Document ID: SEC-2018-0482-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2018-03-22T04:00Z

[Federal Register Volume 83, Number 56 (Thursday, March 22, 2018)]
[Notices]
[Pages 12625-12627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05792]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82889; File No. SR-BOX-2018-09]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Correct an Error in IM-7600-2

March 16, 2018.
    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 March 12, 2018, BOX Options Exchange LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to correct an inadvertent error in IM-7600-2. 
The text of the proposed rule change is available from the principal 
office of the Exchange, at the Commission's Public Reference Room and 
also on the Exchange's internet website at http://boxoptions.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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend IM-7600-2 to 
correct an inadvertent error that was [sic] subject of a prior rule 
filing. In August 2017, the Securities and Exchange Commission 
(``SEC'') approved BOX's filing to establish rules for an open-outcry 
trading floor.\3\ The Exchange notes that it mistakenly referenced 
``Public Customers'' rather than ``Customers'' in IM-7600-2(h) when 
establishing these rules.
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    \3\ See Securities Exchange Release No. 81292 (August 2, 2017), 
82 FR 37144 (August 8, 2017) (Order Approving SR-BOX-2016-48 as 
modified by Amendment Nos. 1 and 2).
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    Under IM-7600-2(h) a Floor Broker must deliver written notification 
prior to entering a tied hedge order on behalf

[[Page 12626]]

of their client. The intent of the rule was to require Floor Brokers to 
provide notice to all clients when entering in a tied hedge order on 
their behalf; however, the term ``Customer'' was inadvertently changed 
to ``Public Customer'' in the drafting process. Under the BOX Rules, 
the term ``Customer'' means either a Public Customer or a broker-
dealer,\4\ whereas the term ``Public Customer'' means a person that is 
not a broker or dealer in securities.\5\ As such, the rule as it is 
currently written does not require the Floor Broker to notify non-
Public Customer clients prior to entering a tied hedge order on their 
behalf; which was not the intent of the rule. The Exchange believes it 
is reasonable and appropriate for all of a Floor Broker's clients, 
regardless of Participant type, to receive written notice prior to the 
Floor Broker entering in a tied hedge order on their behalf as it will 
provide transparency to the client.
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    \4\ See Rule 100(a)(17).
    \5\ See Rule 100(a)(52).
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    Therefore, the Exchange proposes to replace the term ``Public 
Customer'' with the term ``Customer'' in Rule IM-7600-2(h). The 
Exchange believes the term ``Customer'' is more appropriate as broker-
dealers should not have been excluded from the requirements of Rule IM-
7600-2(h) when it was initially adopted. Additionally, the proposed 
correction is similar to the language used in the rules of another 
options exchange.\6\
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    \6\ See NYSE Arca (``Arca'') Rule 6.47-O.01(h). The Exchange's 
reading of Arca's rule is that the term ``customer'' includes 
broker-dealers as well as Public Customers.
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    The Exchange notes that it is not proposing to amend any other part 
of the tied-hedge rule and the BOX rules already allow for Floor 
Brokers to submit tied hedge orders on behalf of broker dealers.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\7\ in general, and Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to protect 
investors and the public interest, promote just and equitable 
principles of trade, and foster cooperation and coordination with 
persons engaged in facilitating transactions in securities by 
correcting an inadvertent error that was made in the adoption of the 
rule. Specifically, the Exchange proposes to change the reference from 
``Public Customers'' to ``Customers'' in Rule IM-7600-2(h). The 
Exchange believes the term ``Customer'' is more appropriate as broker-
dealers should not have been excluded from the requirements of Rule IM-
7600-2(h) when it was initially adopted. Further, the Exchange believes 
it is reasonable and appropriate for all of a Floor Broker's clients, 
regardless of Participant type, to receive written notice prior to the 
Floor Broker entering in a tied hedge order on their behalf.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    As noted above, the proposed correction is similar to the language 
used in the rules of another options exchange.

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

    The proposed rule change will not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act 
as the proposed rule change is simply seeking to eliminate investor 
confusion with regard to the incorrect reference in Rule IM-7600-2(h). 
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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\9\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
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 filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
notes that waiver of the operative delay would allow it to implement 
the proposal immediately and would require a Floor Broker to provide 
written notice to its non-Public Customer clients, as well as its 
Public Customer clients, prior to entering a tied hedge order on their 
behalf. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because the proposed rule change is designed to provide clarity and 
transparency to non-Public Customers regarding the usage of tied hedge 
orders by Floor Brokers and the Exchange's tied hedge order procedures. 
The Commission also notes that the proposed rule change does not change 
the Exchange's existing tied hedge rule that permits Floor Brokers to 
submit tied hedge orders on behalf of non-Public Customers. Rather, the 
proposed rule change would simply require Floor Brokers to provide the 
same type of notice to non-Public Customers as is currently required to 
be provided to Public Customers. Accordingly, the Commission hereby 
waives the operative delay and designates the proposal operative upon 
filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule change should be approved or disapproved.

IV. Solicitation of Comments

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

[[Page 12627]]

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2018-09 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-2018-09. 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-2018-09 and should be submitted on 
or before April 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05792 Filed 3-21-18; 8:45 am]
BILLING CODE 8011-01-P