[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Notices]
[Pages 41798-41813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14883]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95217; File No. SR-BOX-2022-08]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 
12140 (Imposition of Fines for Minor Rule Violations), To Expand the 
List of Violations Eligible for Disposition Under the Exchange's Minor 
Rule Violation Plan and To Update the Fine Schedule Applicable to Minor 
Violations of Certain Rules

July 7, 2022.

I. Introduction

    On March 31, 2022, BOX Exchange LLC (``Exchange'' or ``BOX'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to 
amend Rule 12140 (Imposition of Fines for Minor Rule Violations), to 
expand the list of violations eligible for disposition under the 
Exchange's Minor Rule Violation Plan (``MRVP'') and update the fine 
schedule applicable to minor rule violations related to certain rule 
violations. The proposed rule change was published for comment in the 
Federal Register on April 21, 2022.\4\ On June 3, 2022, the Commission 
extended

[[Page 41799]]

the time period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to approve or disapprove the proposed rule change.\5\ 
On June 10, 2022, the Exchange filed Amendment No. 1 to the proposed 
rule change, which replaced and superseded the proposed rule change in 
its entirety.\6\ The Commission received one comment on the proposed 
rule change.\7\ The Commission is publishing this notice to solicit 
comments on Amendment No. 1 from interested persons and is approving 
the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 94729 (April 15, 
2022), 87 FR 23893.
    \5\ See Securities Exchange Act Release No. 95037, 87 FR 35273 
(June 9, 2022) (extending the time period to July 20, 2022).
    \6\ In Amendment No. 1, the Exchange revised the proposed rule 
change to: (1) provide additional detail and clarification regarding 
the Exchange's usage of the terms ``violation'' and ``offense'' 
within Rule 12140; and (2) clarify the application of fines under 
Rule 12140(d)(6). Amendment No. 1 to the proposed rule change is 
available at: https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm.
    \7\ The Commission has received one comment on the proposal 
which does not relate to the substance of the proposed rule change. 
The comment letter is available at https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm.
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 1

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

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

1. Purpose
    The purpose of the proposed rule change is to amend Rule 12140 
(Imposition of Fines for Minor Rule Violations), which governs the 
Exchange's MRVP, in connection with certain minor rule violations, 
applicable fines, as well as other clarifying and non-substantive 
changes to improve the consistency of the Exchange's MRVP with the 
MRVPs at other options exchanges. Specifically, the proposed rule 
change amends Rule 12140 by: (1) adding certain rule violations that 
the Exchange believes to be minor in nature and consistent with 
violations at other options exchanges; (2) updating the fine schedule 
applicable to minor rule violations related to certain rule violations; 
and (3) making other clarifying and non-substantive changes.
    The MRVP provides that in lieu of commencing a disciplinary 
proceeding, the Exchange may, subject to the certain requirements set 
forth in the Rule, impose a fine, not to exceed $5,000, on any Options 
Participant, or person associated with or employed by an Options 
Participant, with respect to any Rule violation listed in Rule 12140(d) 
or (e) discussed below. Any fine imposed pursuant to this Rule that (i) 
does not exceed $2,500 and (ii) is not contested, shall be reported on 
a periodic basis, except as may otherwise be required by Rule 19d-1 
under the Act or by any other regulatory authority. Further, the Rule 
provides that any person against whom a fine is imposed under the Rule 
shall be served with a written statement setting forth: (i) the Rule(s) 
allegedly violated; (ii) the act or omission constituting each such 
violation; (iii) the fine imposed for each violation; and (iv) the date 
by which such determination becomes final and such fine must be paid or 
contested, which date shall be not less than twenty-five (25) calendar 
days after the date of service of such written statement. Rule 12140 
(d) and (e) set forth the list of specific Exchange Rules under which 
an Options Participant or person associated with or employed by an 
Options Participant may be subject to a fine for violations of such 
Rules and the applicable fines that may be imposed by the Exchange. As 
with all the violations incorporated into its MRVP, the Exchange will 
proceed under this Rule only for violations that are minor in nature. 
Any other violation will be addressed pursuant to Rules 12030 (Letters 
of Consent) or 12040 (Charges).
    As stated above, the Exchange is proposing to make clarifying and 
non-substantive changes to the MRVP. The Exchange is proposing to 
update language within the MRVP to remove the term ``occurrence'' and 
replace it with ``violation'' when the term is being used to represent 
a singular instance and ``offense'' when the term may be used to 
represent multiple violations aggregated together. The Exchange is 
proposing these changes to improve the consistency of the use of these 
terms within the MVRP. The Exchange is also proposing to update any use 
of the term ``running'' to ``rolling'' within the MRVP fine schedules. 
There is no substantive difference in the Exchange's interpretation of 
the term ``running'' and ``rolling.'' The purpose of these changes is 
to provide greater clarity within the Exchange's MRVP by using more 
consistent terminology throughout. The Exchange believes these 
technical and non-substantive changes are reasonable and appropriate 
because they will increase readability of the MRVP and help prevent 
investor confusion. Further, these proposed changes will allow the 
Exchange to carry out its regulatory responsibility more quickly and 
efficiently by reducing confusion regarding terminology in the 
administration of the MRVP. The Exchange notes that the proposed 
changes are intended to provide for greater consistency within the 
Exchange's MRVP itself and with the MRVPs of the other options 
exchanges.
Exercise Limits
    First, the Exchange proposes to amend 12140(d)(1), Position Limits 
to include violations of Exercise limits pursuant to Rule 3140.\8\ The 
Exchange believes that amending Rule 12140(d)(1), Position Limits, to 
include violations of Exercise Limits pursuant to BOX Rule 3140 is 
appropriate because it will allow the Exchange to carry out its 
regulatory responsibility more efficiently and in a manner that is 
consistent with the way it handles violations of position limits. 
Violations of position and exercise limits on the Exchange generally 
occur together, so adding exercise limits to the existing position 
limits minor rule violation will allow the Exchange to address these 
related violations more effectively. The Exchange proposes that the 
fine levels for exercise limit violations match the current fine levels 
for position limits. The Exchange is also proposing to update the 
language in the heading of the fine schedule to change ``violations'' 
to ``offenses''. The Exchange believes this change is reasonable as it 
adds detail and clarity to the fine schedules by clarifying the 
Exchange's use of these terms as used within the fine schedules. The 
Exchange believes this change may help reduce Participant confusion 
over the Exchange's application of the fines within BOX Rule 
12140(d)(1).
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    \8\ The Exchange notes that BOX Rule 3140 establishes a limit on 
the number of option contracts of a single class that an Options 
Participant can exercise within any five consecutive business days. 
Exercise limits are fixed by the Exchange pursuant to Rule 3140 and 
vary by class of options. See BOX Rule 3140.
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    Under this rule, any Participant who violates Rule 3120 or Rule 
3140 regarding position or exercise limits shall be subject to the 
fines listed below. The Exchange notes that this proposal is consistent 
with the MRVPs in place at

[[Page 41800]]

Cboe Exchange, Inc. (``Cboe Options''), NYSE American, LLC (``NYSE 
American'') and NYSE Arca, Inc. (``NYSE Arca'').\9\
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    \9\ See Cboe Options Rule 13.15(g)(1). See also NYSE American 
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(21).

------------------------------------------------------------------------
   Number of cumulative offenses within any rolling
               twenty-four month period                     Sanction
------------------------------------------------------------------------
First Offense.........................................              $500
Second Offense........................................             1,000
Third Offense.........................................             2,500
Fourth and Each Subsequent Offense....................             5,000
------------------------------------------------------------------------

Requests for Trade Data
    As stated above, the Exchange is proposing to make clarifying and 
non-substantive changes. As such, the Exchange is proposing to amend 
Rule 12140(d)(3) Requests for Trade Data pursuant to Rule 10040, to 
change ``offense'' to ``violation'' within the fine schedule. The 
Exchange is proposing this change to clarify the distinction between 
offense and violation by updating the terminology to only use the term 
``offense'' when the listed fines are meant to cover multiple 
violations. The purpose of these changes is to provide greater clarity 
within the Exchange's MRVP by using more consistent terminology 
throughout. As such, the Exchange is proposing to amend Rule 
12140(d)(3) Requests for Trade Data pursuant to Rule 10040, to change 
``offense'' to ``violation'' within the fine schedule. The Exchange 
believes this proposed clarifying and non-substantive change is 
appropriate because it will help clarify this distinction between 
offense and violation by updating the terminology to only use the term 
``offense'' when the listed fines are meant to cover multiple 
violations. The Exchange believes these technical and non-substantive 
changes are reasonable and appropriate because they will increase 
readability of the MRVP and help prevent investor confusion. Further, 
these proposed changes will allow the Exchange to carry out its 
regulatory responsibility more quickly and efficiently by reducing 
confusion regarding terminology in the administration of the MRVP. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency within the Exchange's MRVP itself and with the 
MRVPs of the other options exchanges. The Exchange is not proposing to 
amend the sanctions under this Rule 12140(d)(3). The Exchange proposes 
to update the fine schedule as follows:

------------------------------------------------------------------------
  Number of violations within one calendar
                    year                               Sanction
------------------------------------------------------------------------
2nd Violation..............................  $500.
3rd Violation..............................  $1,000.
4th Violation..............................  $2,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

