Document ID: SEC-2021-1614-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2021-11-18T05:00Z

[Federal Register Volume 86, Number 220 (Thursday, November 18, 2021)]
[Notices]
[Pages 64554-64556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93562; File No. SR-BOX-2021-26]

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

November 12, 2021.
    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 October 28, 2021, BOX Exchange LLC (``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 Options 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 November 1, 2021. 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 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 Section II.A. (QOO Order Fees) and 
Section II.C. (QOO Order Rebate) of the BOX Fee Schedule. Specifically, 
the Exchange proposes to amend Section II.A. (QOO Order Fees) to remove 
the QOO Order fee cap of $75,000 per month per Broker Dealer and 
Section II.C. (QOO Order Rebate) to remove the QOO Order rebate cap of 
$30,000 per month per Broker Dealer.
    Currently, QOO Order fees for Broker Dealers on BOX are capped at 
$75,000 per month per Broker Dealer. The Exchange proposes to eliminate 
this monthly QOO Order fee cap for Broker Dealers. The fee cap was 
intended to incentivize Broker Dealers to submit floor transactions on 
the Exchange by capping manual transaction fees. The Exchange no longer 
believes such fee cap is necessary because, as discussed herein, the 
fee cap was initially established to incentivize Broker Dealers to 
bring increased liquidity and order flow to the new BOX Trading Floor, 
however the BOX Trading Floor is now well established and does not need 
this incentive to encourage order flow to the Trading Floor.
    The Exchange also applies a QOO Order rebate cap of $30,000 per 
month per Broker Dealer. Currently, Floor Brokers are eligible to 
receive a $0.075 per contract rebate for all Broker Dealer and Market 
Maker QOO Orders presented on the BOX Trading Floor.\5\ The rebate is 
not applied to Public Customer executions, executions subject to the 
Strategy QOO Order Fee Cap, or Broker Dealer executions where the 
Broker Dealer is facilitating a Public Customer. The Exchange proposes 
to remove the monthly rebate cap for Broker Dealer executions.\6\ The 
Exchange notes that it is not making any other changes to the QOO Order 
fees or the QOO Order Rebate. The QOO Order fees and QOO Order rebate 
will be assessed and applied in the same manner as they are today.
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    \5\ Floor Brokers are also eligible to receive a $0.05 per 
contract rebate for all Professional Customer QOO Orders presented 
on the BOX Trading Floor.
    \6\ The Exchange notes that BOX has removed the QOO Order rebate 
cap in the past. See Securities Exchange Act Release No. 87704 
(December 10, 2019), 84 FR 68499 (December 16, 2019) (SR-BOX-2019-
35).
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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, in general, and Section 
6(b)(4) and 6(b)(5) of the Act,\7\ 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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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed elimination of the QOO 
Order fee cap of $75,000 per month per Broker Dealer and the QOO Order 
rebate cap of $30,000 per month per Broker Dealer is reasonable, 
equitable, and not unfairly discriminatory. As discussed above, the 
Exchange established the QOO Order fee cap and rebate cap in an effort 
to incentivize market participants to send order flow to the BOX 
Trading Floor. The Exchange believes such incentive is no longer 
necessary because the Exchange has a well-established trading floor and 
no longer needs this incentive to encourage increased order flow to the 
BOX Trading Floor.

[[Page 64555]]

