Document ID: SEC-2023-1365-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2023-11-27T05:00Z

[Federal Register Volume 88, Number 226 (Monday, November 27, 2023)]
[Notices]
[Pages 82929-82933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26092]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98997; File No. SR-BOX-2023-27]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
of Proposed Rule Change To Amend the Short Term Option Series Program 
in IM-5050-6

November 21, 2023.
    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 November 16, 2023, BOX 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 Exchange. 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.
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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 BOX IM-5050-6 (Short Term Option 
Series Program). 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 https://rules.boxexchange.com/rulefilings.

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

[[Page 82930]]

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 Exchange proposes to amend IM-5050-6 (Short Term Option Series 
Program) to permit the listing of two Wednesday expirations for options 
on United States Oil Fund, LP (``USO''), United States Natural Gas 
Fund, LP (``UNG''), SPDR Gold Shares (``GLD''), iShares Silver Trust 
(``SLV''), and iShares 20+ Year Treasury Bond ETF (``TLT'') 
(collectively ``Exchange Traded Products'' or ``ETPs''). This is a 
competitive filing that is based on a proposal recently submitted by 
Nasdaq ISE, LLC (``Nasdaq ISE'') and approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 98905 (November 13, 
2023) (SR-ISE-2023-11) (Order Approving a Proposed Rule Change to 
Amend the Short Term Option Series Program to Permit the Listing of 
Two Wednesday Expirations for Options on Certain Exchange Traded 
Products).
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    Currently, as set forth in IM-5050-6, after an option class has 
been approved for listing and trading on the Exchange as a Short Term 
Option Series pursuant to BOX Rule 100(a)(66) \4\ the Exchange may open 
for trading on any Thursday or Friday that is a business day (``Short 
Term Option Opening Date'') series of options on that class that expire 
at the close of business on each of the next five Fridays that are 
business days and are not Fridays in which monthly options series or 
Quarterly Options Series expire (``Friday Short Term Option Expiration 
Dates''). The Exchange may have no more than a total of five Short Term 
Option Expiration Dates. Further, if the Exchange is not open for 
business on the respective Thursday or Friday, the Short Term Option 
Opening Date for Short Term Option Weekly Expirations will be the first 
business day immediately prior to that respective Thursday or Friday. 
Similarly, if the Exchange is not open for business on a Friday, the 
Short Term Option Expiration Date for Short Term Option Weekly 
Expirations will be the first business day immediately prior to that 
Friday.
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    \4\ BOX Rule 100(a)(66) provides that a Short Term Options 
Series means a series in an option class that is approved for 
listing and trading on BOX in which the series is opened for trading 
on any Monday, Tuesday, Wednesday, Thursday or Friday that is a 
business day and that expires on the Monday, Tuesday, Wednesday, 
Thursday, or Friday of the next business week, or, in the case of a 
series that is listed on a Friday and expires on a Monday, is listed 
one business week and one business day prior to that expiration. If 
a Tuesday, Wednesday, Thursday or Friday is not a business day, the 
series may be opened (or shall expire) on the first business day 
immediately prior to that Tuesday, Wednesday, Thursday or Friday, 
respectively. For a series listed pursuant to this section for 
Monday expiration, if a Monday is not a business day, the series 
shall expire on the first business day immediately following that 
Monday.
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    Additionally, the Exchange may open for trading series of options 
on the symbols provided in Table 1 of IM-5050-6 that expire at the 
close of business on each of the next two Mondays, Tuesdays, 
Wednesdays, and Thursdays, respectively, that are business days and are 
not business days in which monthly options series or Quarterly Options 
Series expire (``Short Term Option Daily Expirations''). For those 
symbols listed in Table 1, the Exchange may have no more than a total 