Quotation Parameters
    The Exchange is also proposing to amend Rule 12140(d)(5) Quotation 
Parameters to increase and strengthen the sanctions imposed under this 
section. The Exchange believes that increasing and strengthening these 
sanctions is appropriate as the proposed more robust fine schedules may 
help deter violative conduct on BOX. The Exchange believes that 
increasing these sanctions will allow the Exchange to provide more 
appropriate punishments and more effectively deter violations of this 
nature. The Exchange believes that removing the lesser penalty (Letter 
of Caution) for the first, second, and third offenses in order to 
provide fines for the first, second, and third offenses and, 
ultimately, formal disciplinary proceedings for the fourth offense and 
thereafter during one calendar year is appropriate. The Exchange 
believes this fine structure may serve to deter repeat-offenders more 
effectively. The Exchange notes this proposed change will bring the 
sanctions for violations regarding spread parameters or market maker 
quotations in line with the sanctions imposed by NYSE Arca.\10\
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    \10\ See NYSE Arca Rule 10.12(k)(i)(41).
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    Rule 12140(d)(5) currently permits the Exchange to issue a Letter 
of Caution for the first, second, and third occurrence within a one 
calendar year running basis. For the fourth, fifth, sixth occurrences 
during a one-year running period, the fine schedule currently permits 
the Exchange to issue a fine of $250, $500, and $1,000, respectively. 
The fine schedule also provides that for the seventh occurrence and 
thereafter, during a one-year running period, the sanction is 
discretionary with the Hearing Committee. The proposed rule change 
updates the fine schedule to provide that, on a one-year rolling basis, 
the Exchange may apply a fine of $1,000 for a first offense, may apply 
a fine of $2,500 for a second offense, may apply a fine of $3,500 for a 
third offense, and may proceed with formal disciplinary action for a 
fourth offense and thereafter.
    As described above, the Exchange is proposing to update the 
language to use ``offense'' or ``violation'' instead of ``occurrence'' 
and ``rolling'' instead of ``running'' within the fine schedule for 
consistency within the MRVP and to clarify the Exchange's usage of such 
terms. The Exchange believes these technical and non-substantive 
changes are reasonable and appropriate because they will increase 
readability of the MRVP and help prevent investor confusion. Further, 
these proposed changes will allow the Exchange to carry out its 
regulatory responsibility more quickly and efficiently by reducing 
confusion regarding terminology in the administration of the MRVP. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency within the Exchange's MRVP itself and with the 
MRVPs of the other options exchanges. Under this proposed amendment, 
any Participant who violates Rule 8040(a)(7) regarding spread 
parameters or market maker quotations shall be subject to the fines 
listed below.

[[Page 41801]]



------------------------------------------------------------------------
  Fine schedule (implemented on a one-year
               rolling basis)                          Sanction
------------------------------------------------------------------------
1st Offense................................  $1,000.
2nd Offense................................  $2,500.
3rd Offense................................  $3,500.
4th Offense and Thereafter.................  Formal Disciplinary Action.
------------------------------------------------------------------------

Lead Market Maker Continuous Quoting
    Next the Exchange proposes to amend Rule 12140(d)(6), Continuous 
Quotes to include continuous quoting violations by Lead Marker Makers 
pursuant to BOX Rule 8050(e) and Rule 8055(c)(1). The Exchange believes 
that amending Rule 12140(d)(6), Continuous Quotes to include continuous 
quoting violations by Lead Marker Makers pursuant to BOX Rule 
8055(c)(1) is appropriate because it will allow the Exchange to carry 
out its regulatory responsibility quickly and efficiently in a manner 
that is consistent with the way it handles continuous quoting 
violations for all types of Market Makers.\11\
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    \11\ The Exchange adopted Rule 7135 (Execution and Pro Rata 
Priority) to establish and govern pro rate execution on BOX and Rule 
8055 (Lead Market Makers) which details the designation and 
obligations of Lead Market Makers on BOX. Rule 7350(c)(2) details 
Lead Market Maker Priority and Lead Market Makers may be assigned by 
the Exchange in each options class in accordance with Rule 8055. The 
Exchange now proposes to include Lead Market Maker Continuous 
Quoting in its MRVP. See Securities Exchange Act Release No. 91897 
(May 14, 2021), 86 FR 27490 (May 20, 2021) (SR-BOX-2021-11).
---------------------------------------------------------------------------

    The Exchange is also proposing to increase and strengthen the 
sanctions imposed under this section, which the Exchange believes will 
more effectively deter violative conduct. The Exchange notes that this 
proposed change will bring the sanctions for violations of continuous 
quoting obligations in line with the sanctions imposed by Cboe 
Options.\12\ Rule 12140(d)(6) currently permits the Exchange to give a 
Letter of Caution for the first violation within one calendar year. For 
subsequent violations during the same period, the fine schedule permits 
the Exchange to issue a fine of $300 per day. The Exchange proposes to 
update the fine schedule as follows:
---------------------------------------------------------------------------

    \12\ See Cboe Options Rule 13.15(g)(9).

------------------------------------------------------------------------
    Violations within one calendar year                Sanction
------------------------------------------------------------------------
1st Violation..............................  Letter of Caution.
2nd Violation..............................  $1,500.
3rd Violation..............................  $3,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    The proposed rule change updates the fine schedule to provide that, 
during one calendar year, the Exchange may give a Letter of Caution for 
a first violation, may apply a fine of $1,500 for a second violation, 
may apply a fine of $3,000 for a third violation, and may proceed with 
formal disciplinary action for subsequent violations.\13\ As described 
above, and as is the case for all rule violations covered under Rule 
12140(d) and (e), the Exchange may determine that a violation of 
Market-Maker quoting obligations is intentional, egregious, or 
otherwise not minor in nature and choose to proceed under the 
Exchange's formal disciplinary rules rather than its MRVP. The Exchange 
believes that maintaining the lesser penalty (Letter of Caution) for a 
first violation and then providing higher fines for second and third 
violations and, ultimately, formal disciplinary proceedings for any 
subsequent violations during one calendar year is appropriate. This 
will allow the Exchange to levy progressively larger fines and greater 
penalties against repeat-offenders (as opposed to a smaller fine range 
for any violations that may come after a first violation). The Exchange 
believes this fine structure may serve to deter repeat-offenders while 
providing reasonable warning for a first violation within one calendar 
year.
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    \13\ The Exchange notes that Cboe Options has identical 
sanctions in place. See Cboe Options Rule 13.15(g)(9).
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    Under this proposed amendment, any Participant who violates Rule 
8050(e) or Rule 8055(c)(1) regarding Market Maker or Lead Market Maker 
continuous quotes shall be subject to the fines listed above. In 
calculating fine thresholds for each Market Maker or Lead Market Maker, 
all violations occurring within the Surveillance Review Period as 
defined within the Exchange Surveillance Procedures in any of that 
Market Maker or Lead Market Maker's appointed classes are to be added 
together.\14\
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    \14\ The referenced Surveillance Review Period is a quarterly 
review period that is specified within the Exchange Surveillance 
Procedures, which are utilized by FINRA's options surveillance 
group. As specified within the referenced Exchange Surveillance 
Procedures, staff will determine the total number of days throughout 
the quarter in which the market maker quoted less than 60% of the 
aggregate quotable time of all its appointed classes after each 
series was opened.
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    The Exchange is also proposing to remove language from Rule 
12140(d)(6) that states ``Violations of Rule 8050(e) or Rule 8055(c)(1) 
that continue over consecutive trading days will be subject to a 
separate fine, pursuant to this paragraph (6), for each day during 
which the violation occurs and is continuing up to a limit of fifteen 
consecutive trading days.'' With the proposed updates to the fine 
schedule replacing the fine of $300 per day with a fine of $1,500, this 
language is no longer necessary. This language was originally included 
to allow the Exchange to fine a Participant $300 per day for each 
consecutive trading day during which a violation occurs. The Exchange 
is proposing to reformat the fine schedule and remove the listed fine 
of $300 per day. The Exchange is now proposing a fine of $1,500 for a 
second violation, a fine of $3,000 for a third violation, and formal 
disciplinary action for any subsequent violations. Under the new 
format, the language allowing consecutive trading day violations for up 
to fifteen days to be fined separately is no longer consistent or 
feasible. Under the MRVP, a Participant may only be fined a maximum of 
$5,000 and with the greater fines being proposed the previous fine 
structure no longer applies. The Exchange believes that removing this 
language will clarify the proposed updates to the fine schedule and may 
help reduce Participant confusion over the Exchange's application of 
the fines within BOX Rule 12140(d)(6). The Exchange notes that Cboe 
Options, and NYSE Arca have similar rule provisions in their MRVPs 
addressing Market Maker and Lead

[[Page 41802]]

Market Maker continuous quoting obligations.\15\
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    \15\ See Cboe Options Rule 13.15(g)(9). See also NYSE American 
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
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Mandatory Systems Testing
    The Exchange is also proposing to make clarifying and non-
substantive changes to amend the language within the fine schedules to 
use the terms ``and thereafter'' and ``subsequent'' instead of ``or 
more'' when detailing the number of violations. There is no substantive 
difference in the Exchange's interpretation between ``or more'' and 
``subsequent'' or ``and thereafter''. The purpose of the change is to 
provide greater clarity within the Exchange's own MRVP by using more 
consistent terminology. The Exchange proposes to amend 12140(d)(7), 
Mandatory Systems Testing pursuant to BOX Rule 3180, to change ``or 
more'' to ``and thereafter'' within the fine schedule. The Exchange 
believes these technical and non-substantive changes are reasonable and 
appropriate because they will increase readability of the MRVP and help 
prevent investor confusion. Further, these proposed changes will allow 
the Exchange to carry out its regulatory responsibility more quickly 
and efficiently by reducing confusion regarding terminology in the 
administration of the MRVP. The Exchange notes that the proposed change 
is intended to provide for greater consistency within the Exchange's 
MRVP itself and with the MRVPs of the other options exchanges. Under 
this rule, any Participant who violates Rule 3180 regarding the failure 
to conduct or participate in the testing of computer systems, or 
failure to provide required reports or maintain required documentation, 
shall be subject to the fines listed below.

