Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 77579 

12 15 U.S.C. 78q–1. 

13 15 U.S.C. 78s(b)(2). 

14 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

U.S.C. 78c(f). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See, e.g. Phlx Rule 1080(l), CBOE Rule 8.13, ISE 

Supplementary Material .03 to Rule 713, MIAX 

Rule 514. 

Act 12 and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,13 that the 

proposed rule change (File No. SR–ICC– 

2014–18) be, and hereby is, approved.14

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–30120 Filed 12–23–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73878; File No. SR–BOX– 

2014–28] 

Self-Regulatory Organizations; BOX 

Options Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Adopt New Rule 7300 To Allow the 

Exchange To Trade Preferenced 

Orders 

December 18, 2014. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

8, 2014, BOX Options Exchange LLC 

(the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt new 

Rule 7300 to allow the Exchange to 

trade Preferenced Orders. The text of the 

proposed rule change is available from 

the principal office of the Exchange, at 

the Commission’s Public Reference 

Room and also on the Exchange’s 

Internet Web site at http://

boxexchange.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt new 

Rule 7300 (Preferenced Orders) to allow 

BOX Options Participants 

(‘‘Participants’’) to submit orders for 

which a Market Maker is designated to 

receive an allocation preference on the 

Exchange (‘‘Preferenced Orders’’). This 

proposal provides an enhanced 

allocation to a Preferred Market Maker 

when it is quoting at NBBO. 

This is a competitive filing based on 

the rules of a number of competing 

options exchanges.3 This proposal will 

allow the Exchange to be competitive 

with other options exchanges that 

provide similar enhanced allocation 

opportunities to Market Makers to 

reward them for attracting order flow to 

the Exchange. 

Preferenced Orders 

A Preferenced Order, as proposed, is 

any order submitted by a Participant to 

the Exchange for which a Market Maker 

is designated (a ‘‘Preferred Market 

Maker’’) to receive execution priority, 

with respect to a portion of the 

Preferenced Order, upon meeting 

certain qualifications described below. 

Preferenced Orders are submitted by a 

Participant by designating an order as 

such and identifying a Preferred Market 

Maker when entering the order. 

Preferenced Orders may be submitted 

by any Participant on the Exchange. All 

existing order types and designations 

may be entered as Preferenced Orders, 

with the exception of Customer Cross 

Orders (which do not involve Market 

Makers) and Directed Orders (which 

relate to the PIP and COPIP matching 

algorithms). If a Market-on-Opening 

Order or a Complex Order is submitted 

as a Preferenced Order, the designation 

as a Preferenced Order will be 

disregarded and such order will be 

treated on the Exchange the same as if 

it were not a Preferenced Order. 

Preferenced Orders may interact with 

auctions and other functionality of the 

Exchange. 

Participants may designate an order as 

a Preferenced Order and identify the 

applicable Preferred Market Maker 

across all forms of connectivity to the 

Exchange. Preferenced Orders will be 

displayed on the Exchange’s High Speed 

Vendor Feed (‘‘HSVF’’) the same as 

orders that are not designated as 

Preferenced Orders. 

A Preferred Market Maker must 

maintain a continuous two-sided 

market, pursuant to Rule 8050(c)(1), 

throughout the trading day, in option 

classes for which it accepts Preferenced 

Orders, for 99% of the time the 

Exchange is open for trading in each 

such option class; provided, however, 

that for purposes of this requirement, a 

Preferred Market Maker is not required 

to quote in intra-day add-on series or 

series that have a time to expiration of 

nine months or more in classes for 

which it receives Preferenced Orders 

and a Market Maker may still be a 

Preferred Market Maker in any such 

series if the Market Maker otherwise 

complies with the Preferred Market 

Maker requirements. Compliance with 

this requirement will be determined on 

a monthly basis; however, determining 

compliance with this requirement on a 

monthly basis does not relieve a 

Preferred Market Maker from meeting 

this quoting requirement on a daily 

basis, nor does it prohibit the Exchange 

from taking disciplinary action against a 

Preferred Market Maker for failing to 

meet this requirement each trading day. 

If a technical failure or limitation of a 

system of the Exchange prevents a 

Market Maker from maintaining, or 

prevents a Market Maker from 

communicating to the Exchange, timely 

and accurate electronic quotes in an 

option class, the duration of such failure 

will be disregarded in determining 

whether the Market Maker has satisfied 

this requirement. The Exchange may 

consider other exceptions to this 

obligation based on a demonstrated 

legal or regulatory requirement or other 

mitigating circumstances. 