of two Short Term Option Daily Expirations for each of Monday, Tuesday, 
Wednesday, and Thursday expirations at one time.
Proposal
    At this time, the Exchange proposes to expand the Short Term Option 
Daily Expirations to permit the listing and trading of options on USO, 
UNG, GLD, SLV, and TLT expiring on Wednesdays. The Exchange proposes to 
permit two Short Term Option Expiration Dates beyond the current week 
for each Wednesday expiration at one time.\5\ In order to effectuate 
the proposed changes, the Exchange would add USO, UNG, GLD, SLV, and 
TLT to Table 1 of IM-5050-6, which specifies each symbol that qualifies 
as a Short Term Option Daily Expiration.
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    \5\ Consistent with the current operation of the rule, the 
Exchange notes that if it adds a Wednesday expiration on a Tuesday, 
it could technically list three outstanding Wednesday expirations at 
one time. The Exchange will therefore clarify the rule text in IM-
5050-6 to specify that it can list two Short Term Option Expiration 
Dates beyond the current week for each Monday, Tuesday, Wednesday, 
and Thursday expiration.
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    The proposed Wednesday USO, UNG, GLD, SLV, and TLT expirations will 
be similar to the current Wednesday SPY, QQQ, and IWM Short Term Option 
Daily Expirations set forth in IM-5050-6, such that the Exchange may 
open for trading on any Tuesday or Wednesday that is a business day 
(beyond the current week) series of options on USO, UNG, GLD, SLV, and 
TLT to expire on any Wednesday of the month that is a business day and 
is not a Wednesday in which Quarterly Options Series expire 
(``Wednesday USO Expirations,'' ``Wednesday UNG Expirations,'' 
``Wednesday GLD Expirations,'' ``Wednesday SLV Expirations,'' and 
``Wednesday TLT Expirations'') (collectively, ``Wednesday ETP 
Expirations'').\6\ In the event Short Term Option Daily Expirations 
expire on a Wednesday and that Wednesday is the same day that a 
Quarterly Options Series expires, the Exchange would skip that week's 
listing and instead list the following week; the two weeks would 
therefore not be consecutive. Today, Wednesday expirations in SPY, QQQ, 
and IWM similarly skip the weekly listing in the event the weekly 
listing expires on the same day in the same class as a Quarterly 
Options Series.
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    \6\ While the relevant rule text in IM-5050-6 also indicates 
that the Exchange will not list such expirations on a Wednesday that 
is a business day in which monthly options series expire, 
practically speaking this would not occur.
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    USO, UNG, GLD, SLV, and TLT Friday expirations would continue to 
have a total of five Short Term Option Expiration Dates provided those 
Friday expirations are not Fridays in which monthly options series or 
Quarterly Options Series expire (``Friday Short Term Option Expiration 
Dates'').
    Similar to Wednesday SPY, QQQ, and IWM Short Term Option Daily 
Expirations within IM-5050-6, the Exchange proposes that it may open 
for trading on any Tuesday or Wednesday that is a business day series 
of options on USO, UNG, GLD, SLV, and TLT that expire at the close of 
business on each of the next two Wednesdays that are business days and 
are not business days in which Quarterly Options Series expire.
    The interval between strike prices for the proposed Wednesday ETP 
Expirations will be the same as those for the current Short Term Option 
Series for Friday expirations applicable to the Short Term Option 
Series Program.\7\ Specifically, the Wednesday ETP Expirations will 
have a strike interval of $0.50 or greater for strike prices below 
$100, $1 or greater for strike prices between $100 and $150, and $2.50 
or greater for strike prices above $150.\8\ As is the case with other 
equity options series listed pursuant to the Short Term Option Series 
Program, the Wednesday ETP Expirations series will be P.M.-settled.
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    \7\ See IM-5050-6.
    \8\ Id.
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    Pursuant to BOX Rule 100(a)(66), with respect to the Short Term 
Option Series Program, a Wednesday expiration series shall expire on 
the first business day immediately prior to that Wednesday, e.g., 
Tuesday of that week if the Wednesday is not a business day.
    Currently, for each option class eligible for participation in the 
Short

[[Page 82931]]

