Document ID: SEC-2017-1414-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2017-08-21T04:00Z

[Federal Register Volume 82, Number 160 (Monday, August 21, 2017)]
[Notices]
[Pages 39630-39635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17545]

[[Page 39630]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81398; File No. SR-BOX-2017-26]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Rule 2120 (Trading Conduct and Order & Decorum on the Trading Floor) 
and Amend Rule 12140 (Imposition of Fines for Minor Rule Violations) To 
Adopt Rule Violations and Sanctions Applicable to the Trading Floor

August 15, 2017.
    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 August 9, 2017, BOX Options Exchange LLC (``BOX'' or the 
``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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Rule 2120, Trading Conduct and Order 
& Decorum on the Trading Floor, to enable the Exchange to enforce 
compliance with the Trading Conduct and Order & Decorum rules and amend 
Rule 12140 (Imposition of Fines for Minor Rule Violations) to adopt 
violations and sanctions applicable to the Trading Floor. 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 purpose of the proposed rule change is to (i) adopt Rule 2120 
to enable the Exchange to establish and enforce compliance with trading 
conduct and order and decorum on the trading floor; and (ii) amend Rule 
12140 to adopt rule violations and sanctions applicable to the Trading 
Floor \3\ under the Exchange's Minor Rule Violation Plan (``MRVP''). 
The Exchange proposes these rules in conjunction with the approval of 
BOX's recent filing to adopt rules for an open outcry Trading Floor.\4\
---------------------------------------------------------------------------

    \3\ The term ``Trading Floor'' or ``Options Floor'' means the 
physical trading floor of the Exchange located in Chicago. The 
Trading Floor shall consist of at least one ``Crowd Area'' or 
``Pit''. A Crowd Area or Pit shall be marked with specific visible 
boundaries on the Trading Floor, as determined by the Exchange. All 
series for a particular option class will be allocated to the same 
Crowd Area. A Floor Broker must open outcry an order in the 
corresponding Crowd Area. See BOX Rule 100(a)(67).
    \4\ 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).
---------------------------------------------------------------------------

Proposed Rule 2120
    First, the Exchange proposes to adopt Rule 2120 which governs 
trading conduct and order & decorum on the Trading Floor. The Exchange 
proposes that Rule 2120(a) states [sic] that upon the determination of 
an Options Exchange Official that a Floor Participant's conduct on the 
Trading Floor of the Exchange is such that it violates the provisions 
of (b) through (d) discussed below, impairs the maintenance of a fair 
and orderly market, or impairs public confidence in the operations of 
the Exchange, a Floor Participant of the Exchange may be fined pursuant 
to the Bylaws and Rules of the Exchange. This shall also apply to a 
Floor Participant's failure to adequately supervise an employee to 
ensure his compliance with this rule. A Floor Participant adversely 
affected by a determination made under this Section may obtain review 
thereof in accordance with the provisions of the Rule 12000 Series. 
Fines imposed by an Options Exchange Official hereunder shall not 
preclude further disciplinary action by the Exchange pursuant to the 
Bylaws and Rules of the Exchange. The Exchange notes that this rule is 
based on the rules of NYSE Arca (``Arca'').\5\
---------------------------------------------------------------------------

    \5\ See NYSE Arca Rule 6.2(b). There are no substantive 
differences between proposed Rule 2120(a) and Arca Rule 6.2(b).
---------------------------------------------------------------------------

    Next, the Exchange proposes Rule 2120(b) which governs the 
Standards of Dress and Conduct. The Exchange proposes that all Floor 
Participants are required to act in a manner consistent with a fair and 
orderly market and with the maintenance of public confidence in the 
Exchange. Accordingly, the Exchange proposes appropriate standards 
pertaining to dress and conduct on the Trading Floor. Proposed Rule 
2120(b)(1) details the Standards of Dress on the Trading Floor. 
Specifically, all persons on the Trading Floor, whether Floor 
Participants, employees of Floor Participants or visitors, shall at all 
times, whether prior to, during or after trading sessions, be dressed 
in a manner appropriate for business purposes and in accordance with 
good taste and professional standards. The term ``good taste'' shall be 
interpreted in a conservative manner. The Exchange may impose 
additional standards of dress or otherwise modify these standards of 
dress by means of a written policy that will be distributed to Floor 
Participants. The Exchange again notes that this provision is based on 
the rules of Arca.\6\
---------------------------------------------------------------------------

