Document ID: SEC-2023-1369-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2023-11-28T05:00Z

[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Notices]
[Pages 83185-83189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26111]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99007; File No. SR-BOX-2023-28]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Establish IM-
7600-8

November 21, 2023.
    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 November 17, 2023, BOX Exchange LLC (``BOX'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to proposes to establish IM-7600-8. 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 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 purpose of the proposed rule change is to establish IM-7600-8. 
Proposed IM-7600-8 codifies current functionality and proposes an 
additional enhancement. Specifically, the Exchange is proposing to 
codify current functionality that, upon order entry, the system reduces 
a Complex QOO Order or multi-leg QOO Order to its simplest form, which 
also requires a corresponding quantity increase and a price decrease 
(for example the system will reduce 6A+3B, 1 time to 2A+B, 3 times for 
\1/3\ of the price).\5\ Additionally, the Exchange is proposing that, 
if reducing the order to its simplest form results in a net price for 
the order that exceeds three decimal places, the system will round the 
net price of the Complex QOO Order or multi-leg QOO Order to the third 
decimal place with the advantage to the initiating side. For purposes 
of executing and determining the priority of the component legs of 
Complex QOO or multi-leg QOO Orders, the system will calculate the 
quantities and prices of the component legs in one cent ($0.01) 
increments necessary to achieve the net price of the order. The 
component legs of a Complex QOO Order or multi-leg QOO Order will 
execute in one cent ($0.01) increments and the priority of each 
component leg will be determined based on its execution price. A 
Complex QOO Order or multi-leg QOO Order that is reduced to its 
simplest form will be executed pursuant to the provisions in Rule 7600 
(Qualified Open Outcry Orders--Floor Crossing), including Rule 7600(c) 
(Submission of QOO Orders).
---------------------------------------------------------------------------

    \5\ The strategy 6A+3B, 1 time for X price is equal to the 
strategy 2A+B, 3 times for X/3 of the price. See also infra note 5.
---------------------------------------------------------------------------

Background
    Today, BOX Participants may submit a Complex QOO Order or multi-leg 
QOO Order with leg ratios that have not been reduced by the highest 
common denominator for the component legs of the order. Upon receipt of 
such a Complex QOO Order or multi-leg QOO Order, the system will reduce 
the order to its simplest form by dividing the leg quantities by their 
highest common denominator.\6\ The system makes a corresponding 
reduction to the price of the strategy and a corresponding increase to 
the quantity of the strategy so that the net price of the order before 
and after the reduction by the highest common denominator is 
economically equivalent.\7\ The order is then accepted into the system 
and processed according to Exchange rules. The Exchange reduces such 
strategy orders to their simplest form to avoid populating the Complex 
Order Book \8\ with multiple versions of economically equivalent 
strategies which may cause confusion and result in unnecessary demands 
on system resources. Currently, when this process of reducing an order 
to its simplest form results in a net price with more than three 
decimal places (i.e., 1.666...) (``non-conforming strategy price''), 
the system rejects the Complex QOO Order or multi-leg QOO Order back to 
the submitting Participant.\9\
---------------------------------------------------------------------------

    \6\ For example, a Complex QOO Order is submitted as 6A+3B. The 
system will reduce the strategy to its simplest form by dividing 
each leg by their highest common denominator (i.e., 3), resulting in 
2A+B (6A/3 + 3B/3). This operation is performed so that the system 
is not replete with multiple versions of economically equivalent 
strategies which would populate the Complex Order Book and may cause 
confusion and result in unnecessary demands on system resources.
    \7\ For example, if the above Complex Order of 6A+3B was 
submitted with a price of 3.30 for the strategy, in addition to 
dividing each leg by 3, the system will divide the price by the same 
value, resulting in a price of 1.10 (3.30/3) for the reduced 
strategy of 2A+B. Additionally, the system would multiply the 
quantity of the strategy by 3 so that the net result is a strategy 
for 2A+B for 1.10, 3 times. In summary, the strategy 6A+3B, 1 time 
for 3.30 is economically equivalent to 2A+B, 3 times for 1.10.
    \8\ The term ``Complex Order Book'' means the electronic book of 
Complex Orders maintained by the BOX Trading Host. See BOX Rule 
7240(a)(8).
    \9\ The Exchange notes that currently when reducing strategy 
orders to their simplest form results in a net price with three or 
fewer decimal places, the Complex QOO Order or multi-leg QOO Order 
is executed pursuant to the provisions in Rule 7600.
---------------------------------------------------------------------------

