Document ID: SEC-2017-0147-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2017-02-02T05:00Z

[Federal Register Volume 82, Number 21 (Thursday, February 2, 2017)]
[Notices]
[Pages 9101-9103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02184]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79891; File No. SR-BOX-2017-03]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Rule 8040 (Obligations of Market Makers)

January 27, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 9102]]

notice is hereby given that on January 17, 2017, BOX Options Exchange 
LLC (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 self-
regulatory organization. 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 8040 (Obligations of Market 
Makers). 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend BOX Rule 8040(a)(9) (Obligations of 
Market Makers) to amend the provision pertaining to trades that are 
more than $0.25 below parity. Additionally, the Exchange proposes to 
eliminate Rule 8040(a)(10), the provision providing for bids (offers) 
to be no more than $1 lower (higher) than the last preceding 
transaction plus or minus the aggregate change in the last sale price 
of the underlying (``the one point rule'').
    First, the Exchange proposes to eliminate the one point rule as 
various market changes have rendered the rule obsolete and unnecessary. 
For example, Market Makers are subject to various quotation 
requirements, including bid/ask quote width requirements contained in 
Rule 8050. The Exchange also has an obvious error rule that contains 
provisions on erroneous pricing errors (e.g., 7170) and has in place 
certain price check parameters that will not permit the automatic 
execution of certain orders if the execution would take place at prices 
inferior to the national best bid/offer (e.g., Rule 7290).
    Second, the Exchange is proposing to retain Rule 8040(a)(9) as a 
guideline but to modify it to provide that an amount larger than $0.25 
may be appropriate considering the particular market conditions (not 
just unusual conditions as the rule currently states). Currently, 
Market Makers are expected ordinarily, except in unusual market 
conditions, to refrain from purchasing a call option or a put option at 
a price more than $0.25 below parity. In the case of call options, 
parity is measured by the bid in the underlying security, and in the 
case of put options, parity is measured by the offer in the underlying 
security (``the parity rule''). The Exchange proposes to revise the 
rule to provide that the $0.25 guideline may be increased, or the rule 
waived, by the Exchange on a series-by-series basis.\3\ The Exchange 
believes that revising the $0.25 parity rule in this manner modernizes 
the guideline to reflect market changes and will provide more 
flexibility to take into consideration the particular trading in a 
security, including but not limited to the underlying market price, 
market conditions, and applicable minimum bid/ask width requirements 
for a given options series. Additionally, the Exchange believes that 
the proposed change to Rule 8040(a)(9) harmonizes the Exchange's parity 
rule with other options exchanges' parity rules in the industry.\4\
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    \3\ The Exchange will provide Participants with notice, via 
Regulatory Circular, if the rule will be waived.
    \4\ See Chicago Board Options Exchange (``CBOE'') Rule 8.7(.02); 
International Securities Exchange (``ISE'') Rule 803(a)(1); Miami 
International Securities Exchange LLC (``MIAX'') Rule 603(a).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\5\ in general, and Section 
6(b)(5) of the Act,\6\ in particular in that the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \7\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts, to remove impediments to and to perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest, because it 
will eliminate the outdated one point rule and update the parity rule 
to incorporate more flexibility and recognize changing market 
conditions. As discussed above, the Exchange believes the proposed 
change to Rule 8040(a)(9) is reasonable and appropriate, as other 
options exchanges have similar rules currently in place at their 
respective exchanges.\8\ Further, the Exchange believes the proposed 
elimination of Rule 8040(a)(10) is reasonable and appropriate as 
another exchange in the industry filed to remove the language as the 
rule was obsolete and unnecessary.\9\
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
    \8\ See supra note 4.
    \9\ See Securities Exchange Release No. 60897 (October 28, 
2009), 74 FR 57217 (November 4, 2009) (Notice of Filing and 
Immediate Effectiveness SR-ISE-2009-85).
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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 discussed 
above, the Exchange notes that the proposed rule change is 
substantially similar to rules at other options exchanges in the 
industry. As discussed above, the Exchange believes that the proposed 
change to revise the parity rule and eliminate the one point rule is 
consistent with the market maker obligations at other options 
exchanges.

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, it has become 
effective pursuant to Section 19(b)(3)(A) \10\ of the Act and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.

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[[Page 9103]]

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \12\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ 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 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest because it will 
allow the changes to be implemented immediately to update certain 
Market Maker guidelines to better reflect current market conditions. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\14\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2017-03 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-2017-03. 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-2017-03, and should be 
submitted on or before February 23, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02184 Filed 2-1-17; 8:45 am]
 BILLING CODE 8011-01-P