------------------------------------------------------------------------
    Violations within one calendar year                Sanction
------------------------------------------------------------------------
First Violation............................  $250.
Second Violation...........................  $500.
Third Violation............................  $1,000.
Fourth Violation...........................  $2,000.
Fifth Violation and Thereafter.............  Formal Disciplinary Action.
------------------------------------------------------------------------

Maintenance, Retention and Furnishing of Books, Records and Other 
Information
    Next, the Exchange proposes to adopt 12140(d)(10), Maintenance, 
Retention and Furnishing of Books, Records and Other Information 
pursuant to BOX Rule 10000. Under this rule, any Participant who 
violates Rule 10000 regarding the failure to make, keep current, and 
preserve such books and records as required, or failure to furnish such 
books and records in a timely manner upon request by the Exchange shall 
be subject to the fines listed below.

------------------------------------------------------------------------
Number of violations within any twenty-four
            month rolling period                       Sanction
------------------------------------------------------------------------
Initial Violation..........................  $500.
Second Violation...........................  $1,000.
Third Violation............................  $2,500.
Fourth Violation and Thereafter............  $5,000 or Formal
                                              Disciplinary Action.
------------------------------------------------------------------------

    The Exchange believes the adoption of Rule 12140(d)(10) into the 
MRVP is appropriate because it will allow the Exchange to carry out its 
regulatory responsibility more efficiently and help deter BOX 
Participants from failing to make, keep current, and preserve such 
books and records as required, or failure to furnish such books and 
records in a timely manner upon request by the Exchange. The Exchange 
notes that adding this provision will help ensure consistency within 
the MRVP's of the various options exchanges. NYSE American and NYSE 
Arca have rule provisions within their respective minor rule violation 
plans that addresses similar recordkeeping violations.\16\ Further, the 
proposed fine schedule for these types of violations is similar to the 
recordkeeping sanctions imposed by NYSE American and NYSE Arca.\17\
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    \16\ NYSE American and NYSE Arca have subsections within their 
MRVPs listing numerous specific recordkeeping violations. NYSE 
American Rule 9217 and NYSE Arca Rule 10.12 contain minor rule 
violations regarding failures to comply with the books and records 
requirements of Rule 324 and failures to furnish in a timely manner 
books, records or other requested information or testimony in 
connection with an examination of financial responsibility and/or 
operational conditions. See NYSE American Rule 9217(ii). See also 
NYSE Arca Rule 10.12(k)(iii).
    \17\ The NYSE American and NYSE Arca MRVPs contain numerous 
recordkeeping minor rule violations with fines ranging from $500 to 
$5,000 depending on the specific violation and the fine level. See 
NYSE American Rule 9217 (ii). See also NYSE Arca Rule 10.12(k)(iii).
    \18\ See NYSE American Rule 9217(ii)(12). See also NYSE Arca 
Rule 10.12(k)(iii)(12).
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Anti-Money Laundering Compliance Program
    The Exchange also proposes to adopt 12140(d)(11), Anti-Money 
Laundering Compliance Program pursuant to BOX Rule 10070. Under this 
Rule any Participant who violates Rule 10070 regarding the failure to 
satisfy the anti-money laundering compliance program requirements shall 
be subject to the fines listed below. The Exchange believes the 
adoption of Rule 12140(d)(11), is appropriate because it will help 
deter BOX Participants from failing to satisfy the requirements of the 
anti-money laundering compliance program. The Exchange believes that 
adding this rule to the MRVP will allow the Exchange to carry out its 
regulatory responsibility more quickly and efficiently with respect to 
violations of BOX Rule 10070. The Exchange notes that this proposed 
addition is consistent with the minor rule violations relating to anti-
money laundering program failure with the MRVPs at NYSE American and 
NYSE Arca.\18\ Additionally, Cboe Options has a rule provision in its 
MRVP that addresses violations related to anti-money laundering 
implementation relating to the failure to designate a person 
responsible for implementing and monitoring the anti-money laundering 
compliance program.\19\ The proposed fine schedule provides that, 
within any twenty-four-month rolling period, the Exchange may apply a 
fine of $1,000 for an initial violation and $2,500 for

[[Page 41803]]

subsequent violations. The Exchange believes that the proposed 
sanctions are appropriate, as they will provide sufficient warning to 
first time offenders, while deterring repeat offenders. These sanctions 
are identical to the sanctions applied by Cboe Options and similar to 
the sanctions applied by NYSE American and NYSE Arca for minor rule 
violations relating to anti-money laundering compliance program 
violations.\20\
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    \19\ See Cboe Options Rule 13.15(g)(13).
    \20\ Cboe Options applies sanctions of $1,000 for a first 
offense and $2,500 for subsequent offenses, while NYSE American and 
NYSE Arca have sanctions of $2,000 for 1st level, $4,000 for 2nd 
level, and $5,000 for third level. See Cboe Options Rule 
13.15(g)(13). See also NYSE American Rule 9217(ii)(12). See also 
NYSE Arca Rule 10.12(k)(iii)(12).

------------------------------------------------------------------------
   Number of violations within any twenty-four month
                    rolling period                          Sanction
------------------------------------------------------------------------
Initial Violation.....................................            $1,000
Subsequent Violations.................................             2,500
------------------------------------------------------------------------

Locked and Crossed Market Violations
    The Exchange is proposing to amend current Rule 12140(d)(10) \21\ 
Locked and Crossed Market Violations to increase and strengthen the 
sanctions imposed under this section. The Exchange believes that 
increasing and strengthening these sanctions for violations relating to 
locked and crossed markets is appropriate as the proposed more robust 
fine schedules may help deter violative conduct on BOX. The Exchange 
believes that increasing these sanctions will allow the Exchange to 
provide more appropriate punishments and more effectively deter 
violations of this nature. The Exchange notes this proposed change will 
bring the sanctions for violations regarding procedures to be followed 
in the instance of a Locked Market or a Crossed Market more in line 
with the sanctions imposed by Cboe Options.\22\ Rule 12140(d)(10) 
currently permits the Exchange to issue a Letter of Caution for an 
initial violation within a twelve-month rolling period. The current 
fine schedule also permits the Exchange to apply a fine of $250 for a 
second violation, $500 for a third violation, and formal disciplinary 
action for the fourth violation or more within a twelve-month rolling 
period. The proposed rule change updates the fine schedule to provide 
that, within any twelve-month rolling period, the Exchange may apply a 
fine of $500 for an initial violation, may apply a fine of $2,500 for a 
second violation, and may apply a fine of $5,000 or proceed with formal 
disciplinary action for subsequent violations. Under this proposed 
amendment, any Participant who violates Rule 15020 regarding procedures 
to be followed in the instance of a Locked or Crossed Market shall be 
subject to the fines listed below.
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    \21\ As discussed above, this proposed rule change subsequently 
renumbers current Rule 12140 (d)(10) to (d)(12) as a result of the 
proposed addition of Rules 12140(d)(10), and (d)(11).
    \22\ Cboe Option's MRVP provides for sanctions of $500-1,000 for 
a first offense, $1,000-2,500 for a second offenses, and $2,500-
5,000 and a Staff Interview for subsequent offenses. See Cboe 
Options Rule 13.15(g)(8).

------------------------------------------------------------------------
  Number of violations within any twelve-
            month rolling period                       Sanction
------------------------------------------------------------------------
Initial Violation..........................  $500.
Second Violation...........................  $2,500.
Subsequent Violations......................  $5,000 or Formal
                                              Disciplinary Action.
------------------------------------------------------------------------

Market Maker Assigned Activity Violations
    As stated above, the Exchange is proposing to make clarifying and 
non-substantive changes to amend the language within the fine schedules 
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or 
more'' when detailing the number of violations. There is no substantive 
difference in the Exchange's interpretation between ``or more'' and 
``subsequent'' or ``and thereafter''. The purpose of the change is to 
provide greater clarity within the Exchange's MRVP by using more 
consistent terminology. The Exchange proposes to amend current Rule 
12140(d)(11),\23\ Market Maker Assigned Activity Violations pursuant to 
BOX Rule 8030(e), to change ``or more'' to ``and thereafter'' within 
the fine schedule. The Exchange believes these technical and non-
substantive changes are reasonable and appropriate because they will 
increase readability of the MRVP and help prevent investor confusion. 
Further, these proposed changes will allow the Exchange to carry out 
its regulatory responsibility more quickly and efficiently by reducing 
confusion regarding terminology in the administration of the MRVP. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency within the Exchange's MRVP itself and with the 
MRVPs of the other options exchanges. Under this rule, any Participant 
who violates Rule 8030(e) regarding the failure of Market Makers to 
limit their execution in options classes outside of their appointed 
classes to twenty-five percent (25%) of the total number of contracts 
executed during a quarter by such Market Maker, is subject to the fines 
listed below.
---------------------------------------------------------------------------

    \23\ As discussed above, this proposed rule change subsequently 
renumbers Rule 12140 (d)(11) to (d)(13) as a result of the proposed 
addition of Rules 12140(d)(10), and (d)(11).

------------------------------------------------------------------------
  Number of violations within any twelve-
            month rolling period                       Sanction
------------------------------------------------------------------------
Initial Violation..........................  Letter of Caution.
Second Violation...........................  $500.
Third Violation............................  $1,000.
Fourth Violation...........................  $2,500.
Fifth Violation and Thereafter.............  Formal Disciplinary Action.
------------------------------------------------------------------------


[[Page 41804]]

Request for Quote Violations
    As detailed above, the Exchange is proposing to make clarifying and 
non-substantive changes to amend the language within the fine schedules 
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or 
more'' when detailing the number of violations. There is no substantive 
difference in the Exchange's interpretation between ``or more'' and 
``subsequent'' or ``and thereafter''. The purpose of the change is to 
provide greater clarity within the Exchange's MRVP by using more 
consistent terminology. The Exchange proposes to amend current Rule 
12140(d)(12),\24\ Request for Quote Violations pursuant to BOX Rule 
8050(c)(2)-(c)(4), to change ``or more'' to ``and thereafter'' within 
the fine schedule. The Exchange believes these technical and non-
substantive changes are reasonable and appropriate because they will 
increase readability of the MRVP and help prevent investor confusion. 
Further, these proposed changes will allow the Exchange to carry out 
its regulatory responsibility more quickly and efficiently by reducing 
confusion regarding terminology in the administration of the MRVP. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency within the Exchange's MRVP itself and with the 
MRVPs of the other options exchanges. Under this rule, any Participant 
who violates Rule 8050(c)(2)-(c)(4) regarding the failure of a Market 
Maker to respond to a Request for Quote (``RFQ'') on BOX, is subject to 
the fines listed below.
---------------------------------------------------------------------------

    \24\ As discussed above, this proposed rule change subsequently 
renumbers Rule 12140 (d)(12) to (d)(14) as a result of the proposed 
addition of Rules 12140(d)(10), and (d)(11).