Proposal
    The Exchange now proposes a system enhancement to accept a Complex 
QOO Order or multi-leg QOO Order with a non-conforming strategy price. 
Under this proposal, when reducing the leg ratios of the Complex QOO 
Order or multi-leg QOO Order, the system will now round a non-
conforming strategy price to a net price with three decimals to the 
advantage of the initiating side instead of rejecting such orders. The 
order can then be accepted and processed pursuant to Exchange rules. 
The Exchange notes that the current priority rules for Complex QOO 
Orders and multi-leg QOO Orders will continue to apply. As discussed 
above, if the

[[Page 83186]]

process of reducing a strategy order to its simplest form results in 
the net price of the order that exceeds three decimal places the system 
will round the net price of the Complex QOO Order or multi-leg QOO 
Order to the third decimal place with advantage to the initiating side. 
For purposes of executing and determining the priority of the component 
legs of Complex QOO or multi-leg QOO Orders, the system will calculate 
the quantities and prices of the component legs in one cent ($0.01) 
increments necessary to achieve the net price of the order. The 
component legs of a Complex QOO Order or multi-leg QOO Order will 
execute in one cent ($0.01) increments and the priority of each 
component leg will be determined based on its execution price. A 
Complex QOO Order or multi-leg QOO Order that is reduced to its 
simplest form will be executed pursuant to the provisions in Rule 7600 
(Qualified Open Outcry Orders--Floor Crossing), including Rule 7600(c) 
(Submission of QOO Orders).
    The priority rules for Complex QOO and multi-leg QOO Orders will 
apply to Complex QOO and multi-leg QOO Orders with prices rounded 
pursuant to proposed IM-7600-8. The Exchange notes that order priority 
rules for Complex QOO Orders include that Complex QOO Orders may not 
trade through any equal or better priced Public Customer orders on the 
Complex Order Book and may not trade through any non-Public Customer 
Complex bids or offers on the Complex Order Book that are ranked ahead 
of such equal or better priced Public Customer Complex bids or offers, 
and may not trade through any non-Public Customer bids or offers on the 
Complex Order Book that are priced better than the proposed execution 
price. Additionally, the Complex QOO Order may be executed at a price 
without giving priority to equivalent bids or offers in the individual 
series legs on the initiating side, provided at least one options leg 
betters the corresponding bid or offer on the BOX Book by at least one 
minimum trading increment as set forth in Rule 7240(b)(1).\10\
---------------------------------------------------------------------------

    \10\ See BOX Rule 7600(c). The term ``BOX Book'' means the 
electronic book of orders on each single option series maintained by 
the BOX Trading Host. See BOX Rule 100(a)(10).
---------------------------------------------------------------------------

    Order priority rules for multi-leg QOO Orders include that each 
component series of a multi-leg QOO Order may not trade through any 
equal or better priced Public Customer bids or offers on the BOX Book 
for that series or any non-Public Customer bids or offers on the BOX 
Book for that series that are ranked ahead of or equal to better priced 
Public Customer bids or offers, and may not trade through any non-
Public Customer bids or offers for that series on the BOX Book that are 
priced better than the proposed execution price. Specifically, the 
initiating side component legs of a multi-leg QOO Order must execute 
against the BOX Book as provided by Rules 7600(d) and (h) before 
executing against the contra-side multi-leg QOO Order.\11\
---------------------------------------------------------------------------

    \11\ See BOX Rule 7600(c). The Exchange notes that the 
initiating side of a QOO Order is allocated first against any better 
priced bids or offers on the BOX Book, provided that an adequate 
book sweep size was provided by the Floor Broker pursuant to 
paragraph (h). Next, at the same price as the contra-side of the QOO 
Order, if any contracts of the initiating side remain, the 
initiating side of the QOO Order will match against Public Customer 
Orders on the BOX Book, along with any bids or offers of non-Public 
Customers ranked ahead of such Public Customer Orders on the BOX 
Book, provided that an adequate book sweep size was provided by the 
Floor Broker pursuant to paragraph (h). Multiple bids or offers at 
the same price are matched based on time priority. See BOX Rules 
7600(d)(1) and (2).
---------------------------------------------------------------------------