    \6\ See NYSE Arca Rule 6.2(c).The Exchange notes that it is not 
copying NYSE Arca Rule 6.2(c)(1)(A-D), as the Exchange believes that 
the listed dress code requirements and restrictions are unnecessary. 
The Exchange believes the language in proposed Rule 2120(b)(1) is 
sufficient.
---------------------------------------------------------------------------

    Next, the Exchange proposes to adopt 2120(b)(2) which governs the 
Standard of Conduct on the Trading Floor. Specifically, all persons on 
the Trading Floor are required to conduct themselves in accordance with 
a seemly and professional standard of behavior. Further, no person 
while on the Trading Floor shall: (i) Engage in any act or practice 
that may be detrimental to the interest or welfare of the Exchange; or 
(ii) engage in any act or practice that may serve to disrupt or hinder 
the ordinary and efficient conduct of business; or (iii) engage in any 
act or practice that may serve to jeopardize the safety or welfare of 
any other individual; or (iv) act in a disorderly manner, which 
includes, but is not limited to, the use of abusive or indecorous 
language. Further, with regard to the Standards of Conduct provision, 
the Exchange further proposes that (i) the entry of food or drink may 
be permitted at the discretion of the Exchange and that alcoholic 
beverages may not be consumed on the Trading Floor at any time; (ii) 
Smoking

[[Page 39631]]

in any form, any kind of tobacco use, or any expectorating on the 
Trading Floor, is prohibited; \7\ (iii) Running on the Trading Floor, 
which shall mean any movement at a degree of speed which may disrupt 
other occupants of the Trading Floor, is prohibited; (iv) Standing on 
chairs, furniture, booths, ladders, stools and similar items is 
prohibited; and (v) No object of any kind may be placed in the Pit if 
it could obstruct the flow of people in or out of the Pit. This 
includes all chairs, stools or other furniture. The Exchange notes that 
these proposed provisions are based on the rules of Arca.\8\
---------------------------------------------------------------------------

    \7\ This prohibition shall apply at all times whether or not the 
Trading Floor is in session.
    \8\ See Arca Rule 6.2(c)(2). The Exchange notes that there are 
no substantive differences between proposed Rule 2120(b)(2) and Arca 
Rule 6.2(c)(2).
---------------------------------------------------------------------------

    Next, the Exchange proposes Rule 2120(c)(1) which governs Trading 
Floor Badges, Admission By Badge Only. Specifically, the Exchange 
proposes that admission to the Trading Floor will be by badge only 
except in the case of certain designated Options Exchange Officials. 
While on the Trading Floor, all persons must at all times display 
appropriate badges. All Trading Floor employees seeking admission to 
the Trading Floor without a badge must be identified by the Options 
Exchange Official or representative thereof and supplied with a 
temporary badge. Non-Floor Participant employees of Floor Participants 
seeking admission without a badge must be identified by a Floor 
Participant and supplied with a temporary badge, and the Floor 
Participant may be subject to a fine in the event of continual failure 
of its employees to have appropriate badges. The Exchange notes that 
this proposed rule is based on the rules of Arca.\9\
---------------------------------------------------------------------------

    \9\ See Arca Rule 6.2(d)(1). The Exchange notes that there are 
no substantive differences between proposed Rule 2120(c)(1) and Arca 
Rule 6.2(d)(1).
---------------------------------------------------------------------------