Except as described below, orders 

submitted to the Exchange as 

Preferenced Orders will be treated the 

same as other orders submitted to the 

Exchange, including being executed in 

price/time priority according to the 

existing matching algorithm on the 

Exchange. 

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77580 Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 

4For purposes of Example 1(a), in which the 

order submitted is not a Preferenced Order, Market 

Maker 2 is treated as any other Market Maker and 

does not have any preference as a Preferred Market 

Maker. 

5Example 1(a) illustrates the price/time priority 

matching algorithm that currently exists on the 

Exchange. 

For each price level at which all order 

quantities on the BOX Book are fully 

executable against a Preferenced Order 

on a single options series, all such 

orders at that price will be filled and the 

balance of the Preferenced Order, if any, 

will be executed, to the extent possible, 

against orders at the next best price 

level. However, at the final price level, 

where the remaining quantity of the 

Preferenced Order is insufficient to 

match the total quantity of orders on the 

BOX Book, the allocation algorithm for 

orders executable against the remaining 

quantity of the Preferenced Order will 

differ from the regular price/time 

priority algorithm by allocating 

executions as described below, in the 

following order: (1) To Public 

Customers, (2) a preferred percentage to 

the Preferred Market Maker, (3) to all 

remaining quotes and orders on single 

option series and (4) to any Legging 

Order. 

(Step 1) Public Customer Allocation 

First, all orders for the account of 

Public Customers, if any, will be 

allocated for execution against the 

Preferenced Order. If multiple orders on 

the Exchange for the account of Public 

Customers are available for execution at 

the same price, the respective trade 

allocations will be by time priority. If, 

at the end of the Public Customer 

allocation, any unallocated quantity of 

the Preferenced Order remains, the 

balance of the Preferenced Order will 

next be allocated as described in 

paragraph (2) below. 

(Step 2) Preferred Market Maker 

Allocation 

After the Public Customer allocation, 

if (i) the price level being processed is 

at NBBO, (ii) the Preferred Market 

Maker has an existing quote on the 

opposite side of the Preferenced Order 

that is also at NBBO at the time the 

Preferenced Order is received and (iii) 

the Preferred Market Maker would not 

receive a greater allocation if allocated 

according to time priority in the next 

step, then a preferred trade allocation 

shall be provided to the Preferred 

Market Maker equal to forty percent 

(40%) of the remaining quantity of the 

Preferenced Order, notwithstanding any 

time priority of other executable orders 

at the same price level. However, if only 

one other executable, non-Public 

Customer order (in addition to the quote 

of the Preferred Market Maker) matches 

the Preferenced Order at the final price 

level, then the Preferred allocation to 

the Preferred Market Maker shall be 

equal to fifty percent (50%) of the 

remaining quantity of the Preferenced 

Order. 

The quantity of the allocation to the 

Preferred Market Maker will be limited 

by the total quantity of the Preferred 

Market Maker quote. Executions are 

allocated in numbers of whole contracts 

and, to ensure the allocation priority 

afforded to Preferred Market Makers 

does not exceed the applicable 40% or 

50% specified in proposed Rule 

7300(c)(2), allocations of fractional 

contracts to the Preferred Market Maker 

in the Preferred allocation step are 

rounded down to the nearest whole 

number, which will not be less than one 

(1) contract. Legging Orders will not be 

considered when determining whether 

the Preferred Market Maker is allocated 

40% or 50% in this step. As a result, in 

no case will a Preferred Market Maker 

receive an allocation preference (above 

what it would otherwise receive if 

executed in normal price-time priority) 

in excess of forty percent (40%) of the 

remaining quantity of the Preferenced 

Order after Public Customer orders are 

filled (or fifty percent (50%) if only one 

other non-Public Customer matches) at 

the final price level. 

At the end of the Preferred allocation 

or if no Preferred allocation is made, the 

balance of the Preferenced Order will 

next be allocated as described in 

paragraph (3) below. 

(Step 3) Remaining Orders Allocation 

After the Preferred allocation or if no 

Preferred allocation is made, any 

remaining unallocated quantity of the 

Preferenced Order will be allocated to 

all remaining orders and quotes not 

receiving allocation in paragraphs (1) or 

(2) above, including any quote by the 

Preferred Market Maker if no Preferred 

allocation is made, but not including 

any Legging Order, each in order of time 

priority. At the end of the Remaining 

Orders allocation, the balance of the 

Preferenced Order will next be allocated 

as described in paragraph (4) below. 