    The following examples illustrate these concepts:
Example of the Proposed Rounding and Execution of a Complex QOO Order 
With a Non-Conforming Price
    A Complex QOO Order is submitted to transact the strategy of 6A+3B 
for 12.50, 51 times, where the initiating side is buying (quoted in 
terms of the price of buying 6A+3B one time). The system will then 
reduce the order 6A+3B to its simplest form, dividing by its highest 
common denominator of 3, resulting in an order of 2A+B for a net price 
of 4.166... (12.50/3 = 4.166...) and a corresponding increase of the 
quantity to 153 (51 * 3). The strategy 2A+B for 4.166..., 153 times, is 
the equivalent of 6A+3B for 12.50, 51 times (6A/3+3B/3 = 2A+B). Under 
this proposal, the system will round 4.166... in favor of the 
initiating side, resulting in an order of 2A+B at a net price of 4.166, 
153 times. Although the net price of the order is sub-penny, the 
component legs must execute in one cent ($0.01) increments. 
Accordingly, to execute at a net price of 4.166, the order will be 
executed at split prices of 2A+B for 4.16, 62 times and 2A+B for 4.17, 
91 times.\12\ The resulting average execution price per strategy is 
4.1659 ((4.16 * 62/153) + (4.17 * 91/153) = 4.1659) with the advantage 
to the initiating side of the order.\13\
---------------------------------------------------------------------------

    \12\ The Exchange notes that BOX currently utilizes rounding for 
the execution of split price transactions on the BOX Trading Floor 
when the quantity at each price level is not a natural number. Here, 
the current split pricing algorithm rounds the quantity of 2A+B for 
4.16 to 62 times and 2A+B for 4.17 to 91 times because the 
calculation used to split 2A+B for 4.166, 153 times, results in a 
quantity of 61.2 for 4.16 and 91.8 for 4.17. Rounding 61.2 to 62 and 
91.8 to 91, in this case, is to the advantage of the initiating side 
pursuant to BOX IM-7600-7.
    \13\ Today, when a Floor Broker submits a QOO Order to the 
system in sub-minimum increments, the system will split the QOO 
Order into two transactions. The transactions are separated by one 
tick that, when combined, will yield a net price equal to the 
original price entered by the Floor Broker. See Securities Exchange 
Act Release No. 82891 (March 16, 2018), 83 FR 12627 (March 22, 2018) 
(Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, 
To Adopt Rule 7600(i) To Allow Split-Price Transactions on the BOX 
Trading Floor). See also Securities Exchange Act Release No. 87613 
(November 25, 2019), 84 FR 66049 (December 2, 2019) (Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 1, To Amend 
Rule 7600).
---------------------------------------------------------------------------

Example of Complex QOO Order With Resting Public Customer Complex Order
    The above Complex QOO Order (6A+3B for 12.50, 51 times, reduced and 
rounded to 2A+B for 4.166, 153 times) would execute a quantity of 62 
for 4.16 and a quantity of 91 for 4.17.\14\ However, assuming there is 
a Public Customer Complex Order offered at 4.16 on the Complex Order 
Book, the above Complex QOO Order for 2A+B will be rejected \15\ 
because the Public Customer Complex Order at 4.16 on the Complex Order 
Book has priority over the Complex QOO Order.
---------------------------------------------------------------------------

    \14\ See supra note 10. [sic]
    \15\ The Exchange notes that a Floor Broker may, but is not 
required to, provide a book sweep size. The book sweep size is the 
number of contracts, if any, of the initiating side of the QOO Order 
that the Floor Broker is willing to relinquish to orders and quotes 
on the Complex Order Book and the BOX Book that have priority 
pursuant to Rule 7240(b)(2) and (3) as well as Rule 7600(c). If the 
number of contracts on the Complex Order Book or the BOX Book that 
have priority over the contra-side order is greater than the book 
sweep size, then the QOO Order will be rejected. If the number of 
contracts on the Complex Order Book or BOX Book that have priority 
over the contra-side order is less than or equal to the book sweep 
size, then the QOO Order will execute. See BOX Rule 7600(h).
---------------------------------------------------------------------------