------------------------------------------------------------------------
  Number of violations within any twelve-
            month rolling period                       Sanction
------------------------------------------------------------------------
Initial Violation..........................  Letter of Caution.
Second Violation...........................  $250.
Third Violation............................  $500.
Fourth Violation and Thereafter............  Formal Disciplinary Action.
------------------------------------------------------------------------

Trade Through Violations

    As stated above, the Exchange is proposing to make clarifying and 
non-substantive changes to amend the language within the fine schedules 
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or 
more'' when detailing the number of violations. There is no substantive 
difference in the Exchange's interpretation between ``or more'' and 
``subsequent'' or ``and thereafter''. The purpose of the change is to 
provide greater clarity within the Exchange's MRVP by using more 
consistent terminology. The Exchange proposes to amend current Rule 
12140(d)(13),\25\ Trade Through Violations pursuant to BOX Rule 15010, 
to change ``or more'' to ``and thereafter'' within the fine schedule. 
The Exchange believes these technical and non-substantive changes are 
reasonable and appropriate because they will increase readability of 
the MRVP and help prevent investor confusion. Further, these proposed 
changes will allow the Exchange to carry out its regulatory 
responsibility more quickly and efficiently by reducing confusion 
regarding terminology in the administration of the MRVP. The Exchange 
notes that the proposed change is intended to provide for greater 
consistency within the Exchange's MRVP itself and with the MRVPs of the 
other options exchanges. Under this rule, any Participant who violates 
Rule 15010(a) regarding trade throughs is subject to the fines listed 
below.
---------------------------------------------------------------------------

    \25\ As discussed above, this proposed rule change subsequently 
renumbers Rule 12140 (d)(13) to (d)(15) as a result of the proposed 
addition of Rules 12140(d)(10), and (d)(11).

------------------------------------------------------------------------
Number of violations within any twenty-four
            month rolling period                       Sanction
------------------------------------------------------------------------
Initial Violation..........................  $500.
Second Violation...........................  $1,000.
Third Violation............................  $2,500.
Fourth Violation and Thereafter............  $5,000 or Formal
                                              Disciplinary Action.
------------------------------------------------------------------------

Trading Floor Violations Fine Schedules
    The Exchange is proposing to update the fine schedules applicable 
to minor rule violations related to certain Trading Floor violations 
listed in Rule 12140(e) to increase and strengthen the sanctions. The 
Exchange adopted the minor rule violations and corresponding fines 
under Rule 12140(e) in 2017 following the establishment of the BOX 
Trading Floor.\26\ In adopting its current trading floor minor rule 
violations, the Exchange believed it appropriate to adopt a lower fine 
amount than in place at NYSE Arca as the new trading floor was 
established and to be more consistent with the other fines within the 
Exchange's own MRVP. However, the Exchange's Trading Floor is now well-
established, with a greater number of Participants, and the Exchange 
believes that increasing and strengthening these sanctions is 
appropriate as the proposed more robust fine schedules may help deter 
violative conduct on BOX. The Exchange believes that increasing these 
trading floor related sanctions to be more consistent with the other 
options exchanges will allow the Exchange to more effectively deter 
trading floor violations. The Exchange notes that this proposed change 
will bring the sanctions more in line with the fine schedules in place 
at NYSE Arca.\27\
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 81398 (August 15, 
2017), 82 FR 39630 (August 21, 2017) (SR-BOX-2017-26).
    \27\ See NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

    The Exchange is also proposing to update the language within each 
minor rule violation listed within Rule 12140(e) to use the term 
``violation'' instead of ``occurrence'' when detailing the number of 
violations within the fine schedules to provide consistency in the 
terminology used within the Exchange's MRVP. Within the MRVP, the 
Exchange interprets violation to mean one instance, while multiple 
violations may be deemed to constitute one offense. As noted above, the 
Exchange believes that changing ``occurrence'' to ``violation'' in BOX 
Rule 12140(e)(1)-(12) is appropriate to provide consistency within the 
terms used and the Exchange's interpretation of the terms.

[[Page 41805]]

The Exchange is proposing to remove the term ``occurrence'' from the 
MRVP and proposes to replace ``occurrence'' with ``violation'' for a 
singular violation and ``offense'' when the listed fines are meant to 
cover multiple violations. The Exchange is proposing these changes to 
improve consistency within the usage of these terms and to conform the 
fine schedules to the Exchange's new understanding that a violation 
covers a singular rule violation, while multiple violations may be 
aggregated to constitute an offense. The Exchange believes these 
technical and non-substantive changes are reasonable and appropriate 
because they will increase readability of the MRVP and help prevent 
investor confusion. Further, these proposed changes will allow the 
Exchange to carry out its regulatory responsibility more quickly and 
efficiently by reducing confusion regarding terminology in the 
administration of the MRVP. The Exchange notes that the proposed change 
is intended to provide for greater consistency within the Exchange's 
MRVP itself and with the MRVPs of the other options exchanges.
    General Responsibilities of Floor Brokers. The Exchange is 
proposing to amend Rule 12140(e)(1), General Responsibilities of Floor 
Brokers pursuant to BOX Rule 7570, to increase and strengthen the 
sanctions imposed under this section. The Exchange believes that 
increasing and strengthening these sanctions is appropriate as the 
proposed more robust fine schedules may help deter violative conduct on 
BOX. The Exchange believes that increasing these trading floor related 
sanctions to be more consistent with the other options exchanges will 
allow the Exchange to more effectively deter trading floor violations. 
The Exchange notes that this proposed change will bring the sanctions 
in line with the sanctions imposed by NYSE Arca.\28\ Rule 12140(e)(1) 
currently permits the Exchange to apply a fine of $500 for the first 
occurrence, $1,000 for a second occurrence, $2,000 for a third 
occurrence, and formal disciplinary action for subsequent occurrences 
within any rolling twenty-four-month period. The proposed rule change 
updates the fine schedule to provide that, within any twenty-four-month 
rolling period, the Exchange may apply a fine of $1,000 for the first 
violation, $2,500 for a second violation, $5,000 for a third violation, 
and formal disciplinary action for subsequent violations. Under this 
proposed amendment, any Floor Broker who violates Rule 7580(e) 
regarding the failure to use due diligence when handling an order, to 
cause the order to be executed at the best price or prices available to 
him in accordance with the Rules of the Exchange shall be subject to 
the fines listed below.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Rule 10.12 (k)(i)(1).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $5,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Failure to Properly Record Orders. The Exchange is also proposing 
to amend Rule 12140(e)(2) Failure to Properly Record Orders pursuant to 
BOX Rule 7580(e), to increase and strengthen the sanctions imposed 
under this section. The Exchange believes that increasing and 
strengthening these sanctions is appropriate as the proposed more 
robust fine schedules may help deter violative conduct on BOX. The 
Exchange believes that increasing these trading floor related sanctions 
to be more consistent with the other options exchanges will allow the 
Exchange to more effectively deter trading floor violations. The 
Exchange notes that this proposed change brings these sanctions in line 
with the sanctions imposed by NYSE Arca.\29\ Rule 12140(e)(2) currently 
permits the Exchange to apply a fine of $500 for the first occurrence, 
$1,000 for a second occurrence, $2,000 for a third occurrence, and 
formal disciplinary action for subsequent occurrences within any 
twenty-four-month rolling period. The proposed rule change updates the 
fine schedule to provide that, within any twenty-four-month rolling 
period, the Exchange may apply a fine of $500 for the first violation, 
$1,000 for a second violation, $2,500 for a third violation, and formal 
disciplinary action for subsequent violations. Under this proposed 
amendment, any Floor Participant who violates Rule 7580(e) regarding 
the failure to comply with the order format and system entry 
requirements on the Trading Floor shall be subject to the fines listed 
below.
---------------------------------------------------------------------------

    \29\ See NYSE Arca Rule 10.12 (k)(i)(2).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $500.
Second Violation...........................  $1,000.
Third Violation............................  $2,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Failure to Properly Execute a QOO Order. As stated above, the 
Exchange is proposing to make clarifying and non-substantive changes. 
As such, the Exchange is proposing to amend Rule 12140(e)(3) Failure to 
Properly Execute a QOO Order pursuant to Rule 7600, to change 
``occurrence to ``violation'' within the fine schedule. The Exchange is 
proposing this change to update the language within the MRVP to remove 
the term ``occurrence'' and replace it with ``violation'' when the term 
is being used to represent a singular instance and ``offense'' when the 
term may be used to represent multiple violations aggregated together. 
The Exchange is proposing these changes to improve the consistency of 
the use of these terms within the MVRP. The Exchange believes these 
proposed technical and non-substantive changes are reasonable and 
appropriate because they will increase readability of the MRVP and help 
prevent investor confusion. Further, these proposed changes will allow 
the Exchange to carry out its regulatory responsibility more quickly 
and efficiently by reducing confusion regarding terminology in the

[[Page 41806]]

administration of the MRVP. The Exchange notes that the proposed change 
is intended to provide for greater consistency within the Exchange's 
MRVP itself and with the MRVPs of the other options exchanges. The 
Exchange is not proposing to amend the sanctions under this Rule 
12140(e)(3). The Exchange proposes to update the fine schedule as 
follows:

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $500.
Second Violation...........................  $1,000.
Third Violation............................  $2,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Trading Conduct and Order & Decorum on the Trading Floor. The 
Exchange is also proposing to amend Rule 12140(e)(4) Trading Conduct 
and Order & Decorum on the Trading Floor pursuant to BOX Rule 2120(b)-
(d), to increase and strengthen the sanctions imposed under this 
section. The Exchange believes that increasing and strengthening these 
sanctions is appropriate as the proposed more robust fine schedules may 
help deter violative conduct on BOX. The Exchange believes that 
increasing these trading floor related sanctions to be more consistent 
with the other options exchanges will allow the Exchange to more 
effectively deter trading floor violations. The Exchange notes that 
this proposed change brings these sanctions in line with the sanctions 
imposed by NYSE Arca.\30\ Rule 12140(e)(4) currently permits the 
Exchange to apply a fine of $250 for the first occurrence, $500 for a 
second occurrence, $1,000 for a third occurrence, and formal 
disciplinary action for subsequent occurrences within any twenty-four-
month rolling period. The proposed rule change updates the fine 
schedule to provide that, within any twenty-four-month rolling period, 
the Exchange may apply a fine of $1,000 for the first violation, $2,000 
for a second violation, $3,500 for a third violation, and formal 
disciplinary action for subsequent violations. Under this proposed 
amendment, any Floor Participant who violates Rule 2120(b)-(d) 
regarding Trading Floor Conduct and decorum shall be subject to the 
fines listed below.
---------------------------------------------------------------------------

    \30\ See NYSE Arca Rule 10.12 (k)(i)(16).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,000.
Third Violation............................  $3,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Discretionary Transactions. As stated above, the Exchange is 
proposing to make clarifying and non-substantive changes. As such, the 
Exchange is proposing to amend Rule 12140(e)(5) Discretionary 
Transactions pursuant to Rule 7590, to change ``occurrence'' to 
``violation'' within the fine schedule. The Exchange is proposing this 
change to update the language within the MRVP to remove the term 
``occurrence'' and replace it with ``violation'' when the term is being 
used to represent a singular instance and ``offense'' when the term may 
be used to represent multiple violations aggregated together. The 
Exchange is proposing these changes to improve the consistency of the 
use of these terms within the MVRP. The Exchange believes these 
proposed technical and non-substantive changes are reasonable and 
appropriate because they will increase readability of the MRVP and help 
prevent investor confusion. Further, these proposed changes will allow 
the Exchange to carry out its regulatory responsibility more quickly 
and efficiently by reducing confusion regarding terminology in the 
administration of the MRVP. The Exchange notes that the proposed change 
is intended to provide for greater consistency within the Exchange's 
MRVP itself and with the MRVPs of the other options exchanges. The 
Exchange is not proposing to amend the sanctions under this Rule 
12140(e)(5). The Exchange proposes to update the fine schedule as 
follows:

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $250.
Second Violation...........................  $500.
Third Violation............................  $1,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Participant Not Available to Reconcile an Uncompared Trade. 
The Exchange is proposing to amend Rule 12140(e)(6) Floor Participant 
Not Available to Reconcile an Uncompared Trade pursuant to BOX Rule 
8530, to increase and strengthen the sanctions imposed under this 
section. The Exchange believes that increasing and strengthening these 
sanctions is appropriate as the proposed more robust fine schedules may 
help deter violative conduct on BOX. The Exchange believes that 
increasing these trading floor related sanctions to be more consistent 
with the other options exchanges will allow the Exchange to more 
effectively deter trading floor violations. The Exchange notes that 
this proposed change brings these sanctions in line with the sanctions 
imposed by NYSE Arca.\31\ Rule 12140(e)(6) currently permits the 
Exchange to apply a fine of $500 for the first occurrence, $1,000 for a 
second occurrence, $2,000 for a third occurrence, and formal 
disciplinary action for subsequent occurrences

[[Page 41807]]

within any twenty-four-month rolling period. The proposed rule change 
updates the fine schedule to provide that the Exchange may apply a fine 
of $500 for the first violation, $1,000 for a second violation, $2,500 
for a third violation, and may proceed with formal disciplinary action 
for any subsequent violations within any rolling twenty-four-month 
period. Under this proposed amendment, any Floor Participant who 
violates Rule 8530 regarding the resolution of uncompared trades shall 
be subject to the fines listed below.
---------------------------------------------------------------------------

    \31\ See NYSE Arca Rule 10.12(k)(i)(9).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $500.
Second Violation...........................  $1,000.
Third Violation............................  $2,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Participant Communications and Equipment. The Exchange is 
also proposing to amend Rule 12140(e)(7) Floor Participant 
Communications and Equipment pursuant to BOX Rule 7660, to increase and 
strengthen the sanctions imposed under this section. The Exchange 
believes that increasing and strengthening these sanctions is 
appropriate as the proposed more robust fine schedules may help deter 
violative conduct on BOX. The Exchange believes that increasing these 
trading floor related sanctions to be more consistent with the other 
options exchanges will allow the Exchange to more effectively deter 
trading floor violations. The Exchange notes that this proposed change 
brings these sanctions in line with the sanctions imposed by NYSE 
Arca.\32\ Rule 12140(e)(7) currently permits the Exchange to apply a 
fine of $250 for the first occurrence, $500 for a second occurrence, 
$1,000 for a third occurrence, and formal disciplinary action for 
subsequent occurrences within any twenty-four-month rolling period. The 
proposed rule change updates the fine schedule to provide that, within 
any twenty-four-month rolling period, the Exchange may apply a fine of 
$1,000 for the first violation, $2,500 for a second violation, and 
$3,500 for a third violation, and formal disciplinary action for 
subsequent violations. Under this proposed amendment, any Floor 
Participant who violates Rule 7660 regarding Floor Participant 
Communications and Equipment shall be subject to the fines listed 
below.
---------------------------------------------------------------------------

    \32\ See NYSE Arca Rule 10.12(k)(i)(12).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $3,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Improper Vocalization of a Trade. The Exchange is also proposing to 
amend Rule 12140(e)(8) Improper Vocalization of a Trade pursuant to BOX 
Rule 100(b)(5), to increase and strengthen the sanctions imposed under 
this section. The Exchange believes that increasing and strengthening 
these sanctions is appropriate as the proposed more robust fine 
schedules may help deter violative conduct on BOX. The Exchange 
believes that increasing these trading floor related sanctions to be 
more consistent with the other options exchanges will allow the 
Exchange to more effectively deter trading floor violations. The 
Exchange notes that this proposed change will bring these sanctions in 
line with the sanctions imposed by NYSE Arca.\33\ Rule 12140(e)(8) 
currently permits the Exchange to apply a fine of $250 for the first 
occurrence, $500 for a second occurrence, $1,000 for a third 
occurrence, and formal disciplinary action for subsequent occurrences 
within any rolling twenty-four-month period. The proposed rule change 
updates the fine schedule to provide that, within any rolling twenty-
four-month period, the Exchange may apply a fine of $1,000 for the 
first violation, $2,500 for a second violation, $3,500 for a third 
violation, and formal disciplinary action for subsequent violations. 
Under this proposed amendment, any Floor Participant who violates Rule 
100(b)(5) regarding the requirements for public outcry shall be subject 
to the fines listed below.
---------------------------------------------------------------------------

    \33\ See NYSE Arca Rule 10.12(k)(i)(14).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $3,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Market Maker Failure to Comply with Quotation Requirements. 
The Exchange is also proposing to amend Rule 12140(e)(9) Floor Market 
Maker Failure to Comply with Quotation Requirements pursuant to BOX 
Rule 8510(c)(2), to increase and strengthen the sanctions imposed under 
this section. The Exchange believes that increasing and strengthening 
these sanctions is appropriate as the proposed more robust fine 
schedules may help deter violative conduct on BOX. The Exchange 
believes that increasing these trading floor related sanctions to be 
more consistent with the other options exchanges will allow the 
Exchange to more effectively deter trading floor violations. The 
Exchange notes that this proposed change will bring these sanctions in 
line with the sanctions

[[Page 41808]]

imposed by NYSE Arca.\34\ Rule 12140(e)(9) currently permits the 
Exchange to apply a fine of $250 for the first occurrence, $500 for a 
second occurrence, $1,000 for a third occurrence, and formal 
disciplinary action for subsequent occurrences within any rolling 
twenty-four-month period. The proposed rule change updates the fine 
schedule to provide that, within any rolling twenty-four-month period, 
the Exchange may apply a fine of $1,000 for the first violation, $2,500 
for a second violation, and $3,500 for a third violation, and formal 
disciplinary action for subsequent violations. Under this proposed 
amendment, any Floor Participant who violates Rule 8510(c)(2) regarding 
a Floor Market Maker's Obligation of Continuous Open Outcry Quoting 
shall be subject to the fines listed below.
---------------------------------------------------------------------------

    \34\ See NYSE Arca Rule 10.12(k)(i)(39).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $3,500.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Market Maker Quote Spread Parameters. The Exchange is also 
proposing to amend Rule 12140(e)(10) Floor Market Maker Quote Spread 
Parameters pursuant to BOX Rule 8510(d)(1), to increase and strengthen 
the sanctions imposed under this section. The Exchange believes that 
increasing and strengthening these sanctions is appropriate as the 
proposed more robust fine schedules may help deter violative conduct on 
BOX. The Exchange believes that increasing these trading floor related 
sanctions to be more consistent with the other options exchanges will 
allow the Exchange to more effectively deter trading floor violations. 
The Exchange notes that this proposed change will bring these sanctions 
in line with the sanctions imposed by NYSE Arca.\35\ Rule 12140(e)(10) 
currently permits the Exchange to give a Letter of Caution for a first 
occurrence, apply a fine of $250 for a second occurrence, apply a fine 
of $500 for a third occurrence, and proceed with formal disciplinary 
action for subsequent occurrences within any rolling twenty-four-month 
period. The proposed rule change updates the fine schedule to provide 
that, within any rolling twenty-four-month period, the Exchange may 
apply a fine of $1,000 for the first violation, $2,500 for a second 
violation, $3,500 for a third violation, and formal disciplinary action 
for subsequent violations. Under this proposed amendment, any Floor 
Participant who violates Rule 8510(d)(1) regarding legal bid/ask 
differential requirements shall be subject to the fines listed below.
---------------------------------------------------------------------------