QOO Order Fee Cap
    The Exchange established the QOO Order fee cap of $75,000 per month 
per Broker Dealer in 2017 when the Exchange introduced fees for Manual 
Transactions after the approval of the BOX Trading Floor.\8\ The 
Exchange established the QOO Order fee cap for Broker Dealers to 
incentivize Broker Dealers to bring increased liquidity and order flow 
to the new BOX Trading Floor.
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    \8\ See Securities Exchange Act Release No. 81292 (August 2, 
2017), 82 FR 37144 (August 8, 2017) (SR-BOX-2016-48). See also 
Securities Exchange Act Release No. 81504 (August 30, 2017), 82 FR 
42195 (September 6, 2017) (SR-BOX-2017-28).
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    The Exchange believes that removing the $75,000 monthly cap on QOO 
Order Fees for Broker Dealers is reasonable and appropriate because, as 
discussed above, these fee caps were introduced to provide incentives 
for Broker Dealers to bring increased liquidity and order flow to the 
BOX Trading Floor. The Exchange no longer believes such incentive is 
necessary. As such, the Exchange believes the removal of the QOO Order 
fee cap is reasonable.
    The Exchange believes the removal of the QOO Order fee cap is not 
unfairly discriminatory because Public Customer, Market Maker, and 
Professional Customer order fees are not subject to the fee cap. 
Additionally, the QOO Order Fees will continue to be applied in the 
same manner as they are today. Further, the Exchange believes that the 
removal of the monthly QOO Order fee cap for Broker Dealer executions 
is equitable and not unfairly discriminatory because the proposal 
applies to all similarly situated market participants.
QOO Order Rebate Cap
    BOX established the QOO Order Rebate program and the monthly rebate 
cap in August 2017. As discussed in BOX's 2017 proposal to establish 
the QOO Order Rebate program and rebate cap, the rebate was created to 
incentivize order flow to the BOX Trading Floor. Unlike competing 
exchanges, the Exchange does not offer a front-end order entry on the 
BOX Trading Floor. With this, Participants have two possible means of 
bringing orders to the Exchange's Trading Floor for possible execution: 
(1) They can invest in the technology, systems and personnel to 
participate on the Trading Floor and deliver the order to the Exchange 
matching engines for validation and execution; or (2) they can utilize 
the services of another Participant acting as a Floor Broker. The QOO 
Order Rebate program was established to attract order flow by rewarding 
Floor Brokers with rebates for directing qualifying orders to the BOX 
Trading Floor.
    The Exchange believes that removing the rebate cap is reasonable 
and appropriate as it will continue to allow Floor Brokers to price 
their services at a level that would enable them to attract increased 
QOO order flow from market participants who might otherwise utilize the 
front-end order entry mechanism offered by the Exchange's competitors, 
instead of incurring the cost in time and resources to install and 
develop their own internal systems to deliver QOO orders directly to 
the Exchange system. As such, the Exchange believes it is beneficial 
from a competitive standpoint to continue to offer the rebate to the 
executing Floor Broker on a QOO order without capping the dollar amount 
allowed for the rebate. Further, the Exchange believes removing the 
rebate cap will encourage Floor Brokers to bring additional QOO order 
flow to the Exchange because Floor Brokers will be further incentivized 
by the removal of the QOO Order rebate cap for these specific QOO 
orders. Lastly, the Exchange believes the proposed change is reasonable 
and appropriate, as the Exchange is allowing eligible Floor Brokers 
greater opportunities to price their services related to the execution 
of qualifying QOO transactions more competitively.
    In addition, the Exchange believes that removing the QOO Order 
rebate cap is reasonable as a competing exchange with a similar rebate 
program offered to Floor Brokers currently has a rebate cap twelve 
times higher than the QOO Order rebate cap on BOX.\9\
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    \9\ See NYSE Arca Options Fees and Charges, Qualified Contingent 
Cross (``QCC'') Transactions Fees and Credits, Footnote 13 (stating 
the ``maximum Floor Broker credit paid shall not exceed $375,000 per 
month per Floor Broker firm.''). Similar to the Floor Broker Credit 
for Executed QCC Transactions on NYSE Arca, the QOO Order Rebate on 
BOX is applied to both sides of the paired order and is directed to 
the Floor Broker, and not to the Participant who is assessed the QOO 
Order fee. Finally, similar to the BOX QOO Rebate, the NYSE Arca QCC 
credit is only applied when the Floor Broker executes the QCC Order 
manually on the NYSE Arca trading floor.
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    The Exchange believes that the removal of the monthly rebate cap is 
equitable and not unfairly discriminatory because the proposal allows 
all similarly situated Floor Brokers to benefit from the removal of the 
QOO Order rebate cap. Furthermore, the Exchange believes that all 
market participants would benefit from additional trading opportunities 
generated from increased order flow due to the removal of the QOO Order 
rebate cap.

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 notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, the Exchange believes that the degree to which fee changes in 
this market may impose any burden on competition is limited. For the 
reasons discussed above, the Exchange believes that the proposed 
changes do not impose an undue burden on competition. The Exchange does 
not believe that removing the monthly fee cap of $75,000 per Broker 
Dealer and the monthly rebate cap of $30,000 per month per Broker 
Dealer will burden competition because the Exchange capped the Manual 
Transaction Fees for QOO Orders and introduced the QOO Order monthly 
rebate cap in an effort to incentivize market participants, but such 
incentives are no longer necessary because the Exchange has a well-
established trading floor and no longer needs these incentives to 
encourage increased order flow to the BOX Trading Floor.
    With respect to the QOO Order rebate cap, one of the Exchange's 
competitors offers a QCC credit cap that is twelve times higher than 
the Exchange's QOO Order rebate cap.\10\ In addition, as mentioned 
above, the Floor Broker Credit for QCC Transactions on NYSE Arca is 
similar to the QOO Order Rebate on BOX in that it is applied to both 
sides of the paired order and is directed to the Floor Broker and not 
to the Participant who is assessed the QOO Order fee. Moreover, similar 
to the BOX QOO Rebate, the NYSE Arca QCC credit is only applied when 
the Floor Broker executes the QCC Order manually on the NYSE Arca 
trading floor.
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    \10\ Id. See also NASDQ PHLX (``Phlx'') Pricing Schedule, 
Section 4 (stating the ``maximum QCC Rebate to be paid in a given 
month will not exceed $550,000.''). The Exchange notes Phlx's QCC 
Rebate cap is over eighteen times higher than the current QOO Order 
rebate cap on BOX.

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[[Page 64556]]

    Further, the Exchange does not believe that removing the QOO Order 
rebate cap will impose an undue burden on intra-market competition 
because all Floor Brokers will remain eligible to transact QOO Orders 
and receive the same rebate. Further, the Exchange believes that the 
removal of the rebate cap will promote competition by allowing Floor 
Brokers to competitively price their services and for the Exchange to 
remain competitive with other exchanges. As noted above, the Exchange 
previously removed the monthly rebate cap in 2019.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. 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.

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 \11\ and Rule 19b-4(f)(2) 
thereunder,\12\ because it establishes or changes a due, or fee.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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 [email protected]. Please include 
File Number SR-BOX-2021-26 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-2021-26. 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 website (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 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 10:00 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2021-26, and should be submitted on 
or before December 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25126 Filed 11-17-21; 8:45 am]
BILLING CODE 8011-01-P