Example of Multi-Leg QOO Order With Ratio Reduction and No Price 
Rounding
    A multi-leg QOO Order to buy 12A+3B for 12.498, 51 times, will 
first be reduced to its simplest form of 4A+B (12A/3+3B/3) for 4.166 
(12.498/3) and a quantity of 153 (51*3) by the system. In order to 
accomplish this execution, the system would create an order to buy 4A+B 
for 4.16, 62 times, and an order to buy 4A+B for 4.17, 91 times.\16\ 
Further, assume that the BOX Book for leg A is 0.50 bid and 0.52 
offered and for leg B is 2.00 bid and 2.10 offered. The execution for 
4.16 would be broken down into leg A for 0.52 and leg B for 2.08 
(4*.52+2.08=4.16). If there were a Public Customer order on the BOX 
Book at either 0.52 for leg A or 2.08 for leg

[[Page 83187]]

B, the multi-leg QOO Order would be rejected because the Public 
Customer Order at either 0.52 for leg A or 2.08 for leg B on the BOX 
Book has priority over the leg of the multi-leg QOO Order.\17\
---------------------------------------------------------------------------

    \16\ See supra note 10. [sic]
    \17\ The Exchange notes that each component series of a multi-
leg QOO Order may not trade through any equal or better priced 
Public Customer bids or offers on the BOX Book for that series or 
any non-Public Customer bids or offers on the BOX Book for that 
series that are ranked ahead of or equal to better priced Public 
Customer bids or offers, and may not trade through any non-Public 
Customer bids or offers for that series on the BOX Book that are 
priced better than the proposed execution price. See BOX Rule 
7600(c). See also supra notes 9 and 13.
---------------------------------------------------------------------------

Example of the Proposed Rounding and Execution of a Multi-Leg QOO Order 
With a Non-Conforming Price
    A multi-leg QOO Order is submitted to transact the strategy of 
12A+3B for 12.50, 51 times, where the initiating side is buying (quoted 
in terms of the price of buying 12A+3B one time). The system will then 
reduce the order 12A+3B to its simplest form, dividing by its highest 
common denominator of 3, resulting in an order of 4A+B for a net price 
of 4.166... (12.50/3 = 4.166...) and a corresponding increase of the 
quantity to 153 (51*3). The strategy 4A+B for 4.166..., 153 times, is 
the equivalent of 12A+3B for 12.50, 51 times (12A/3+3B/3 = 4A+B). Under 
this proposal, the system will round 4.166... in favor of the 
initiating side, resulting in an order of 4A+B at a net price of 4.166, 
153 times. Next, because the net price is sub-penny, the order will be 
executed at split prices of 4A+B for 4.16, 62 times and 4A+B for 4.17, 
91 times.\18\ The resulting average execution price per strategy is 
4.1659 ((4.16 * 62/153) + (4.17 * 91/153) = 4.1659) with the advantage 
to the initiating side of the order.\19\
---------------------------------------------------------------------------

    \18\ See supra note 10. [sic]
    \19\ See supra note 11. [sic]
---------------------------------------------------------------------------

    The Exchange notes that a similar concept exists at another 
exchange today.\20\ Specifically, Phlx Options 8, Section 
22(a)(2)(E)(i) states that ``rounding of prices may be used only where 
necessary to execute the trade at the MPV, and only to the benefit of a 
Public Customer order or, where multiple Public Customer orders are 
involved, for the Public Customer order that is earliest in time. If no 
Public Customer order is involved, rounding of prices is available to 
the non-Public Customer order that is earliest in time.'' The Exchange 
notes that its proposal differs from Phlx's rule in that the net prices 
for Complex QOO Orders or multi-leg QOO Orders will be rounded to the 
advantage of the initiating side, which is in line with how rounding 
happens on BOX today. Specifically, BOX currently utilizes rounding for 
the execution of split price transactions on the BOX Trading Floor when 
the quantity at each price level is not a natural number. In its filing 
where BOX established split price transactions, the Exchange provided 
the following example which shows how rounding occurs in certain 
situations where the allocation between two increment prices results in 
a fractional amount of contracts.\21\ The example is as follows:
---------------------------------------------------------------------------

    \20\ See Nasdaq PHLX LLC (``Phlx'') Options 8, Section 
22(a)(2)(E)(i).
    \21\ See Securities Exchange Act Release No. 82315 (December 13, 
2017), 83 FR 12627 (March 22, 2018) (Notice of Filing of Amendment 
No. 1 and Order Granting Accelerated Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, To Adopt Rule 7600(i) To 
Allow Split-Price Transactions on the BOX Trading Floor).