    \35\ See NYSE Arca Rule 10.12(k)(i)(41).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $3,500/
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Broker Failure to Honor the Priority of Bids and Offers. The 
Exchange is also proposing to amend Rule 12140(e)(11) Floor Broker 
Failure to Honor the Priority of Bids and Offers pursuant to BOX Rule 
7610(d), to increase and strengthen the sanctions imposed under this 
section. The Exchange believes that increasing and strengthening these 
sanctions is appropriate as the proposed more robust fine schedules may 
help deter violative conduct on BOX. The Exchange believes that 
increasing these trading floor related sanctions to be more consistent 
with the other options exchanges will allow the Exchange to more 
effectively deter trading floor violations. The Exchange notes that 
this proposed change will bring these sanctions in line with the 
sanctions imposed by NYSE Arca.\36\ Rule 12140(e)(11) currently permits 
the Exchange to apply a fine of $500 for a first occurrence, $1,000 for 
a second occurrence, $2,000 for a third occurrence, and may proceed 
with formal disciplinary action for subsequent occurrences within any 
rolling twenty-four-month period. The proposed rule change updates the 
fine schedule to provide that, within any rolling twenty-four-month 
period, the Exchange may apply a fine of $1,000 for the first 
violation, $2,500 for a second violation, $5,000 for a third violation, 
and formal disciplinary action for subsequent violations. Under this 
proposed amendment, any Floor Participant who violates Rule 7610(d) 
regarding a Floor Broker's obligations in determining Time Priority 
Sequence shall be subject to the fines listed below.
---------------------------------------------------------------------------

    \36\ See NYSE Arca Rule 10.12(k)(i)(40).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $1,000.
Second Violation...........................  $2,500.
Third Violation............................  $5,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Floor Broker Failure to Identify a Broker Dealer Order. The 
Exchange is also proposing to amend Rule 12140(e)(12) Floor Broker 
Failure to Identify a Broker Dealer Order pursuant to BOX Rule IM-7580-
2 to increase and strengthen the sanctions imposed under this section. 
The Exchange believes that increasing and strengthening these sanctions 
is appropriate as the proposed more robust fine schedules may help 
deter violative conduct on BOX. The

[[Page 41809]]

Exchange believes that increasing these trading floor related sanctions 
to be more consistent with the other options exchanges will allow the 
Exchange to more effectively deter trading floor violations. The 
Exchange notes that this proposed change will bring these sanctions in 
line with the sanctions imposed by NYSE Arca.\37\ Rule 12140(e)(12) 
currently permits the Exchange to apply a fine of $250 for a first 
occurrence, $500 for a second occurrence, $1,000 for a third 
occurrence, and may proceed with formal disciplinary action for 
subsequent offenses within any rolling twenty-four-month period. The 
proposed rule change updates the fine schedule to provide that, within 
any rolling twenty-four-month period, the Exchange may apply a fine of 
$500 for the first violation, $1,500 for a second violation, $3,000 for 
a third violation, and formal disciplinary action for subsequent 
violations. Under this proposed amendment, any Floor Participant who 
violates Rule IM-7580-2 regarding a Floor Broker's responsibility to 
identify its orders shall be subject to the fines listed below.
---------------------------------------------------------------------------

    \37\ See NYSE Arca Rule 10.12(k)(i)(11).

------------------------------------------------------------------------
Number of violations within any rolling 24-
                month period                           Sanction
------------------------------------------------------------------------
First Violation............................  $500.
Second Violation...........................  $1,500.
Third Violation............................  $3,000.
Subsequent Violations......................  Formal Disciplinary Action.
------------------------------------------------------------------------

    The Exchange believes Exercise Limits (Rule 3140), Lead Market 
Maker Continuous Quoting (Rule 8050(e)), Maintenance, Retention, and 
Furnishing of Books, Records, and Other Information (Rule 10000), and 
Anti-Money Laundering Compliance Program (Rule 10070) to be minor in 
nature and consistent with violations at other options exchanges, and 
therefore proposes to add them to the list of rules in Rule 12140(d) 
eligible for a minor rule fine disposition. Particularly, the Exchange 
believes that violations of each of the rules listed above are suitable 
for incorporation into the MRVP because these violations are minor in 
nature and consistent with violations at other options exchanges. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency across the Exchange's MRVP and the MRVPs of the 
other options exchanges. As detailed above, the Exchange is also 
proposing to increase and strengthen the fines for certain minor rule 
violations under Rule 12140. The Exchange believes that the proposed 
increased fines will strengthen the Exchange's ability to carry out its 
oversight and enforcement responsibilities in cases where full 
disciplinary proceedings are unwarranted in view of the minor nature of 
the particular violation. Specifically, the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices 
because it will provide the Exchange the ability to issue greater fines 
and more effectively deter violative conduct.
    The Exchange is also proposing to make additional technical and 
non-substantive changes to provide greater clarity and consistency 
within the Exchange's MRVP and with the MRVPs of the other options 
exchanges. As a result of the proposed addition of Rules 12140(d)(10) 
and (d)(11) above, the proposed rule change subsequently renumbers 
current Rules 12140(d)(10), (11), (12), (13), and (14), to Rules 
12140(d)(12), (13), (14), (15), and (16), respectively. The Exchange is 
also proposing to amend the language within the fine schedules to use 
the terms ``and thereafter'' and ``subsequent'' instead of ``or more'' 
when detailing the number of violations. The Exchange proposes to 
update ``or more'' to ``and thereafter'' in Rule 12140(d)(7), (13),\38\ 
(14),\39\ and (15),\40\ and ``or more'' to ``subsequent'' in Rules 
12140(d)(6) and (12).\41\ There is no substantive difference in the 
Exchange's interpretation between ``or more'' and ``subsequent'' or 
``and thereafter.'' The purpose of the change is to provide greater 
clarity within the Exchange's MRVP by using more consistent 
terminology. The Exchange believes these technical and non-substantive 
changes are reasonable and appropriate because they will increase 
readability of the MRVP and help prevent investor confusion. Further, 
these proposed changes will allow the Exchange to carry out its 
regulatory responsibility more quickly and efficiently by reducing 
confusion regarding terminology in the administration of the MRVP. The 
Exchange notes that the proposed change is intended to provide for 
greater consistency within the Exchange's MRVP itself and with the 
MRVPs of the other options exchanges.
---------------------------------------------------------------------------

    \38\ As noted above, this is current Rule 12140(d)(11),but the 
Exchange is proposing to renumber certain subsections under 12140(d) 
due to the proposed addition of Rule 12140(d)(10) and (11).
    \39\ As noted above, this is current Rule 12140(d)(12), but the 
Exchange is proposing to renumber certain subsections under 12140(d) 
due to the proposed addition of Rule 12140(d)(10) and (11).
    \40\ As noted above, this is current Rule 12140(d)(13), but the 
Exchange is proposing to renumber certain subsections under 12140(d) 
due to the proposed addition of Rule 12140(d)(10) and (11).
    \41\ As noted above, this is current Rule 12140(d)(10), but the 
Exchange is proposing to renumber certain subsections under 12140(d) 
due to the proposed addition of Rule 12140(d)(10) and (11).
---------------------------------------------------------------------------

2. Statutory Basis

    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\42\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \43\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in 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. The Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \44\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Exchange further believes that the proposed rule changes 
to Rule 12140(d) are consistent with Section 6(b)(6) of the Act,\45\ 
which provides that members and persons associated with members shall 
be appropriately disciplined for

[[Page 41810]]