(Step 4) Legging Orders 

If, after the allocation of all orders and 

quotes in paragraphs (1) through (3) 

above, there remains any unallocated 

quantity of the Preferenced Order, 

allocation of such remaining quantity of 

the Preferenced Order will be made to 

the Legging Order at the same price. 

Example 1: Preferenced Order 

Allocation 

Suppose that the BOX Book on 

options instrument A is as follows in 

order of time priority: 

NBBO: Buy at 2.00/Sell at 2.03 

Legging Order to buy 30 contracts at 

2.00 

Market Maker 1 Order to buy 8 contracts 

at 2.00 

Preferred Market Maker 2 Quote 4 to buy 

30 contracts at 2.00 

Public Customer 1 Order to buy 10 

contracts at 2.00 

Market Maker 3 Order to buy 7 contracts 

at 2.00 

Public Customer 2 Order to buy 5 

contracts at 2.00 

Total Orders to buy 90 contracts at 2.00 

Example 1(a): Allocation of Nonpreferenced Order 

Suppose a Market Order that is not a 

Preferenced Order 5 to sell 50 contracts 

of options instrument A is submitted. 

The trade allocation at the best available 

price (at 2.00) is in time priority as 

follows: 

Market Maker 1: 8 contracts 

Market Maker 2: 30 contracts 

Public Customer 1: 10 contracts 

Market Maker 3: 2 contracts 

Total allocation: 50 contracts 

Example 1(b) Preferenced Order 

Allocation (40% to Preferred Market 

Maker) 

Suppose a Preferenced Order that is a 

Market Order to sell 25 contracts of 

options instrument A is submitted. The 

trade allocation at the best available 

price (at 2.00) is as follows: 

Step 1 

Public Customer 1: 10 contracts 

(Public Customers allocated in time 

priority) 

Public Customer 2: 5 contracts 

(Public Customers allocated in time 

priority) 

Step 2 

Preferred Market Maker 2: 4 contracts 

(Preferred allocation = 40% of 10 

contracts remaining = 4 contracts) 

Step 3 

Market Maker 1: 6 contracts 

(Remaining orders allocated in time 

priority; Preferenced Order is filled) 

Total allocation: 25 contracts 

Example 1(c): Allocation of Preferenced 

Order to Preferred Market Maker When 

Time Priority Is Better Than Preferred 

Allocation 

Suppose a Preferenced Order that is a 

Market Order to sell 85 contracts of 

options instrument A is submitted. The 

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Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 77581 

6As provided in the Exchange’s Rule 7150(a)(1), 

the Preferenced Order is an Unrelated Order to the 

PIP and, pursuant to Rule 7150(j), executes at a 

penny better than NBBO because the best BOX 

price on the opposite side of the market from the 

Preferenced Order is at NBBO ($2.10). 

trade allocation at the best available 

price (at 2.00) is as follows: 

Step 1 

Public Customer 1: 10 contracts 

(Public Customers allocated in time 

priority) 

Public Customer 2: 5 contracts 

(Public Customers allocated in time 

priority) 

Step 2 

Preferred Market Maker 2: 0 contracts 

(Preferred allocation = 40% of 70 

contracts remaining = 28 contracts to 

be allocated in Step 2; however, if 

executed in time priority with all 

remaining quotes/orders in Step 3, the 

full 30 contracts of the Preferred 

Market Maker’s quote would be 

allocated at that step; accordingly, no 

preference is allocated in this Step 2 

and the Preferred Market Maker is 

allocated with all other orders in time 

priority in Step 3) 

Step 3 

Market Maker 1: 8 contracts 

(Remaining orders allocated in time 

priority) 

Preferred Market Maker 2: 30 contracts 

(Remaining orders allocated in time 

priority, which results in a greater 

allocation than it would have received 

under Step 2; accordingly, no 

preference is allocated in Step 2 and 

the Preferred Market Maker is 

allocated with other orders in time 

priority in this Step 3) 

Market Maker 3: 7 contracts 

(Remaining orders allocated in time 

priority) 

Step 4 

Legging Order: 25 contracts 

(Legging Order allocated last; 

Preferenced Order is filled) 

Total allocation: 85 contracts 

Example 2: Preferenced Order 

Allocation (50% to Preferred Market 

Maker) 

Suppose that the BOX Book on 

options instrument A is as follows in 

order of time priority: 