    The Exchange then proposes Rule 2120(c)(2) which governs the 
Withdrawal of Trading Floor Badges. Specifically, the Exchange proposes 
that in the event that any Floor Participant's Letter of Guarantee is 
revoked by a Clearing Participant in accordance with the procedures 
stated in Rule 8070, such Floor Participant will not be entitled to 
enter into transactions on the Trading Floor until and unless a new 
Letter of Guarantee has been issued to such Floor Participant by a 
Clearing Participant. Accordingly, the Exchange will withdraw promptly 
the Trading Floor badge of any Floor Participant whose Letter of 
Guarantee has been properly revoked, and will retain such badge under 
its control until the Floor Participant is subsequently covered by a 
Letter of Guarantee. A Floor Participant whose badge has been withdrawn 
under this Rule may, so long as his Floor Participant status continues, 
gain access to the Trading Floor by means of his Floor Participant 
identification pass, but may not enter into any transactions thereon. 
The Exchange notes that this proposed rule is based on the rules of 
Arca.\10\
---------------------------------------------------------------------------

    \10\ See Arca Rule 6.2(d)(2). The Exchange notes that there are 
no substantive differences between proposed Rule 2120(c)(2) and Arca 
Rule 6.2(d)(2).
---------------------------------------------------------------------------

    Next, the Exchange proposes Rule 2120(d) which details the rules 
and regulations regarding visitors on the Trading Floor. Specifically, 
the Exchange proposes that (1) Visitors must be the invited guests of a 
Floor Participant or of certain designated members of the Exchange 
staff. Other non-Floor Participant employees are not permitted to 
invite visitors to the Trading Floor; (2) Visitors must be signed in by 
the inviting Floor Participant or staff personnel, and wear a visitors 
badge at all times when on the Trading Floor. The inviting Floor 
Participant will be responsible for the visitor's conduct on the 
Trading Floor and for the return of badges and must accompany such 
visitors at all times while they are on the Trading Floor; (3) Visitors 
may not enter the Crowd Area, block passageways, or otherwise disrupt 
or impair activity on the Trading Floor; (4) Persons associated with 
Floor Participants may visit the Floor only upon an invitation under 
the terms of subsection (1), above; (5) The Exchange may restrict 
visiting on the Trading Floor in any manner at any time when the 
Exchange deems that the presence of some or all visitors may interfere 
with orderly Trading Floor procedures. The Exchange notes that this 
rule is based on the rules of Arca.\11\
---------------------------------------------------------------------------

    \11\ See Arca Rule 6.2(e). The Exchange notes a few minor 
differences between the proposed rules regarding visitors on the BOX 
Trading Floor and those rules of Arca. First, the Exchange did not 
copy any reference to an ``OTP Firm floor manager,'' as such 
managers or their equivalent are not present on the BOX Trading 
Floor. Second, the Exchange notes that there is a small difference 
between proposed Rule 2120(d)(5) and Arca Rule 6.2(e)(6). The 
Exchange proposes to allow the Exchange to restrict visiting on the 
Trading Floor in any manner at any time while Arca gives this 
authority to the Options Floor Manager. The Exchange notes that it 
did not copy this language as an Options Floor Manager or its 
equivalent does not exist on the BOX Trading Floor. Third, the 
Exchange notes that it did not copy Arca Rules 6.2(e)(4) and (7), as 
these rules do not apply to the BOX Trading Floor. While all 
visitors are allowed on the BOX Trading Floor, they must be invited 
by the Exchange or a Floor Participant. See proposed Rule 
2120(d)(1). Arca Rule 6.2(e)(4) allows OTP Holders and OTP Firms who 
are not normally engaged on the Options Trading Floor to visit 
without an invitation. The Exchange believes that this distinction 
is unnecessary as all visitors to the BOX Trading Floor must be 
invited by a Floor Participant or a member of the Exchange staff 
pursuant to proposed Rule 2120(d)(1). Further, Arca Rule 6.2(e)(7) 
states that a group of visitors comprising more than fifteen persons 
may not enter the Trading Floor without prior approval of the 
Exchange. The Exchange believes that this rule is also unnecessary, 
as proposed Rule 2120(d)(5) allows the Exchange to restrict visiting 
on the Trading Floor in any manner at any time regardless of the 
size of the visiting group. As such, the Exchange believes that not 
including Arca Rules 6.2(e)(4) and (7) is reasonable and in line 
with the proposed rules discussed herein.
---------------------------------------------------------------------------