Term Option Series Program, the Exchange is limited to opening thirty 
(30) series for each expiration date for the specific class.\9\ The 
thirty (30) series restriction does not include series that are open by 
other securities exchanges under their respective weekly rules; the 
Exchange may list these additional series that are listed by other 
options exchanges.\10\ With the proposed changes, this thirty (30) 
series restriction would apply to Wednesday USO, UNG, GLD, SLV, and TLT 
Short Term Option Daily Expirations as well. In addition, the Exchange 
will be able to list series that are listed by other exchanges, 
assuming they file similar rules with the Commission to list Wednesday 
ETP Expirations.
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    \9\ See id.
    \10\ See IM-5050-6.
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    With this proposal, Wednesday ETP Expirations would be treated 
similarly to existing Wednesday SPY, QQQ, and IWM Expirations. With 
respect to monthly option series, Short Term Option Daily Expirations 
will be permitted to expire in the same week in which monthly option 
series on the same class expire. Not listing Short Term Option Daily 
Expirations for one week every month because there was a monthly on 
that same class on the Friday of that week would create investor 
confusion.
    Further, as with Wednesday SPY, QQQ, and IWM Expirations, the 
Exchange would not permit Wednesday ETP Expirations to expire on a 
business day in which monthly options series or Quarterly Options 
Series expire. Therefore, all Short Term Option Daily Expirations would 
expire at the close of business on each of the next two Wednesdays that 
are business days and are not business days in which monthly options 
series or Quarterly Options Series expire. The Exchange believes that 
it is reasonable to not permit two expirations on the same day in which 
a monthly options series or a Quarterly Options Series would expire 
because those options would be duplicative of each other.
    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of Wednesday ETP Expirations. The 
Exchange has the necessary capacity and surveillance programs in place 
to support and properly monitor trading in the proposed Wednesday ETP 
Expirations. The Exchange currently trades P.M.-settled Short Term 
Option Series that expire Wednesday for SPY, QQQ and IWM and has not 
experienced any market disruptions nor issues with capacity. Today, the 
Exchange has surveillance programs in place to support and properly 
monitor trading in Short Term Option Series that expire Wednesday for 
SPY, QQQ and IWM.
Implementation
    The Exchange will issue a notice to Participants via Regulatory 
Notice with appropriate advanced notice announcing the implementation 
date of the proposed rule change. The Exchange notes that Nasdaq ISE 
applied a similar process to govern the implementation of its proposed 
rule change.
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''),\11\ in general, and section 6(b)(5) of the Act,\12\ 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. Similar to Wednesday expirations in SPY, QQQ, and IWM, 
the proposal to permit Wednesday ETP Expirations, subject to the 
proposed limitation of two expirations beyond the current week, would 
protect investors and the public interest by providing the investing 
public and other market participants more choice and flexibility to 
closely tailor their investment and hedging decisions in these options 
and allow for a reduced premium cost of buying portfolio protection, 
thus allowing them to better manage their risk exposure.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange represents that it has an adequate surveillance 
program in place to detect manipulative trading in the proposed option 
expirations, in the same way that it monitors trading in the current 
Short Term Option Series for Wednesday SPY, QQQ and IWM expirations. 
The Exchange also represents that it has the necessary system capacity 
to support the new expirations. Finally, the Exchange does not believe 
that any market disruptions will be encountered with the introduction 
of these option expirations. As discussed above, the Exchange believes 
that its proposal is a modest expansion of weekly expiration dates for 
GLD, SLV, USO, UNG, and TLT given that it will be limited to two 
Wednesday expirations beyond the current week. Lastly, the Exchange 
believes its proposal will not be a strain on liquidity provides 
because of the multi-class nature of GLD, SLV, USO, UNG, and TLT and 
the available hedges in highly-correlated instruments, as described 
above.
    The Exchange believes that the proposal is consistent with the Act 
as the proposal would overall add a small number of Wednesday ETP 
Expirations by limiting the addition of two Wednesday expirations 
beyond the current week. The addition of Wednesday ETP Expirations 
would remove impediments to and perfect the mechanism of a free and 
open market by encouraging Market Makers to continue to deploy capital 
more efficiently and improve market quality. The Exchange believes that 
the proposal will allow Participants to expand hedging tools and tailor 
their investment and hedging needs more effectively in USO, UNG, GLD, 
SLV, and TLT as these funds are most likely to be utilized by market 
participants to hedge the underlying asset classes.
    Similar to Wednesday SPY, QQQ, and IWM expirations, the 
introduction of Wednesday ETP Expirations is consistent with the Act as 
it will, among other things, expand hedging tools available to market 
participants and allow for a reduced premium cost of buying portfolio 
protection. The Exchange believes that Wednesday ETP Expirations will 
allow market participants to purchase options on USO, UNG, GLD, SLV, 
and TLT based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively, thus allowing them to 
better manage their risk exposure. Today, the Exchange lists Wednesday 
SPY, QQQ, and IWM Expirations.\13\
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    \13\ See IM-5050-6.
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    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Wednesday ETP Expirations 
should simply expand the ability of investors to hedge risk against 
market movements stemming from economic releases or market events that 
occur throughout the month in the same way that the Short Term Option 
Series Program has expanded the landscape of hedging.
    There are no material differences in the treatment of Wednesday 
SPY, QQQ and IWM expirations compared to the proposed Wednesday ETP 
Expirations. Given the similarities between Wednesday SPY, QQQ and IWM 
expirations and the proposed Wednesday ETP Expirations, the

