Participant chose to 

terminate its Market Maker status on 

BOX but retained its status as an Order 

Flow Provider on BOX demonstrates 

that market participants can and do alter 

their membership statuses at exchanges 

if the market participant deems any fees 

as too high for its relevant marketplace. 

In BOX’s case, the Participant 

determined that the Exchange’s 

proposed fees for electronic Market 

Makers did not make business sense for 

itself, however it retained its 

membership as a BOX Participant in a 

different capacity. 

In sum, the Exchange believes the 

proposed fees are reasonable and reflect 

a competitive environment, as BOX 

seeks to amend its Trading Permit fees 

for Market Makers, while still attracting 

Market Makers to continue to, or seek 

to, access BOX. The Exchange further 

believes the proposed Trading Permit 

fees discussed herein are an appropriate 

balance between offsetting the costs to 

which Market Makers cost BOX and 

continuing to incentivize Market Makers 

to access and make a market on BOX. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intra-Market Competition 

The Exchange believes that the 

proposed electronic Market Maker 

Trading Permit fees do not place certain 

market participants at a relative 

disadvantage to other market 

participants because the proposed fees 

do not favor certain categories of market 

participants in a manner that would 

impose a burden on competition; rather, 

the fee rates are designed in order to 

provide objective criteria for Market 

Makers of different sizes and business 

models that best matches their quoting 

activity on BOX. Further, the Exchange 

believes that the proposed electronic 

Market Maker Trading Permit fees will 

not impose a burden on intramarket 

competition because, when these fees 

are viewed in the context of the overall 

activity on BOX, Market Makers: (1) 

Consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on BOX; 

and (3) require the high touch network 

support services provided by BOX and 

its staff, including more costly network 

monitoring, reporting and support 

services, resulting in a much higher cost 

to BOX. The Exchange notes that the 

majority of customer demand comes 

from Market Makers, whose transactions 

make up a majority of the volume on 

BOX. Further, as discussed herein, other 

Participant types (Broker Dealers, 

Professional Customers, and Public 

Customers) take up significantly less 

BOX resources and costs. As such, the 

Exchange does not believe charging 

electronic Market Makers higher 

Trading Permit fees than other 

Participant types will impose a burden 

on intramarket competition. 

The Exchange believes that the tiered 

structure of the proposed electronic 

Market Maker Trading Permit fees will 

not impose a burden on intramarket 

competition because the tiered structure 

takes into account the number of classes 

quoted by each individual Market 

Maker. As discussed herein, the BOX 

system requires increased performance 

and capacity in order to provide the 

opportunity for each Market Maker to 

quote in a higher number of options 

classes on BOX. Specifically, the more 


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29992 Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 

20See Options Volume by Exchange available at 

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

21 15 U.S.C. 78s(b)(3)(A)(ii). 

22 17 CFR 240.19b–4(f)(2). 23 17 CFR 200.30–3(a)(12). 

classes that are actively quoted on BOX 

by a Market Maker requires increased 

memory for record retention, increased 

bandwidth for optimized performance, 

increased functionalities on each 

application layer, and increased 

optimization with regard to surveillance 

and monitoring of such classes quoted. 

As such, basing the Market Maker 

Trading Permit fee on the greatest 

number of classes quoted in on any 

given day in a calendar month is 

reasonable and appropriate when taking 

into account how the increased number 

of quoted classes directly impact the 

costs and resources for BOX. 

Inter-Market Competition 

The Exchange believes the proposed 

Market Maker Trading Permit Fees do 

not place an undue burden on 

competition on other SROs that is not 

necessary or appropriate. In particular, 

market making firms are not forced to 

become market makers on all options 

exchanges. The Exchange notes that it 

has far less Market Makers as compared 

to the much greater number of market 

makers at other options exchanges. 

There are a number of large market 

makers that are participants of other 

options exchange but not Participants of 

BOX. The Exchange is also unaware of 

any assertion that its existing fee levels 

or the proposed electronic Market 

Maker Fees would somehow unduly 

impair its competition with other 

options exchanges. To the contrary, if 

the fees charged are deemed too high by 

a market making firm, they can simply 

discontinue their membership with 

BOX. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily favor one of the 

15 competing options venues if they 

deem fee levels at a particular venue to 

be excessive. Based on publiclyavailable information, and excluding 

index-based options, no single exchange 

has more than 17% market share. 

Therefore, no exchange possesses 

significant pricing power in the 

execution of multiply-listed equity and 

ETF options order flow. For the month 

of November 2021, BOX had a market 

share of approximately 5.58% of 

executed multiply-listed equity 

options 20 and BOX believes that the 

ever-shifting market share among 

exchanges from month to month 

demonstrates that market participants 

can discontinue or reduce use of certain 

categories of products, or shift order 

flow, in response to fee changes. In such 

an environment, BOX must continually 

adjust its fees and fee waivers to remain 

competitive with other exchanges and to 

attract order flow to the facility. 

Finally, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues. In such 

an environment, the Exchange must 

continually review, and consider 

adjusting, its fees and credits to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Exchange Act 21

and Rule 19b–4(f)(2) thereunder,22

because it establishes or changes a due, 

or fee. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend the rule change if 

it appears to the Commission that the 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or would otherwise further 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2022–17 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2022–17. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–BOX–2022–17, and should 

be submitted on or before June 7, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10520 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Data Collection Available for Public 

Comments 

ACTION: 60-Day notice and request for 

comments. 

SUMMARY: The Small Business 

Administration (SBA) intends to request 

approval, from the Office of 

Management and Budget (OMB) for the 


khammond on DSKJM1Z7X2PROD with NOTICES