    Next, the Exchange proposes Rule 2120(e) which details Exclusion 
from the Trading Floor. Specifically, the Exchange proposes Rule 
2120(e)(1) which states that an Options Exchange Official or an officer 
of the Exchange may exclude a Participant and any associated person of 
the Participant from the Trading Floor for breaches of regulations that 
relate to administration of order, decorum, health, safety and welfare 
on the Exchange that occurred on the Trading Floor or on the premises 
immediately adjacent to the Trading Floor. Specifically, Participants 
shall be excluded if they pose an immediate threat to the safety of 
persons or property, are seriously disrupting Exchange operations, or 
are in possession of a firearm. Participants so excluded may be 
excluded for a period of up to five business days. The Exchange notes 
that this rule is based on the rules of PHLX.\12\
---------------------------------------------------------------------------

    \12\ See PHLX Rule 60(b)(i). The Exchange notes that there are 
no substantive differences between proposed Rule 2120(e)(1) and 
60(b)(i).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes Rule 2120(e)(2). Specifically, 
the Exchange proposes that if a Participant shall be excluded for a 
period exceeding forty-eight (48) hours, an expedited hearing 
(``Expedited Hearing'') will be held before the Chair of the Hearing 
Committee or his or her designee (``Expedited Hearing Officer'') within 
forty-eight (48) business hours after the Participant's exclusion from 
the Trading Floor. Written notice will be provided to the Participant 
of the date, time and place of the hearing. The Participant may be 
represented by counsel. The Expedited Hearing Officer shall conduct an 
Expedited Hearing. The Expedited Hearing Officer shall allow both the 
Participant or his or her representative and Exchange staff to present 
arguments. The Expedited Hearing Officer shall make a determination of 
whether to continue the Participant's exclusion from the Trading Floor 
for a period of up to five (5) business days. The determination shall 
be based on the severity of the threat posed to persons on the Trading 
Floor, the disruptiveness caused by the actor and the safety and 
welfare of persons on the Trading Floor.

[[Page 39632]]

The Expedited Hearing Officer shall make a ruling at the time of the 
hearing and a written decision will be provided to the Participant 
following the hearing. Participants shall not be excluded from 
electronic trading, but will not be permitted to be physically present 
on the Trading Floor for the duration of any exclusion. The Exchange 
notes that this rule is based on the rules of PHLX .\13\
---------------------------------------------------------------------------

    \13\ See PHLX Rule 60(c). The Exchange notes that there is a 
minor difference between proposed Rule 2120(e)(2) and PHLX Rule 
60(c). Specifically, the Exchange did not include references to the 
``Business Conduct Committee,'' as such committee does not exist on 
BOX. The Exchange instead proposes that the Expedited Hearing will 
be held before the Chair of the Hearing Committee or his or her 
designee. The Exchange believes that this change is appropriate as 
this change better aligns the rule with BOX's disciplinary rules.
---------------------------------------------------------------------------

    Further, the Exchange proposes Rule 2120(e)(3) which states that 
exclusion from the Trading Floor may not be the exclusive sanction for 
breaches of this Rule and the regulations thereunder. In addition to 
exclusion, a Participant may also be subject to a fine or the matter 
may be referred to the Hearing Committee where it shall proceed in 
accordance with the Rule 12000 Series. The Exchange notes that this 
rule is based on the rules of PHLX. \14\
---------------------------------------------------------------------------

    \14\ See PHLX Rule 60(c)(iv). The Exchange notes that there are 
no substantive differences between proposed Rule 2120(e)(3) and PHLX 
Rule 60(c)(iv).
---------------------------------------------------------------------------

    Lastly, the Exchange proposes the procedure to be followed when a 
Participant is to be excluded from the Trading Floor. Specifically, the 
Exchange proposes that there is no further right of appeal. The 
determination that a Participant shall be excluded is final. There is 
no appeal from such determination. Further, the Exchange proposes that 
a report in appropriate form shall be made to the SEC. However, no 
report shall be made in a case where a clerical employee is excluded 
for a breach of regulations relating to order, decorum, health, safety 
and welfare or administration of the Exchange.\15\ The Exchange notes 
that this rule is based on the rules of PHLX.\16\
---------------------------------------------------------------------------

