Document ID: SEC-2014-2081-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2014-12-11T05:00Z

[Federal Register Volume 79, Number 238 (Thursday, December 11, 2014)]
[Notices]
[Pages 73681-73684]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29004]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73753; File No. SR-BOX-2014-26]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adjust the Fees and Credits for Complex Orders Executed Against Orders 
on the BOX Book

December 5, 2014.
    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 December 4, 2014, BOX Options Exchange LLC (the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``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

[[Page 73682]]

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 to 
adjust the fees and credits for Complex Orders Executed Against Orders 
on the BOX Book on the BOX Market LLC (``BOX'') options facility. 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 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 adjust the fees and credits outlined in Section III.A. (Complex 
Orders Executed Against Orders on the BOX Book).
    Specifically, for Complex Orders executing against orders on the 
BOX Book the Exchange proposes to assess different fees and credits for 
Complex Orders in Penny Pilot Classes than Complex Orders in Non-Penny 
Pilot Classes. Currently all Complex Order transactions that execute 
against orders on the BOX Book are assessed a $0.35 per contract per 
leg credit when executed by Public Customers, a $0.45 per contract per 
leg fee when executed by Professional Customers and Broker Dealers, and 
a $0.40 per contract per leg fee when executed by Market Makers.
    The proposed fees and credits for Complex Orders executing against 
orders on the BOX Book are as follows:

------------------------------------------------------------------------
                                            Penny pilot      Non-Penny
              Account type                    classes      pilot classes
------------------------------------------------------------------------
Public Customer.........................         ($0.35)         ($0.70)
Professional Customer and Broker Dealer.           $0.40           $0.80
Market Maker............................           $0.40           $0.80
------------------------------------------------------------------------

    For example, if a Professional Customer's Penny Pilot Complex Order 
A+B executes against orders on the BOX Book, the Professional Customer 
will be charged $0.80 ($0.40 for A, plus $0.40 for B). If instead the 
Professional Customer's Complex Order is in a Non-Penny Pilot class, 
the Professional Customer will be charged $1.60 ($0.80 for A, plus 
$0.80 for B). A Public Customer executing a Penny Pilot Complex Order 
A+B will receive a credit of $0.70 ($0.35 for A, plus $0.35 for B).
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,\5\ 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.
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    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fees and credits are 
reasonable, equitable and non-discriminatory. In particular, the 
proposed fees and credits will allow the Exchange to apply separate 
fees and credits for transactions in penny pilot issues and those in 
non-penny pilot issues, a distinction that is made in many other 
sections of the BOX Fee Schedule, including Section III.B of the Fee 
Schedule (Complex Orders Executed Against Other Complex Orders). The 
Exchange notes that submitting Complex Orders to BOX is entirely 
voluntary and that several other competing exchanges possess similar 
Complex Order functionalities. Participants can therefore choose what 
type of order to submit to BOX, or direct their Complex Order flow to 
any other exchange if they determine the proposed Complex Order fee 
structure to be unreasonable.
    The Exchange believes it is equitable, reasonable and not unfairly 
discriminatory to assess fees and credits according to whether the 
Complex Order executes against orders on the BOX Book or against 
another Complex Order and according to the account types of the 
Participant submitting the Complex Order. This fee structure was 
adopted by the Exchange over a year ago \6\ and has been accepted by 
both the Commission and the industry. The result of this structure is 
that a Participant does not know the fee it will be charged when 
submitting a Complex Order. 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 to a credit 
depending upon how its Complex Order interacts.
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    \6\ See Securities Exchange Act Release No. 71312 (January 15, 
2014), 79 FR 3649 (January 22, 2014) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To 
Establish Fees for Complex Order Price Improvement Period 
(``COPIP'') Transactions).
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    The Exchange believes it is reasonable and equitable to provide 
credits for Public Customer Complex Orders and to charge fees to 
Professional Customers, Broker Dealers and Market Makers when their 
Complex Orders execute on the BOX Book. Specifically the Exchange 
believes that the proposed $0.35 credit for Public Customers and $0.40 
fee for Professional Customers, Broker Dealers and Market Makers in 
Penny Pilot Classes, and the proposed $0.70 credit for Public Customers 
and $0.80 fee for Professional Customers, Broker Dealers and Market 
Makers in Non-Penny Pilot Classes are reasonable and strike an 
appropriate balance between the fees charged for standard orders and 
the Complex Order Fees and Credits applied when a Complex Order 
executes against another Complex Orders [sic]. The proposed credits for 
Public Customer Complex Orders that execute on the BOX Book are equal 
to the credits