NBBO: Buy at 2.00/Sell at 2.03 

Market Maker 1 Order to buy 20 

contracts at 2.00 

Preferred Market Maker 2 Quote to buy 

30 contracts at 2.00 

Public Customer 1 Order to buy 10 

contracts at 2.00 

Public Customer 2 Order to buy 5 

contracts at 2.00 

Legging Order to buy 30 contracts at 

2.00 

Total Orders to buy 95 contracts at 2.00 

Suppose a Preferenced Order that is a 

Market Order to sell 50 contracts of 

options instrument A is submitted. The 

trade allocation at the best available 

price (at 2.00) is as follows: 

Step 1 

Public Customer 1: 10 contracts 

(Public Customers allocated in time 

priority) 

Public Customer 2: 5 contracts 

(Public Customers allocated in time 

priority) 

Step 2 

Preferred Market Maker 2: 17 contracts 

(Preferred allocation = 50% of 35 

contracts remaining = 17 contracts 

(rounded down)) 

Step 3 

Market Maker 1: 18 contracts 

(Remaining orders allocated in time 

priority; Preferenced Order is filled) 

Total allocation: 50 contracts 

Example 3: Multiple Price Levels 

The following examples illustrate 

trade allocation of Preferenced Orders at 

multiple price levels. 

Example 3(a): Exposed Order 

Suppose that the BOX Book on 

options instrument A is as follows in 

order of time priority: 

NBBO: Buy at 2.00/Sell at 2.10 

Broker Dealer Order to sell 10 contracts 

at 2.10 

Public Customer Order to sell 10 

contracts at 2.10 

Preferred Market Maker Quote to sell 10 

contracts at 2.10 

(No buy orders on instrument A exist on 

the BOX Book) 

Suppose an Order to sell 10 contracts 

at $2.00 (within the NBBO spread) is 

received and exposed. 

Suppose next that, while the 

foregoing sell Order is exposed, NBBO 

moves to: 

Buy at 1.95/Sell at 2.10 

Suppose finally that, while the 

foregoing sell Order is exposed, a 

Preferenced Order to buy 30 contracts at 

$2.10 is received. 

The trade allocation is as follows: 

First Price Level ($2.00) 

Exposed Order: 10 contracts 

Second Price Level ($2.10) 

Step 1 

Public Customer: 10 contracts 

Step 2 

Preferred Market Maker: 5 contracts 

(Preferred allocation = 50% of 10 

contracts remaining = 5 contracts) 

Step 3 

Broker Dealer: 5 contracts 

Total allocation: 30 contracts 

Example 3(b): PIP Order 

Suppose that the BOX Book on 

options instrument A is as follows in 

order of time priority: 

NBBO: Buy at 2.00/Sell at 2.10 

Broker Dealer Order to sell 10 contracts 

at 2.10 

Public Customer Order to sell 10 

contracts at 2.10 

Preferred Market Maker Quote to sell 10 

contracts at 2.10 

(No buy orders on instrument A exist on 

the BOX Book) 

Suppose a PIP Order to sell 10 

contracts is received with a Primary 

Improvement Order to buy 10 contracts 

at $2.00. 

Suppose further that, during the PIP, 

a Preferenced Order to buy 30 contracts 

at $2.10 is received. 

The trade allocation is as follows: 

First Price Level ($2.09) 

PIP Order: 10 contracts 6

Second Price Level ($2.10) 

Step 1 

Public Customer: 10 contracts 

Step 2 

Preferred Market Maker: 5 contracts 

(Preferred allocation = 50% of 10 

contracts remaining = 5 contracts) 

Step 3 

Broker Dealer: 5 contracts 

Total allocation: 30 contracts 

As described above, only orders on 

single option series designated as 

Preferenced Orders will be treated 

differently from orders entered on the 

Exchange that are not Preferenced 

Orders. Complex Orders may also be 

submitted as Preferenced Orders. 

However, any Preferenced Order 

designation will be disregarded for 

Complex Orders for purposes of 

dissemination, matching and execution 

and Complex Orders submitted as 

Preferenced Orders will be treated the 

same as Complex Orders submitted 

without such designation. As a result, 

no special allocation will be made to 

any Preferred Market Maker, and no 

alternate allocation algorithm will be 

applied, when executing a Complex 

Order designated as a Preferenced 

Order. 

It will be a violation of proposed Rule 

7300 for a Market Maker to be informed 

of a pending Preferenced Order, with 

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77582 Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 

7 15 U.S.C. 78f(b). 

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

9See, e.g., Securities Exchange Act Release No. 

