Document ID: SEC-2013-1847-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2013-10-25T04:00Z

[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Notices]
[Pages 64046-64048]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-25119]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70726; File No. SR-BOX-2013-50]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend BOX Rules 4020 (Opening of Accounts), 4050 (Discretionary 
Accounts), and 4060 (Confirmation to Public Customers) To Conform to 
the Corresponding Rules of FINRA

October 21, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on October 9, 2013, BOX Options Exchange LLC (the 
``Exchange'' or ``BOX'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been substantially prepared by 
the Exchange. BOX has designated the proposed rule change as 
constituting a ``non-controversial'' rule change under Exchange Act 
Rule 19b-4(f)(6),\3\ which renders the proposal effective upon receipt 
of this filing by the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the BOX Rules to conform to the 
corresponding rules of the Financial Industry Regulatory Authority, 
Inc. (``FINRA''). 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend BOX Rules 4020 (Opening of 
Accounts), 4050 (Discretionary Accounts), and 4060 (Confirmation to 
Public Customers) to conform to the corresponding rules of FINRA.\4\ 
The Exchange believes the proposed amendments would clarify to Order

[[Page 64047]]

Flow Providers (``OFPs'') their requirements with respect to 
supervision of their public customer options business and confirmations 
to public customers. In addition, the Exchange believes that the 
proposed amendments would align the Exchange's rules with FINRA's 
rules, thereby facilitating FINRA's enforcement of the Exchange's 
rules.
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    \4\ See FINRA Rule 2360(b)(12), (16), and (18).
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    First, the Exchange proposes to amend BOX Rule 4020(f)(3) to 
clarify the person responsible for approving accounts that do not meet 
the specific criteria and standards for writing uncovered short options 
transactions and for maintaining written records of the reasons for 
every account so approved. Specifically, the Exchange proposes to 
replace the terms ``Senior Options Principal and/or Compliance Options 
Principal'' with the term ``a specific Options Principal(s).'' The 
terms ``Senior Options Principal and/or Compliance Options Principal'' 
are not used anywhere else in the BOX Rules, while the term ``Options 
Principal'' is used in similar provisions and is already defined in the 
BOX Rules.\5\ The new term would have the same significance as the 
terms it is replacing, as the Exchange currently treats these three 
terms interchangeably when deciding if the OFP has met it supervision 
requirements. Moreover, the Exchange believes that using the term ``a 
specific Options Principal(s)'' in Rule 4020(f)(3) would align its rule 
with the corresponding FINRA rule,\6\ thereby facilitating FINRA's 
enforcement of the Exchange's rules.
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    \5\ See BOX Rule 100(a)(41).
    \6\ FINRA Rule 2360(b)(16)(E)(iii).
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    In addition, the Exchange proposes to amend Rule 4050. First, the 
Exchange proposes to remove section (a)(2). The Exchange believes that 
the requirement found in section (a)(2)--that each discretionary order 
be reviewed and approved on a daily basis--is no longer necessary and 
consequently overly burdensome. Second, the Exchange proposes to add a 
new section to Rule 4050, entitled ``Discretion as to Price or Time 
Excepted''. The Exchange believes that adding this section would 
clarify the duration and circumstances surrounding a price and time 
discretion exemption as well as facilitate FINRA's enforcement of the 
BOX Rules. In addition, the Exchange believes that removing section 
(a)(2) and adding the new language would align BOX Rule 4050 with the 
corresponding FINRA rule,\7\ thereby facilitating FINRA's enforcement 
of the Exchange's rules.
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    \7\ FINRA Rule 2360(b)(18)(A)(ii).
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    Finally, the Exchange proposes to add language to Rule 4060(b) to 
state that written confirmations relating to options transactions do 
not need to specify the exchange or exchanges on which an option is 
executed. The Exchange believes that requiring written confirmations 
relating to options transactions specify the exchange or exchanges on 
which an option is executed is overly burdensome in light of the recent 
increase in order routing to away exchanges.\8\ Furthermore, even with 
this information removed from the transaction confirmation, a Public 
Customer would be able to receive this detail upon request. Finally, 
the Exchange believes that this change would help FINRA enforce the BOX 
Rules by aligning Rule 4060(b) with the corresponding FINRA rule.\9\
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    \8\ The Exchange is a participant in the Options Order 
Protection and Locked/Crossed Market Plan (``Plan''). The Plan 
requires the Participating Options Exchanges to adopt rules 
``reasonably designed to prevent Trade Throughs.'' Under the Plan, 
the Exchange cannot execute orders at a price that is inferior to 
the National Best Bid and Offer, nor can the Exchange place an order 
on its books that would cause the Exchange's best bid or offer to 
lock or cross another exchange's quote. If the Exchange cannot 
execute or book an order, it will route the order to an Away 
Exchange on behalf of the Options Participant who submitted the 
Eligible Order through a third-party broker dealer.
    \9\ FINRA Rule 2360(b)(12).
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    The Exchange believes the proposed rule change would provide 
greater certainty to OFPs regarding the Exchange's rules by aligning 
them more closely with the corresponding FINRA rules. Moreover, the 
Exchange believes that aligning these rules more closely with the 
corresponding FINRA rules would aid in FINRA's enforcement of the 
Exchange's rules. Finally, the Exchange believes the proposed rule 
change would remove provisions that are no longer necessary and are now 
overly burdensome.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Exchange Act Section 6(b),\10\ in general, and Exchange 
Act Section 6(b)(5),\11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the proposed rule change would 
promote consistency between the Exchange's rules and FINRA's rules and 
provide uniform rules governing how OFPs conduct business with the 
public. By promoting consistency with FINRA's rules, the Exchange 
believes the proposed rule change would facilitate FINRA's enforcement 
of the Exchange's rules. By providing uniform rules governing how OFPs 
conduct business with the public, the Exchange believes the proposed 
rule change would foster certainty for market participants. 
Accordingly, the Exchange believes that the proposed rule change would 
promote a free and open market and a national market system and the 
protection of investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    As stated above, the Exchange believes that the proposed rule 
change would clarify certain provisions of the Exchange's rules and 
make them substantially similar to the corresponding FINRA rules.\12\ 
Specifically, the Exchange believes the proposed rule change is 
necessary to establish uniform rules regarding how OFPs conduct 
business with the public. The Exchange does not believe that the 
proposed rule change would impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. In this regard, the Exchange does not believe the proposed rule 
change would impose any burden on any intramarket competition as it 
applies to all OFPs. In addition, the Exchange does not believe the 
proposed rule change would bring any unnecessary burden on intermarket 
competition as it is consistent with the corresponding FINRA rules. 
Therefore, the Exchange does not believe the proposed rule change would 
impose a burden on competition.
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    \12\ See supra note 4.
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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

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant

[[Page 64048]]

burden on competition; and (iii) become operative for 30 days from date 
on which it was filed, or such shorter time as the Commission may 
designate, it has become effective pursuant to Exchange Act Section 
19(b)(3)(A) \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). Pursuant to Exchange Act Rule 19b-
4(f)(6)(iii), the Exchange is required to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and the text of the proposed rule 
change, at least five business days prior to the date of the filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Commission has determined to waive the 
requirement that the Exchange provide the Commission with written 
notice of its intent to file the proposed rule change at least five 
business days prior to the filing date.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Exchange Act. If the 
Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Exchange 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-2013-50 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2013-50. 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, on official business days between 
the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-2013-50 and 
should be submitted on or before November 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25119 Filed 10-24-13; 8:45 am]
BILLING CODE 8011-01-P