[[Page 73683]]

already in place for Public Customers' [sic] that execute against non-
Public Customers in Section III.B. (Complex Orders Executed Against 
Other Complex Orders). Further, the proposed fees for Professional 
Customers, Broker Dealers and Market Makers in both Penny Pilot Classes 
and Non-Penny Pilot Classes are in line with the fees assessed for when 
these Participants' Complex Orders execute against other Complex 
Orders. The Exchange believes the proposed fees and credits will 
continue to encourage Participants to execute Complex Orders by 
ensuring that they receive similar incentives and fees regardless of 
where their Complex Order executes. The Exchange believes this will 
help attract Complex Order flow to the Exchange and create increased 
liquidity, which will ultimately benefit all Participants trading on 
BOX. The proposed fees and credits are also competitive with the fees 
and credits offered for similar transactions on at least one other 
exchange.\7\
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    \7\ For Complex Orders that interact with the regular order 
book, NYSE Arca, Inc. charges Public Customers $0.47 or $0.85 
(depending on issue), Broker Dealers $0.49 or $0.89 (depending on 
issue), and Market Makers $0.49 or $0.87 (depending on issue).
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    For Complex Orders that execute on the BOX Book, the Exchange 
believes it is reasonable to charge Professional Customers, Broker 
Dealers, and Market Makers less for executions in penny pilot issues 
than non-penny issues because these classes are typically the more 
actively traded and assessing lower fees will further incentivize 
Complex Order transaction [sic] in penny pilot issues on the Exchange, 
ultimately benefiting all Participants trading on BOX. The Complex 
Order fees are competitive with the fees and credits offered for 
similar transactions on at least one other exchange.\8\ Additionally, 
the Exchange believes it is reasonable to give a greater credit to 
Public Customers in Complex Order transactions involving non-penny 
pilot issues than penny pilot issues. These classes have wider spreads 
and are less actively traded; and giving a larger credit will further 
incentivize Public Customers to trade in these classes. The proposed 
Public Customer credits are competitive with the credits offered for 
similar transactions on at least one other exchange.\9\
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    \8\ The International Securities Exchange, LLC (``ISE'') 
assesses Professional Customers and Broker Dealers $0.44 for Complex 
Order transactions in Penny Names and $.87 for Complex Order 
transactions in non-Penny Names. Market Makers are assessed $0.43 
for Complex Order transactions in Penny Names and $0.85 for Complex 
Order transactions in non-Penny Names.
    \9\ At the lowest volume tier level, the ISE gives Public 
Customers a $0.30 credit for Complex Order transactions in Penny 
Names, and a $0.63 credit for Complex Order transactions in non-
Penny Names.
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    The Exchange believes that the proposed fees and credits are 
reasonable because a Public Customer submitting Complex Orders on BOX 
will recognize that it will never pay a fee for these transactions. 
Depending on where and with whom the Complex Order executes, the Public 
Customer may receive an additional benefit for submitting the order. 
Likewise, a Professional Customer or Broker Dealer submitting Complex 
Orders will recognize that it will not be charged more than $0.45 in 
penny pilot issues and $0.80 in non-penny pilot issues. (When the 
Professional Customer or Broker Dealer's Complex Order executes against 
a Public Customer's Complex Order). The same is true for Market Makers, 
who will recognize that their maximum charge when submitting a Complex 
Order will be $0.40 in penny pilot issues and $0.80 in non-penny pilot 
issues.
    The Exchange believes providing a credit to Public Customers for 
Complex Orders that execute against orders on the BOX Book is equitable 
and non-discriminatory. The securities markets generally, and BOX in 
particular, have historically aimed to improve markets for investors 
and develop various features within the market structure for customer 
benefit. Accordingly, the Exchange believes that providing a credit for 
Public Customer Complex Order transactions is appropriate and not 
unfairly discriminatory. Public Customers are less sophisticated than 
other Participants and the credit will help to attract a higher level 
of Public Customer order flow to the Complex Order Book and create 
liquidity, which the Exchange believes will ultimately benefit all 
Participants trading on BOX.

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 believes that the 
proposed fees and credits will neither impose burdens on competition 
among various Exchange Participants nor impose any burden on 
competition among exchanges in the listed options marketplace, not 
necessary or appropriate in furtherance of the purposes of the Act. BOX 
currently assesses distinct fees and credits for transactions in Penny 
Pilot and Non-Penny Pilot issues and the proposed change is simply 
adopting this type of structure for Complex Order that execute on the 
BOX Book.

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-2014-26 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-2014-26. 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

[[Page 73684]]

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-2014-26, and should be submitted on or before 
January 2, 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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29004 Filed 12-10-14; 8:45 am]
BILLING CODE 8011-01-P