45936 (May 15, 2002), 67 FR 36279, 26280 (May 23, 

2002); Securities Exchange Act Release No. 42835 

(May 26, 2000), 65 FR 35683, 35685–66 (June 5, 

2000); Securities Exchange Act Release No. 42455 

(February 24, 2000), 65 FR 11388, 11398 (March 2, 

2000); Phlx 80/20 Proposal, 67 FR at 48787–88. 

respect to which such Market Maker is 

designated as the Preferred Market 

Maker, prior to its entry on the 

Exchange. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),7 in general, and section 6(b)(5) 

of the Act,8 in particular, in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest. 

In particular, the Exchange believes 

this proposed rule change is a 

reasonable modification designed to 

provide incentives and enhanced 

allocation to a Preferred Market Maker 

when it is quoting at NBBO. The 

Exchange also believes that the 

proposed rule change will increase the 

number of transactions on the Exchange 

by attracting additional order flow to the 

Exchange, which will ultimately 

enhance competition and provide 

customers with additional opportunities 

for execution. The Exchange believes 

these changes are consistent with the 

goals to remove impediments to and to 

perfect the mechanism for a free and 

open market and a national market 

system. 

Specifically, the Exchange believes 

that the proposal will result in increased 

liquidity available at improved prices, 

with more competitive pricing outside 

the control of any single Participant. 

The proposed rule change should 

promote and foster competition. 

Preferenced Order Allocation 

The Exchange believes the proposed 

changes to the Preferenced Order 

allocations are an improvement over the 

current allocation algorithm, and will 

benefit all market participants 

submitting Preferenced Orders on the 

Exchange. As a result of the proposed 

changes, the Exchange believes that 

existing and additional Participants will 

use Preferenced Orders to increase the 

number of orders that are submitted to 

the Exchange. Additionally, the 

Exchange believes that the proposed 

Preferenced Order allocation algorithm 

will encourage greater participation by 

Market Makers to provide quotes on the 

Exchange as Preferred Market Makers. 

These additional responses should 

encourage greater competition on the 

Exchange, which should, in turn, 

benefit and protect investors and the 

public interest through the potential for 

greater volume of orders and executions. 

The proposed rule changes provide 

priority of Public Customer orders over 

Preferred Market Makers at the same 

price. The Exchange believes this 

priority is consistent with the purposes 

of the Act. The Exchange believes the 

Preferenced Order allocation proposal is 

designed to promote just and equitable 

principles of trade and to protect 

investors and the public interest, 

because it recognizes the unique status 

of Public Customers in the marketplace 

by ensuring Public Customers maintain 

priority before any allocations afforded 

to Preferred Market Makers. 

The Exchange believes that the 

proposed Preferenced Order allocation 

is reasonable, equitable and not unfairly 

discriminatory to both customers and 

Participants. Giving Preferred Market 

Makers allocation priority for 40% or 

50% of the remaining quantity of the 

Preferenced Order will provide 

important incentives for Preferred 

Market Makers to provide liquidity on 

BOX, which provides greater 

opportunity for executions, tighter 

spreads and better pricing for all 

Participants. While the Commission has, 

in the past, been concerned about 

locking up large portions of order flow 

from intra-market price competition, the 

Exchange believes that the proposed 

preferred allocation percentage 

adequately balances the aim of 

rewarding the Preferred Market Maker 

with the aim of leaving a sizeable 

enough portion of the incoming 

Preferenced Order for the other Market 

Makers quoting at the same price. The 

Commission has previously taken the 

position that a preference of 40% is not 

clearly inconsistent with the Act and 

standards of competition and free and 

open markets.9

The Exchange believes that 

disregarding Legging Orders when 

determining whether the Preferred 

Market Maker retains 40% or 50% 

under proposed Rule 7300(c)(2) is 

reasonable, equitable and not unfairly 

discriminatory to customers and 

Participants because Legging Order 

allocation will not be affected by the 

Preferred Market Maker retaining the 

difference between 40% or 50% as 

discussed above. 

The Exchange believes that the 

Preferred Market Maker allocation is 

designed to promote just and equitable 

principles of trade and to protect 

investors and the public interest, 

because it strikes a reasonable balance 

between encouraging vigorous price 

competition and rewarding Market 

Makers for their unique duties. In order 

to receive an allocation preference, 

Preferred Market Makers must meet 

heightened quoting requirements as 

Market Makers, and also be quoting at 

the NBBO at the time the Preferenced 

Order is received. Heightened quoting 

requirements mean that Preferred 

Market Makers must maintain a 

continuous two-sided market 

throughout the trading day, in option 

classes for which it accepts Preferenced 

Orders, for 99% of the time the 

Exchange is open for trading in each 

such option class; provided that it is not 

required to so quote in intra-day add-on 

series or series that have a time to 

expiration of nine months or more. 

