Document ID: SEC-2015-1504-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2015-09-10T04:00Z

[Federal Register Volume 80, Number 175 (Thursday, September 10, 2015)]
[Notices]
[Pages 54625-54627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22743]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75828; File No. SR-BOX-2015-30]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule on the BOX Market LLC Options Facility

September 3, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 1, 2015, BOX Options Exchange LLC (the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with 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\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule on 
the BOX Market LLC (``BOX'') options facility. While changes to the fee 
schedule pursuant to this proposal will be effective upon filing, the 
changes will become operative on September 1, 2015. 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

[[Page 54626]]

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX 
to amend how PIP and COPIP Orders \5\ executing on the BOX Book are 
treated within the BOX Fee Schedule. Specifically, the Exchange 
proposes to now treat both sides of these transactions as Non-Auction 
transactions in regards to both Exchange Fees (Section I) and Liquidity 
Fees and Credits (Section II). While this type of interaction is not 
common, the Exchange believes that doing so will add greater clarity to 
the Fee Schedule and reduce Participant confusion about how these 
executions are treated.
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    \5\ A PIP Order or COPIP Order is a Customer Order (an agency 
order for the account of either a customer or a broker-dealer) 
designated for the PIP or COPIP, respectively.
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    The Exchange first proposes to add subsection 3 to Section I.B. 
(PIP and COPIP Orders Executed Against Orders on the BOX Book) and 
state that each PIP or COPIP Order which executes against an Unrelated 
Order on the BOX Book shall be treated as a Non-Auction transaction and 
be subject to Section I.A. Exchange Fees (Non-Auction Transactions).\6\ 
The Exchange then proposes to amend Section II.A. (PIP and COPIP 
Transactions) to add language which specifies that each PIP Order or 
COPIP Order that executes against an Unrelated Order on the BOX Book 
shall be treated as a Non-Auction transaction and deemed exempt from 
Liquidity Fees and Credits.
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    \6\ For the PIP, an Unrelated Order is a non-Improvement Order 
entered into the BOX market during a PIP. For the COPIP, an 
Unrelated Order is a non-Improvement Order entered on BOX during a 
COPIP or BOX Book Interest during a COPIP.
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    The Exchange does not believe that this change will have a 
noticeable impact on the fees assessed on its Participants.\7\ Almost 
all PIP and COPIP Orders executing against orders on the BOX Book will 
be Public Customer orders, which are not assessed an Exchange fee. 
Similarly, under the Non-Auction fee structure Public Customers are 
also never assessed a fee. The Exchange notes that the Public Customer 
in this scenario may actually receive an additional rebate of up to 
$0.70 under Section I.A.1. (Tiered Volume Rebate for Non-Auction 
Transactions.)
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    \7\ The Exchange notes that in almost all scenarios the PIP and 
COPIP Order would be considered a taker of liquidity for purposes of 
the Non-Auction transaction fee structure.
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    While unlikely that a Participant other than a Public Customer 
would be interacting with the order on the BOX Book, the Exchange notes 
that a Market Maker who submits a PIP or COPIP Order that executes 
against an order on the BOX Book would be charged anywhere from $0.05 
to $0.55 in Penny Pilot Classes and $0.10 to $0.90 in Non-Penny Pilot 
Classes depending on the Participant type that the Order interacted 
with. The Market Maker would also be eligible for the Tiered Volume 
Rebate of up to $0.10 per contract depending on its monthly average 
daily volume. Comparatively, the same Market Maker would be assessed a 
$0.20 Exchange fee for the PIP and COPIP Order and a credit for 
removing liquidity of $0.35 (Penny Pilot Classes) and $0.75 (Non-Penny 
Pilot Classes).
    A Professional Customer or Broker Dealer who submits a PIP or COPIP 
Order that executes against an order on the BOX Book could be charged 
anywhere from $0.40 to $0.64 in Penny Pilot Classes and $0.40 to $0.99 
in Non-Penny Pilot Classes. The same Professional Customer or Broker 
Dealer would be assessed a $0.37 Exchange fee for the PIP and COPIP 
Order and a credit for removing liquidity of $0.35 (Penny Pilot 
Classes) and $0.75 (Non-Penny Pilot Classes).
    The Exchange also proposes to remove obsolete language in this 
subsection that references immediately marketable Unrelated Orders, 
specifically the language that states that ``an Unrelated Order that is 
not immediately marketable will be charged as an Improvement Order when 
it executes against a PIP Order or a COPIP Order,'' as well as ``When a 
non-immediately marketable order executes against a PIP Order or a 
COPIP Order, therefore becoming an Unrelated Order, it shall be charged 
as an Improvement Order.'' Since the introduction of the pro-rata 
allocation algorithm within the PIP and COPIP,\8\ all Unrelated Orders 
are systematically treated as immediately marketable. Therefore the 
Exchange believes this language is no longer necessary and removing it 
will reduce participant confusion about how these executions are 
treated within the Fee Schedule. The Exchange also proposes to remove 
footnotes which are referenced in the text that is being removed.
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    \8\ See Securities Exchange Act Release No. 72848 (August 14, 
2014), 79 FR 49361 (August 20, 2014)(Order Granting Approval of a 
Proposed Rule Change To Adopt New Trade Allocation Algorithms for 
Matching Trades at the Conclusion of the PIP and the COPIP).
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    The Exchange notes that the fees for immediately marketable 
Unrelated Orders remain unchanged. These orders continue to be charged 
as Non-Auction transactions for purposes of the BOX Fee schedule.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5)of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among BOX Participants and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers. The proposed changes will allow the Exchange to be 
competitive with other exchanges and to apply fees and credits in a 
manner that is equitable among all BOX Participants. Further, the 
Exchange operates within a highly competitive market in which market 
participants can readily direct order flow to any other competing 
exchange if they determine fees at a particular exchange to be 
excessive.
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    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes treating PIP and COPIP Orders that execute 
against an Unrelated Order on the BOX Book as Non-Auction transactions 
is reasonable, equitable and not unfairly discriminatory. As the 
Exchange noted above, almost all PIP and COPIP Orders are from the 
accounts of Public Customers. If this type of interaction does take 
place the Public Customer will still not be charged a fee and may also 
receive a credit depending on its ADV for the month.
    Additionally, the Exchange believes it is reasonable to potentially 
assess Market Makers, Broker Dealers, and Professional Customers with 
higher fees if their PIP or COPIP Orders execute on the BOX Book. While 
this scenario is rare, the Exchange notes that it has adopted similar 
methodology for Complex Orders that execute on the BOX Book, and while 
the result of this structure is that the BOX Participant does not know 
the fee it will be charged when submitting a PIP or COPIP Order, the 
Participant must recognize that it could be charged the highest 
applicable fee on the exchange's schedule. For example, while a Market 
Maker's PIP Order in a Penny Pilot Class would currently expect to be 
charged a $0.20 exchange fee and receive a $0.35 removal ``credit'' if 
the Order executed