    \15\ The Exchange notes that a clerical employee is not 
considered an ``associated person'' under the Exchange Act, and 
therefore no report shall be made if a clerical employee is in 
violation of rules and regulations relating to order, decorum, 
health, safety and welfare or administration of the Exchange. See 15 
U.S.C. 78c(a)(18).
    \16\ See PHLX Rule 60 Commentary (b). The Exchange notes that 
there are no substantive differences between proposed Rule 
2120(e)(4) and PHLX Rule 60 Commentary (b).
---------------------------------------------------------------------------

Imposition of Fines for Minor Rule Violations
    Exchange Rule 12140 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) and proposed (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. The Exchange now 
proposes to reword the last sentence of Rule 12140(a). Specifically, 
the Exchange proposes to state that the Exchange will proceed under 
this Rule only for violations that are minor in nature. Any other 
violation will be addressed pursuant to Rule 12030 or 12040.
    Next, the Exchange proposes to amend Rule 12140 to adopt section 
(e) which details Trading Floor Violations Subject to Fines and their 
applicable sanctions.
    First, the Exchange proposes to adopt 12140(e)(1), General 
Responsibilities of Floor Brokers pursuant to BOX Rule 7570. Under this 
rule, a Floor Broker who, when handling an order, fails to use due 
diligence 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 following fines:

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

    Next, the Exchange proposes to adopt 12140(e)(2), Failure to 
Properly Record Orders pursuant to BOX Rule 7580(e). Under this rule, 
any Floor Participant who fails to comply with the order format and 
system entry requirements on the Trading Floor shall be subject to the 
following fines:

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

    The Exchange then proposes to adopt 12140(e)(3), Failure to 
Properly Execute a QOO Order, pursuant to BOX Rule 7600. Under this 
rule, any Floor Participant who fails to properly execute a QOO Order 
shall be subject to the following fines:

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

    The Exchange proposes to adopt 12140(e)(4), Trading Conduct and 
Order & Decorum on the Trading Floor, pursuant to proposed Rule 
2120(b)-(d) discussed above. Under this rule, violations of Rule 2120 
related to Trading Floor Conduct and decorum shall be subject to the 
following fines:

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

    The Exchange then proposes to adopt 12140(e)(5), Discretionary 
Transactions. Under this rule, violations of Rule 7590 regarding 
Discretionary Transactions shall be subject to the following fines:

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

    Next, the Exchange proposes to adopt Rule 12140(e)(6), Floor 
Participant Not Available to Reconcile an Uncompared Trade pursuant to 
Rule 8530. Under this proposed rule, violations of Rule 8530 regarding 
the resolution of uncompared trades shall be subject to the following 
fines:

[[Page 39633]]

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

    The Exchange then proposes to adopt Rule 12140(e)(7), Floor 
Participant Communications and Equipment, pursuant to Rule 7660. Under 
this proposed rule, violations of Rule 7660 regarding Floor Participant 
Communications and Equipment shall be subject to the following fines:

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

    Next, the Exchange proposes Rule 12140(e)(8), Improper Vocalization 
of a Trade pursuant to Rule 100(b)(5). Under this proposed rule, 
violations of Rule 100(b)(5) regarding the requirements for public 
outcry shall be subject to the following fines:

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

    The Exchange then proposes to adopt Rule 12140(e)(9), Floor Market 
Maker Failure to Comply with Quotation Requirements pursuant to Rule 
8510(c)(2). Under this rule, violations of Rule 8510(c)(2) regarding a 
Floor Market Maker's Obligations of Continuous Open Outcry Quoting 
shall be subject to the following fines:

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

    The Exchange proposes Rule 12140(e)(10), Floor Market Maker Quote 
Spread Parameters pursuant to Rule 8510(d)(1). Under this proposed 
rule, violations of Rule 8510(d)(1) regarding legal bid/ask 
differential requirements on the Trading Floor shall be subject to the 
following fines:

------------------------------------------------------------------------
Number of violations within any rolling 24-
               month period                           Sanction
------------------------------------------------------------------------
First Occurrence..........................  Letter of Caution.
Second Occurrence.........................  $250.
Third Occurrence..........................  $500.
Subsequent Occurrences....................  Formal Disciplinary Action.
------------------------------------------------------------------------