violation of the provisions of the rules of the exchange, by expulsion, 
suspension, limitation of activities, functions, and operations, fine, 
censure, being suspended or barred from being associated with a member, 
or any other fitting sanction. As noted, the proposed rule change adds 
certain rules as eligible for a minor rule fine disposition under the 
Exchange's MRVP. The Exchange believes that violations of these 
proposed rules are minor in nature and will be more appropriately 
disciplined through the Exchange's MRVP and is proposing to amend the 
fine schedules applicable to these additional rules to appropriately 
sanctions such failures.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78f(b).
    \43\ 15 U.S.C. 78f(b)(5).
    \44\ Id.
    \45\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed change is designed to 
provide a fair procedure for the disciplining of members and persons 
associated with members, consistent with Sections 6(b)(7) and 6(d) of 
the Act.\46\ Rule 12140, currently and as amended, does not preclude a 
Participant or person associated with or employed by a Participant from 
contesting an alleged violation and receiving a hearing on the matter 
with the same procedural rights through a litigated disciplinary 
proceeding. Finally, the Exchange believes that the proposed rule 
change will strengthen its ability to carry out its oversight 
responsibilities as a self-regulatory organization pursuant to the Act 
and reinforce its surveillance and enforcement functions.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to add certain 
rules as eligible for a minor rule fine disposition under its MRVP, 
which it considers violations of such rules to be minor in nature and 
consistent with violations at other options exchanges, will assist the 
Exchange in preventing fraudulent and manipulative acts and practices 
and promoting just and equitable principles of trade, and will serve 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. The Exchange believes violations of the above-
listed rules to be minor in nature and therefore proposes to add them 
to the list of rules in Rule 12140(d) eligible for a minor rule fine 
disposition. Particularly, the Exchange believes that violations of 
each of the rules listed above are suitable for incorporation into the 
MRVP because these violations are generally minor in nature and 
consistent with violations at other options exchanges. Further, the 
Exchange will be able to carry out its regulatory responsibility more 
quickly and efficiently by incorporating these violations into the 
MRVP.
    Specifically, the Exchange believes the adoption of Rule 
12140(d)(10) Maintenance, Retention and Furnishing of Books, Records 
and Other Information pursuant to BOX Rule 10000 is appropriate because 
it will help deter BOX Participants from failing to make, keep current, 
and preserve such books and records as required, or failure to furnish 
such books and records in a timely manner upon request by the Exchange. 
The Exchange believes that adding this rule to the MRVP will allow the 
Exchange to carry out its regulatory responsibility more quickly and 
efficiently. The Exchange believes that the lesser penalty of $500 for 
an initial violation and then providing higher fines for second and 
third violations and the option of a fine of $5,000 or formal 
disciplinary proceedings for a fourth violation and thereafter during a 
rolling twenty-four-month period is appropriate. This will allow the 
Exchange to levy progressively larger fines and greater penalties 
against repeat-offenders. The Exchange believes this fine structure may 
serve to deter repeat-offenders while providing a reasonable penalty 
for a first offense within a rolling twenty-four-month period. The 
Exchange believes that adding this rule to the MRVP will allow the 
Exchange to carry out its regulatory responsibility more quickly and 
efficiently in regard to violations of BOX Rule 10000.
    The Exchange believes the adoption of Rule 12140(d)(11), Anti-Money 
Laundering Compliance Program pursuant to BOX Rule 10070 is appropriate 
because it will help deter BOX Participants from failing to satisfy the 
requirements of the anti-money laundering compliance program. The 
Exchange believes that adding this rule to the MRVP will allow the 
Exchange to carry out its regulatory responsibility more quickly and 
efficiently in regard to violations of BOX Rule 10070. The Exchange 
believes that the proposed fine structure permitting the Exchange to 
apply a fine of $1,000 for a first violation and $2,500 for subsequent 
violations is appropriate as this will effectively penalize both first 
time and repeat offenders. The Exchange believes that the proposed 
fines will be sufficient to warn against and help deter potentially 
violative conduct. The Exchange believes that adding this rule to the 
MRVP will allow the Exchange to carry out its regulatory responsibility 
more quickly and efficiently in regard to violations of BOX Rule 10070.
    The Exchange believes that amending Rule 12140(d)(6), Continuous 
Quotes to include continuous quoting violations by Lead Marker Makers 
pursuant to BOX Rule 8055(c)(1) is appropriate because it will allow 
the Exchange to carry out its regulatory responsibility quickly and 
efficiently in a manner that is consistent with the way it handles 
Market Maker continuous quoting violations. The Exchange notes that 
Cboe Options, and NYSE Arca have rule provisions in their minor rule 
violation plans that address Market Maker and Lead Market Maker 
continuous quoting obligations.\47\ Rule 12140(d)(6) currently permits 
the Exchange to give a Letter of Caution for the first violation within 
one calendar year. For subsequent violations during the same period, 
the fine schedule permits the Exchange to issue a fine of $300 per day. 
The proposed rule change increases and strengthens the fine schedule to 
provide that, during one calendar year, the Exchange may give a Letter 
of Caution for a first violation, may apply a fine of $1,500 for a 
second violation, may apply a fine of $3,000 for a third violation, and 
may proceed with formal disciplinary action for subsequent violations. 
The Exchange believes that maintaining the lesser penalty (Letter of 
Caution) for a first violation and then providing higher fines for 
second and third violations and, ultimately, formal disciplinary 
proceedings for any subsequent violations during one calendar year is 
appropriate. This will allow the Exchange to levy progressively larger 
fines and greater penalties against repeat-offenders (as opposed to a 
fine range for any violations that may come after a first violation). 
The Exchange believes this fine structure may serve to deter repeat-
offenders while providing reasonable warning for a first violation 
within one calendar year. The Exchange believes that removing the 
language from Rule 12140(d)(6) that states ``Violations of Rule 8050(e) 
or Rule 8055(c)(1) that continue over consecutive trading days will be 
subject to a separate fine, pursuant to this paragraph (6), for each 
day during which the violation occurs and is continuing up to a limit 
of fifteen consecutive trading days'' is reasonable because with the 
proposed updates to the fine schedule replacing the fine of $300 per 
day with a fine of $1,500, this language is no longer necessary. This 
language was originally included to allow the Exchange to fine a 
Participant $300 per day for each consecutive trading day during which 
a violation occurs. The Exchange is proposing to

[[Page 41811]]

reformat the fine schedule and remove the listed fine of $300 per day. 
The Exchange is now proposing a fine of $1,500 for a second violation, 
a fine of $3,000 for a third violation, and formal disciplinary action 
for any subsequent violations. Under the new format, the language 
allowing consecutive trading day violations for up to fifteen days to 
be fined separately is no longer consistent or feasible. Under the 
MRVP, a Participant may only be fined a maximum of $5,000 and with the 
greater fines being proposed the previous fine structure no longer 
applies. The Exchange also believes that removing this language will 
clarify the proposed updates to the fine schedule and may help reduce 
Participant confusion over the Exchange's application of the fines 
within BOX Rule 12140(d)(6). The Exchange notes that Cboe Options, and 
NYSE Arca have similar rule provisions in their MRVPs addressing Market 
Maker and Lead Market Maker continuous quoting obligations.\48\ The 
Exchange also notes that the proposed fines will bring the sanctions 
for violations of continuous quoting obligations in line with the 
sanctions currently imposed by Cboe Options.\49\
---------------------------------------------------------------------------

    \47\ See Cboe Options Rule 13.15(g)(9). See also NYSE American 
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
    \48\ See Cboe Options Rule 13.15(g)(9). See also NYSE American 
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
    \49\ See Cboe Options Rule 13.15(g)(9).
---------------------------------------------------------------------------

    The Exchange believes that adding Lead Market Maker Continuous 
Quoting to Rule 12140(d)(6) within the MRVP will allow the Exchange to 
carry out its regulatory responsibility more quickly and efficiently in 
regard to violations of BOX Rule 8055(c)(1). The Exchange notes that 
the proposed change will also provide for greater consistency across 
the Exchange's MRVP and the MRVPs of the other options exchanges. The 
Exchange believes violations of these rules to be minor in nature and 
would be more appropriately disciplined through the Exchange's MRVP. As 
described above, and as is the case for all rule violations covered 
under Rule 12140(d) and (e), the Exchange may determine that a 
violation of Market-Maker quoting obligations is intentional, 
egregious, or otherwise not minor in nature and choose to proceed under 
the Exchange's formal disciplinary rules rather than its MRVP.
    The Exchange believes that amending Rule 12140(d)(1), Position 
Limits, to include violations of exercise limits pursuant to BOX Rule 
3140 is appropriate because it will allow the Exchange to carry out its 
regulatory responsibility quickly and efficiently in a manner that is 
consistent with the way it handles violations of position limits. 
Violations of position and exercise limits on the Exchange generally 
occur contemporaneously, so adding exercise limits to the existing 
position limits minor rule violation will allow the Exchange to address 
these related violations more effectively. The Exchange is proposing to 
keep the fine levels for exercise limit violations the same as the 
current fine levels for position limits. The Exchange believes that 
updating the language in the heading of the fine schedule to change 
``violations'' to ``offenses'' is reasonable as it adds detail and 
clarity to the fine schedules by clarifying the Exchange's use of these 
terms as used within the fine schedules. The Exchange believes this 
change may help reduce Participant confusion over the Exchange's 
application of the fines within BOX Rule 12140(d)(1). The Exchange 
notes that this proposal is consistent with the MRVPs in place at Cboe 
Options, NYSE American, and NYSE Arca.\50\
---------------------------------------------------------------------------

    \50\ See Cboe Options Rule 13.15(g)(1). See also NYSE American 
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(21).
---------------------------------------------------------------------------

    The Exchange believes that increasing and strengthening the 
sanctions in Rule 12140(d)(5) and current Rule 12140(d)(10) \51\ is 
appropriate as the proposed more robust fine schedules may help deter 
violative conduct on BOX. The Exchange believes that increasing these 
sanctions will allow the Exchange to provide more appropriate 
punishments and more effectively deter violations of this nature. As 
such, the Exchange believes that this will assist the Exchange in 
preventing fraudulent and manipulative acts and practices and promoting 
just and equitable principles of trade and will serve 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.
---------------------------------------------------------------------------

    \51\ See supra note 41.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to adopt Rules 
12140(d)(10) and (11), and amend current Rules 12140(d)(1), (5), (6), 
(10),\52\ (11),\53\ (12),\54\ (13),\55\ and (14) \56\ will assist the 
Exchange in preventing fraudulent and manipulative acts and practices 
and promoting just and equitable principles of trade and will serve 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. The Exchange notes that the proposed updates 
to the minor rule violations and subsequent sanctions will bring them 
more in line with the MRVPs in place at NYSE American, NYSE Arca, and 
Cboe Options, will promote greater consistency across the options 
exchanges and reduce investor confusion.
---------------------------------------------------------------------------

    \52\ Id.
    \53\ See supra note 38.
    \54\ See supra note 39.
    \55\ See supra note 40.
    \56\ As noted above, this proposed rule change subsequently 
renumbers current Rule 12140(d)(14) to (d)(16) as a result of the 
proposed addition of Rules 12140(d)(10), and (d)(11).
---------------------------------------------------------------------------