Overall, the proposed Preferred Market 

Maker allocations represent a careful 

balancing by the Exchange of the 

rewards and obligations of various types 

of market participants. The Exchange 

believes these requirements of Preferred 

Market Makers will provide an 

incentive for Market Makers to assume 

these additional responsibilities beyond 

those already required, which will 

facilitate improved trading 

opportunities on BOX for all 

Participants. 

The Exchange believes that the 

proposal to give Legging Orders last 

priority is reasonable, equitable and not 

unfairly discriminatory to customers 

and Participants. Giving Legging Orders 

last priority preserves the established 

priority of Legging Orders since they 

currently have last priority under the 

existing allocation algorithm. The 

Exchange believes that providing 

priority for single option orders over 

Legging Orders in the proposed 

Preferenced Order allocation algorithm 

is reasonable as it preserves the 

established priority of single option 

orders when executing with Complex 

Orders. Therefore the Exchange believes 

this aspect of the proposal will avoid 

investor confusion when executing 

orders on the Exchange. 

In addition, it is consistent with just 

and equitable principles of trade and 

protects investors and the public 

interest that each Preferred Market 

Maker be prohibited from being 

informed of a pending Preferenced 

Order prior to its entry on the Exchange, 

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Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 77583 

10See supra, note 3. 

11See supra, note 3. 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 73464 

(Oct. 29, 2014), 79 FR 65437. 

if such Market Maker is designated as 

the Preferred Market Maker. 

The Exchange notes that this proposal 

is similar to the rules of other 

exchanges.10

For the foregoing reasons, the 

Exchange believes this proposal is a 

reasonable modification to its rules, 

designed to facilitate increased 

interaction of orders on the Exchange, 

and to do so in a manner that ensures 

a dynamic, real-time trading mechanism 

that maximizes opportunities for trade 

executions of orders. The Exchange 

believes it is appropriate and consistent 

with the Act to adopt the proposed rule 

changes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe the 

proposed rule change represents any 

undue burden on competition or will 

impose any burden on competition 

among exchanges in the listed options 

marketplace not necessary or 

appropriate in furtherance of the 

purposes of the Act. To the contrary, the 

proposal is pro-competitive because it 

will enable the Exchange to better 

compete with other options exchanges 

that provide similar allocation 

preferences and algorithms.11

With respect to intra-market 

competition, Preferenced Orders will be 

available to all Participants. The 

Exchange believes that the proposal 

should encourage Market Makers that 

desire to qualify as Preferred Market 

Makers to regularly maintain quotes at 

competitive price levels in order to 

obtain execution percentages on 

Preferenced Orders. As noted above, the 

proposed preferred allocation 

percentage for Preferred Market Makers 

leaves a sizeable enough portion of the 

incoming Preferenced Order for the 

other Market Makers quoting at the 

same price to encourage intra-market 

price competition. Submitting a 

Preferenced Order to the Exchange is 

entirely voluntary and Participants will 

determine whether they wish to submit 

these orders to the Exchange. The 

Exchange operates in a highly 

competitive marketplace with other 

competing exchanges and market 

participants can readily direct their 

order flow to other exchanges if they so 

choose. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2014–28 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2014–28. 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 Web site (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 Web site 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; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BOX– 

2014–28, and should be submitted on or 

before January 14, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–30121 Filed 12–23–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73866; File No. SR– 

NYSEArca–2014–120] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving a 

Proposed Rule Change, as Modified by 

Amendment No. 2 Thereto, To List and 

Trade Shares of the Sit Rising Rate 

Fund Under NYSE Arca Equities Rule 

8.200 

December 17, 2014. 

I. Introduction 

On October 16, 2014, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange 

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

proposed rule change to list and trade 

shares (‘‘Shares’’) of the Sit Rising Rate 

Fund (‘‘Fund’’), pursuant to NYSE Arca 

Equities Rule 8.200. The proposed rule 

change was published for comment in 

the Federal Register on November 4, 

2014.3 On November 6, 2014, the 

Exchange filed Amendment No. 2 to the 

proposed rule change, which 

superseded and replaced the proposed 

mstockstill on DSK4VPTVN1PROD with NOTICES