    Next, the Exchange proposes Rule 12140(e)(11), Floor Broker Failure 
to Honor the Priority of Bids and Offers pursuant to Rule 7610(d). 
Under this proposed rule, violations of Rule 7610(d) regarding a Floor 
Broker's obligations in determining Time Priority Sequence shall be 
subject to the following fines:

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

    The Exchange then proposes Rule 12140(e)(12), Floor Broker Failure 
to Identify a Broker Dealer Order, pursuant to Rule IM-7580-2. Under 
this proposed rule, violations of Rule IM-7580-2 regarding a Floor 
Broker's responsibility to identify its orders shall be subject to the 
following fines:

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

    The Exchange notes that the proposed violations listed above are 
substantially similar to the rules of NYSE Arca's Minor Rule Plan 
regarding violations and sanctions applicable to a physical trading 
floor.\17\
---------------------------------------------------------------------------

    \17\ See Arca Rule 10.12(k). The Exchange notes that it did not 
adopt all of Arca's Minor Rule Plan violations and sanctions, as 
some rules were not applicable to BOX. Specifically, BOX did not 
copy the following Arca Rules as they were not applicable because 
the corresponding rule does not exist on BOX. They are: 
10.12(k)(i)(7), 10.12(k)(i)(10), 10.12(k)(i)(11), 10.12(k)(i)(12), 
10.12(k)(i)(21), 10.12(k)(i)(22), 10.12(k)(i)(23), 10.12(k)(i)(24), 
10.12(k)(i)(25), 10.12(k)(i)(26), 10.12(k)(i)(29), 10.12(k)(i)(30), 
10.12(k)(i)(33), 10.12(k)(i)(34), 10.12(k)(i)(37), 10.12(k)(i)(38), 
10.12(k)(i)(44) and 10.12(k)(i)(45). Because these rules do not 
exist on BOX, there cannot be a corresponding MRVP fine under 
proposed Rule 12140(e). Next, the Exchange did not copy the 
following Arca Rules, as BOX believes they are covered under other 
proposed BOX MRVP rules. They are: 10.12(k)(i)(3) covered under 
proposed Rule 12140(e)(3), 10.12(k)(i)(6) covered under proposed 
Rule 12140(e)(9), 10.12(k)(i)(13) covered under proposed Rule 
12140(e)(7), 10.12(k)(i)(17) covered under proposed Rule 
12140(e)(4), 10.12(k)(i)(19) covered under proposed Rule 
12140(e)(4), 10.12(k)(i)(27) covered under proposed Rule 
12140(e)(7), 10.12(k)(i)(31) covered under proposed Rule 
12140(e)(4), 10.12(k)(i)(32) covered under proposed Rule 
12140(e)(4), 10.12(k)(i)(35) covered under Rule 12140(d)(10)(the 
Exchange notes that this is an existing Rule found in the BOX MRVP 
and is also applicable to the Trading Floor), 10.12(k)(i)(36) 
covered under proposed Rule 12140(e)(4) and 10.12(k)(i)(39) covered 
under proposed Rule 12140(e)(9). Further, the Exchange did not copy 
Arca Rule 10.21(k)(i)(42) because the Exchange believes that the 
inclusion of this rule is unnecessary given the unique nature of the 
BOX Trading Floor. Specifically, the Trading Floor relies heavily on 
the technology used to submit QOO orders for execution. Because the 
technology will not allow orders to be submitted before or after 
trading hours, the Exchange believes that the inclusion of this rule 
is unnecessary. Lastly, the Exchange notes that the proposed 
sanctions are lower when compared to Arca. The Exchange believes the 
proposed sanction amounts are appropriate as they are in line with 
BOX's current MRVP sanctions.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\18\ in general, and Section 
6(b)(5) of the Act,\19\ in particular, in that it is designed 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 for a free and open market and a national market system and, 
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Proposed Rule 2120
    The Exchange believes that proposed Rule 2120, Trading Conduct and 
Order and Decorum on the Trading Floor, imposes reasonable restrictions 
and requirements that are designed to further the objectives of the 
Act. Specifically, the proposed rules are designed to maintain order on 
the Trading Floor and apply to all Floor Participants. Additionally, 
these rules are based on those of competing options exchanges that also 
have trading floors.\20\
---------------------------------------------------------------------------