    The Exchange believes that the proposed technical and clarifying 
changes are appropriate and benefit investors by adding clarity to the 
rules. The Exchange believes that the proposed rule change to renumber 
current Rules 12140(d)(10), (11), (12), (13), and (14), to Rules 
12140(d)(12), (13), (14), (15), and (16), respectively, will benefit 
investors by adding clarity to the rules. The Exchange believes that 
updating the language to use ``offense'' or ``violation'' instead of 
``occurrence'' and ``rolling'' instead of ``running'' within the fine 
schedule is appropriate will provide greater consistency in the 
terminology used within the Exchange's MRVP and with the MRVPs of the 
other options exchanges. The purpose of the change is to provide 
greater clarity within the Exchange's MRVP by using more consistent 
terminology throughout. The Exchange also believes that amending the 
language within the fine schedules to use the terms ``and thereafter'' 
and ``subsequent'' instead of ``or more'' when detailing the number of 
violations will provide more clarity and may reduce investor confusion. 
There is no substantive difference in the Exchange's interpretation 
between ``or more'' and ``subsequent'' or ``and thereafter''. The 
purpose of the change is to provide greater clarity within the 
Exchange's MRVP by using more consistent terminology. The Exchange 
believes these technical and non-substantive changes are reasonable and 
appropriate because they will increase readability of the MRVP and help 
prevent investor confusion. Further, these proposed changes will allow 
the Exchange to carry out its regulatory responsibility more quickly 
and efficiently by reducing confusion regarding terminology in its 
administration of the MRVP. The Exchange notes that the proposed change 
will also provide for greater consistency between the Exchange's MRVP 
and the MRVPs of the other options exchanges, which is designed to 
benefit investors by providing more consistent language among the 
various options exchanges.
    The Exchange believes that the proposed rule change to update the 
fine

[[Page 41812]]

schedule and language applicable to minor rule violations related to 
certain Trading Floor violations listed in Rule 12140(e) to increase 
the sanctions will assist the Exchange in preventing fraudulent and 
manipulative acts and practices and promoting just and equitable 
principles of trade, and will serve 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. 
Particularly, the Exchange believes that updating the fine schedule 
applicable to minor rule violations related to certain Trading Floor 
violations does not directly impact trading on the Exchange, 
maintenance of a fair and orderly market, and/or customer protection. 
The Exchange adopted the minor rule violations and corresponding fines 
under Rule 12140(e) in 2017 following the establishment of the BOX 
Trading Floor.\57\ In 2017, the Exchange believed it appropriate to 
adopt lower fine amounts as the new trading floor was established and 
to be more consistent with the other fines listed within the Exchange's 
MRVP. However, the Exchange's Trading Floor is now well-established, 
and the Exchange believes that increasing and strengthening these 
sanctions is appropriate as the proposed more robust fine schedules may 
help deter violative conduct on BOX. The Exchange believes that 
increasing certain trading floor related sanctions to be more 
consistent with the other options exchanges will allow the Exchange to 
more effectively deter trading floor violations. The Exchange notes 
that this proposed change will bring the sanctions more in line with 
the fine schedules at NYSE Arca.\58\ As such, the proposed rule change 
is also designed to benefit investors by providing more consistent 
penalties across the MRVPs of the Exchange and another exchange.
---------------------------------------------------------------------------

    \57\ See supra note 26.
    \58\ See NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

    The Exchange believes that updating the language within certain 
minor rule violations listed within Rule 12140 to use the term 
``violation'' instead of ``occurrence'' when detailing the number of 
violations within the fine schedules will provide greater clarity and 
consistency in the terminology used within the Exchange's MRVP. Within 
the MRVP, the Exchange interprets a violation to mean a singular rule 
violation, while and multiple violations may be deemed to constitute 
one offense. The Exchange believes that changing ``offense'' to 
``violation'' in Rule 12140(d)(3), ``occurrence'' to ``offense'' in 
Rule 12140(d)(5), and ``occurrence'' to ``violation'' in Rule 
12140(e)(1)-(12) is appropriate because it will help clarify this 
distinction between offense and violation by updating the language in 
the MRVP to only use the term offense when the listed fines cover 
multiple violations grouped together. The Exchange also believes that 
the proposed technical changes to renumber and update the language in 
certain minor rule violations would not be inconsistent with the public 
interest and the protection of investors because investors will not be 
harmed and in fact would benefit from increased clarity and 
transparency, thereby reducing potential confusion.
    In requesting the proposed additions to BOX Rule 12140(d), the 
Exchange in no way minimizes the importance of compliance with Exchange 
Rules and all other rules subject to the imposition of fines under the 
MRVP. Minor rule fines provide a meaningful sanction for minor or 
technical violations of rules when the conduct at issue does not 
warrant stronger, immediately reportable disciplinary sanctions. The 
inclusion of a rule in the Exchange's MRVP does not minimize the 
importance of compliance with the rule, nor does it preclude the 
Exchange from choosing to pursue violations of eligible rules through a 
Letter of Consent if the nature of the violations or prior disciplinary 
history warrants more significant sanctions. Rather, the Exchange 
believes that the proposed rule change will strengthen the Exchange's 
ability to carry out its oversight and enforcement responsibilities in 
cases where full disciplinary proceedings are unwarranted in view of 
the minor nature of the particular violation. Rather, the option to 
impose a minor rule sanction gives the Exchange additional flexibility 
to administer its enforcement program in the most effective and 
efficient manner while still fully meeting the Exchange's remedial 
objectives in addressing violative conduct. Specifically, the proposed 
rule change is designed to prevent fraudulent and manipulative acts and 
practices because it will provide the Exchange the ability to issue a 
minor rule fine for violations relating to the Anti-Money Laundering 
Compliance Program (Rule 10070), Lead Market Maker Continuous Quoting 
(Rule 8055), Exercise Limits (Rule 3140), and Maintenance, Retention 
and Furnishing of Books, Records and Other Information (Rule 10000) 
where a more formal disciplinary action may not be warranted or 
appropriate.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but rather is concerned 
solely with updating its MRVP in connection with rules eligible for a 
minor rule fine disposition. The Exchange believes the proposed rule 
changes, overall, will strengthen the Exchange's ability to carry out 
its oversight and enforcement functions and deter potential violative 
conduct. The Exchange notes that the proposed additional violations are 
similar to minor rule violations designated in the MRVPs on other 
options exchanges.\59\
---------------------------------------------------------------------------

    \59\ Cboe Options, NYSE American, and NYSE Arca have rule 
provisions in their minor rule violation plans that address exercise 
limits and market maker continuous quoting obligations. NYSE Arca 
and Cboe Options have rule provisions in their MRVPs that address 
failures related to AML Program Implementation. Additionally, NYSE 
Arca has rule provisions in its MRVP that address various 
recordkeeping violations. See Cboe Options Rule 13.15(g). See also 
NYSE American Rule 9217. See also NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule changes, overall, will 
strengthen the Exchange's ability to carry out its oversight and 
enforcement functions and deter potential violative conduct. Further, 
the proposal relates to the Exchange's role and responsibilities as a 
self-regulatory organization and the manner in which it disciplines its 
Participants and associated persons for violations of its rules. As 
such, the Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\60\ In particular, the

[[Page 41813]]

Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\61\ 
which requires that the rules of an exchange be designed to promote 
just and equitable principles of trade, to remove impediments and to 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
The Commission also believes that the proposal, as modified by 
Amendment No. 1, is consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act \62\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of Commission 
and Exchange rules. Finally, the Commission finds that the proposal, as 
modified by Amendment No. 1, is consistent with the public interest, 
the protection of investors, or otherwise in furtherance of the 
purposes of the Act, as required by Rule 19d-1(c)(2) under the Act,\63\ 
which governs minor rule violation plans.
---------------------------------------------------------------------------

    \60\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \61\ 15 U.S.C. 78f(b)(5).
    \62\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \63\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    As stated above, the Exchange proposes to amend Rule 12140 by: (1) 
adding certain rule violations that the Exchange believes to be minor 
in nature and consistent with violations at other options exchanges; 
(2) updating the fine schedule applicable to minor rule violations 
related to certain rule violations; and (3) making other clarifying and 
non-substantive changes.
    The Commission believes that Rule 12140 is an effective way to 
discipline a member for a minor violation of a rule. More specifically, 
the Commission finds that the Exchange's proposal, as modified by 
Amendment No. 1, of adding certain rules to the Exchange's list of 
current minor rule violations provides a reasonable means of addressing 
violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission also finds that amending 
the associated fine schedule is consistent with the Act because it may 
help the Exchange's ability to better carry out its oversight and 
enforcement responsibilities by levying appropriate fines for minor 
violations of the rules included in Rule 12140. Lastly, the Commission 
also believes that the Exchange's proposal to make clarifying and non-
substantive changes to Rule 12140 is consistent with the Act because 
such changes will add clarity to the Exchange's rules.
    In approving the propose rule change, as modified by Amendment No. 
1, the Commission in no way minimizes the importance of compliance with 
the Exchange's rules and all other rules subject to fines under Rule 
12140. The Commission believes that a violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, Rule 12140 provides a reasonable means of addressing rule 
violations that may not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that the Exchange 
will continue to conduct surveillance with due diligence and make a 
determination based on its findings, on a case-by-case basis, whether a 
fine of more or less than the recommended amount is appropriate for a 
violation under Rule 12140 or whether a violation requires formal 
disciplinary action.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written views, data, and 
arguments concerning whether Amendment No. 1 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#156760797038767a7878707b6166556670763b727a63"><span class="__cf_email__" data-cfemail="740601181159171b1919111a0007340711175a131b02">[email protected]</span></a>. Please include 
File Number SR-BOX-2022-08 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-2022-08. 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-2022-08 and should be submitted on 
or before August 3, 2022.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
1 in the Federal Register. In Amendment No. 1, the Exchange revised the 
proposed rule change to: (1) provide additional detail and 
clarification regarding the Exchange's usage of the terms ``violation'' 
and ``offense'' within Rule 12140; and (2) clarify the application of 
fines under Rule 12140(d)(6). The Commission believes that Amendment 
No. 1 provides additional accuracy and clarity to the proposed rule 
change and does not raise any novel regulatory issues. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\64\ to approve the proposed rule change, as modified by Amendment 
No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\65\ that the proposed rule change (SR-BOX-2022-08), as modified by 
Amendment No. 1 thereto, be, and it hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \65\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\66\
---------------------------------------------------------------------------

    \66\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14883 Filed 7-12-22; 8:45 am]
BILLING CODE 8011-01-P


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