[[Page 82932]]

Exchange believes that applying the provisions in IM-5050-6 that 
currently apply to Wednesday SPY, QQQ and IWM expirations is justified. 
For example, the Exchange believes that allowing Wednesday ETP 
Expirations and monthly Exchange Traded Product expirations in the same 
week will benefit investors and minimize investor confusion by 
providing Wednesday ETP Expirations in a continuous and uniform manner.

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 change is being proposed as a 
competitive response to a filing submitted by Nasdaq ISE that was 
recently approved by the Commission.\14\
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    \14\ See supra note 3.
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    While the proposal will expand the Short Term Options Expirations 
to allow Wednesday ETP Expirations to be listed on BOX, the Exchange 
believes that this limited expansion for Wednesday expirations for 
options on USO, UNG, GLD, SLV, and TLT will not impose an undue burden 
on competition; rather, it will meet customer demand. The Exchange 
believes that Participants will continue to be able to expand hedging 
tools and tailor their investment and hedging needs more effectively in 
USO, UNG, GLD, SLV, and TLT given multi-class nature of these products 
and the available hedges in highly-correlated instruments, as described 
above.
    Similar to Wednesday SPY, QQQ and IWM expirations, the introduction 
of Wednesday ETP Expirations does not impose an undue burden on 
competition. The Exchange believes that it will, among other things, 
expand hedging tools available to market participants and allow for a 
reduced premium cost of buying portfolio protection. The Exchange 
believes that Wednesday ETP Expirations will allow market participants 
to purchase options on USO, UNG, GLD, SLV, and TLT based on their 
timing as needed and allow them to tailor their investment and hedging 
needs more effectively.
    The Exchange does not believe the proposal will impose any burden 
on inter- market competition, as nothing prevents the other options 
exchanges from proposing similar rules to list and trade Wednesday ETP 
Expirations. Further, the Exchange does not believe the proposal will 
impose any burden on intra-market competition, as all market 
participants will be treated in the same manner under this proposal\.\

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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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, it has become effective pursuant to 
section 19(b)(3)(A)(iii) of the Act \17\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\18\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 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 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 under Rule 19b-4(f)(6) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. According to 
the Exchange, the proposed rule change is a competitive response to a 
filing submitted by Nasdaq ISE that was recently approved by the 
Commission.\21\ The Exchange has stated that waiver of the 30-day 
operative delay would ensure fair competition among the exchanges by 
allowing the Exchange to permit the listing of two Wednesday 
expirations for options on ETPs.\22\ The Commission believes that the 
proposed rule change presents no novel issues and that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Accordingly, the Commission hereby waives the 
30-day operative delay and designates the proposed rule change as 
operative upon filing.\23\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 3.
    \22\ See SR-CboeBZX-2022-37 (July 8, 2022).
    \23\ 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 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 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 Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BOX-2023-27 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-2023-27. 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 (https://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

[[Page 82933]]

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 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make available publicly. We may redact in part or withhold 
entirely from publication submitted material that is obscene or subject 
to copyright protection. All submissions should refer to file number 
SR-BOX-2023-27 and should be submitted on or before December 18, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26092 Filed 11-24-23; 8:45 am]
BILLING CODE 8011-01-P