    \20\ See supra notes 5, 6, 8, 9, 10, 11, 12, 13, 14 and 16.
---------------------------------------------------------------------------

Imposition of Fines for Minor Rule Violations
    The Exchange believes that the proposed changes to Rule 12140 are 
consistent with and further the

[[Page 39634]]

objectives of the Act. Additionally, the Exchange believes that the 
proposal is consistent with Section 6(b)(6) of the Act \21\ which 
requires the rules of an exchange provide that its members be 
appropriately disciplined for violations of the Act as well as the 
rules and regulations thereunder, by imposing pre-set fine amounts for 
breaches of order and decorum to reflect the severity of the violation 
and provide an appropriate form of deterrence for violations of 
Exchange Rules and the regulations thereunder. In addition, because 
existing BOX Rule 12140 provides procedural rights to a person fined 
under the Exchange's MRVP to contest the fine and permits a hearing on 
the matter, the Exchange believes that the proposal is consistent with 
Sections 6(b)(7) and 6(d)(1) of the Act,\22\ because it provides a fair 
procedure for the disciplining of Participants and persons associated 
with Participants.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(6).
    \22\ 15 U.S.C. 78f(b)(7) and (d)(1).
---------------------------------------------------------------------------

    The Exchange believes that the preset fines for Trading Floor 
violations are appropriate to deter Floor Participants from violating 
requirements and restrictions which are necessary for the orderly 
operation of the Trading Floor. The fines should create further 
deterrents for certain activity on the Trading Floor which disrupts the 
orderly operation of the Trading Floor. Further, the minor rule plan 
assists the regulatory staff in protecting its market to the benefit of 
the public. Finally, the Exchange believes that the proposal is 
consistent with the public interest, the protection of investors, or 
otherwise in furtherance of the purposes of the Act, because Rule 12140 
strengthens the Exchange's ability to carry out its oversight and 
enforcement responsibilities as an SRO in cases where full disciplinary 
proceedings may be unsuitable in view of the minor nature of the 
particular violation. Additionally, these rules are based on those of a 
competing options exchange [sic] that also has a trading floor.\23\
---------------------------------------------------------------------------

    \23\ See supra note 17.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In this regard and as indicated 
above, the Exchange notes that the rule changes being proposed are 
similar to the rules of Arca and PHLX.\24\ 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.
---------------------------------------------------------------------------

    \24\ See supra notes 5, 6, 8, 9, 10, 11, 12, 13, 14, 16 and 17.
---------------------------------------------------------------------------

    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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \25\ and Rule 19b-4(f)(6) thereunder.\26\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative upon filing. The 
Exchange has stated that it is requesting this waiver because the 
disciplinary rules contained in this proposed rule change need to be in 
place for the Exchange to operate its recently approved Trading Floor 
and waiver of the operative delay will allow the Exchange to commence 
operation of the Trading Floor in a timely manner while ensuring that 
proper disciplinary rules are in place. The Exchange explained that the 
proposed rules are similar to the rules of other Exchanges and that it 
provided Participants on the Exchange with notice of the disciplinary 
rules contained in the proposed rule change via regulatory circular. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because this waiver will enable the Exchange to begin operating its 
Trading Floor with trading conduct and order and decorum rules in place 
and with a Minor Rule Violation Plan that incorporates violations 
concerning activities related to the Trading Floor. The Commission 
further notes that the proposed rules are based on the rules of other 
exchanges with trading floors. For this reason, the Commission hereby 
waives the 30-day operative delay requirement and designates the 
proposed rule change as operative upon filing.\27\
---------------------------------------------------------------------------

    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \28\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2017-26 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2017-26. 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

[[Page 39635]]

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. 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-2017-26, and should be submitted on or before September 11, 
2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-17545 Filed 8-18-17; 8:45 am]
BILLING CODE 8011-01-P