[[Page 54627]]

against a Primary Improvement Order or Improvement Order in the PIP or 
COPIP, if that Order interacted with an Unrelated Order on the BOX Book 
the Market Maker could now be charged anywhere from $0.00 to $0.51. 
Therefore, the Participant must recognize that it could be charged the 
highest applicable fee on the Exchange's schedule, which may, instead, 
be lowered or changed depending upon how the PIP or COPIP Order 
interacts. This way, a Participant will never be charged a higher fee 
than they expected when submitting a PIP or COPIP Order. Further, a 
majority of PIP and COPIP Orders execute as intended in the PIP and 
COPIP mechanisms, so the Exchange believes that any increase in fees 
will be nominal at most.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing exchanges. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and credits to 
remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed rule change reflects 
this competitive environment.

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. The Exchange also does not 
believe that this change would disincentivize a market participant from 
sending in a PIP or COPIP Order, as the proposed rule change is meant 
to provide clarity to the BOX Fee Schedule so that Participants 
understand the fees they can be charged in this scenario. Under the 
proposed change PIP and COPIP Orders that execute against an Unrelated 
Order on the BOX Book will be subject to fees already in place on the 
Exchange. Further, almost all these transactions the PIP or COPIP Order 
will be from the account of the Public Customer and there will be no 
change to the fees assessed on these Participants. In rare cases, 
Market Makers, Broker Dealers and Professional Customers could be 
assessed a higher fee but the Exchange believes any fees assessed would 
be nominal.
    Finally, the Exchange does not believes that treating PIP and COPIP 
Orders that execute against an Unrelated Order on the BOX Book as Non-
Auction transactions will impose a burden on competition among various 
Exchange Participants because all Participants will be affected to the 
same extent.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \10\ and Rule 19b-4(f)(2) 
thereunder,\11\ because it establishes or changes a due, or fee.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2015-30 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-2015-30. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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-2015-30, and should be 
submitted on or before October 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-22743 Filed 9-9-15; 8:45 am]
 BILLING CODE 8011-01-P