    A Split-Price QOO Order for 301 contracts at $1.025 is received 
by the system where the initiating side is to sell. In order to 
achieve a net price of $1.025, 150.5 contracts would need to be 
executed at $1.00 and 150.5 would need to be executed at $1.05. 
However, executions must occur in whole natural numbers. Therefore, 
the system will instead round to the advantage of the initiating 
side. Specifically, the system will split the order into 151 
contracts at $1.05 and 150 at $1.00. The average execution price is 
$1.0251 which is a better price for the initiating side (i.e., 
selling 301 contracts for an average price of $1.0251 instead of 
$1.025). Two trades would be reported to the tape; a purchase of 151 
---------------------------------------------------------------------------
contracts at $1.05 and a purchase of 150 contracts at $1.00.

    The Exchange notes that, although Complex QOO Order and multi-leg 
QOO Order net prices are allowed to be submitted in sub-minimum 
increment prices, the order, including the legs, may only be executed 
in the minimum increment, which is one cent ($0.01).\22\ Net order 
prices are allowed in sub-minimum increments \23\ because net execution 
prices can be achieved via split prices where transactions separated by 
one tick are combined to yield a net price equal to or very nearly 
equal to the order price, with any advantage going to the initiating 
side.\24\
---------------------------------------------------------------------------

    \22\ See BOX Rules 7050(b) and 7240(b)(1).
    \23\ The Exchange notes that the BOX system allows the net order 
price to be entered up to three places after the decimal.
    \24\ For example, a Floor Broker can execute a split price 
Complex QOO Order at a price of 2.005 in strategy A+B, 100 times 
(100 contracts of A and 100 contracts of B). The order would be 
split into A+B for 2.01, 50 times and A+B for 2.00, 50 times for a 
net price of 2.005 for the strategy. The following executions would 
be reported: 50 Leg A at 1.00, 50 Leg A at 1.00, 50 Leg B at 1.00, 
and 50 Leg B at 1.01.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\25\ in general, and Section 
6(b)(5) of the Act,\26\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 5 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that codifying current functionality that, 
upon order entry, the system reduces a Complex QOO Order or multi-leg 
QOO Order to its simplest form removes impediments to and perfects the 
mechanism of a free and open market and a national market system, and, 
in general protects investors and the public interest by providing 
clarity and transparency in the handling of certain strategy orders. 
Additionally, if the process of reducing a strategy order to its 
simplest form results in the net price of the order that exceeds three 
decimal places the Exchange proposes to round the net price of the 
Complex QOO Order or multi-leg QOO Order to the third decimal place 
with advantage to the initiating side. For purposes of executing and 
determining the priority of the component legs of Complex QOO or multi-
leg QOO Orders, the system will calculate the quantities and prices in 
one cent ($0.01) increments of the component legs necessary to achieve 
the net price of the order. The component legs of a Complex QOO Order 
or multi-leg QOO Order will execute in one cent ($0.01) increments and 
the priority of each component leg will be determined based on its 
execution price. A Complex QOO Order or multi-leg QOO Order that is 
reduced to its simplest form will be executed pursuant to the 
provisions in Rule 7600 (Qualified Open Outcry Orders--Floor Crossing), 
including Rule 7600(c) (Submission of QOO Orders).
    The Exchange believes that allowing investors to enter Complex QOO 
Orders and multi-leg QOO Orders without first reducing such orders to 
their simplest form allows investors the flexibility to express and 
enter orders according to their preferences. In order to better 
accommodate these investor preferences, the Exchange reduces such 
strategy orders to their simplest form so that the system is not 
replete with multiple versions of economically equivalent strategies 
which would populate the Complex Order Book and may cause confusion and 
result in unnecessary demands on system resources. Thus, the Exchange 
believes that accepting and handling such strategy orders as proposed 
removes

[[Page 83188]]

impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in general protects investors and the 
public interest.
    The Exchange believes that the proposed rule is consistent with 
current rules on BOX. Specifically, as detailed above, BOX rounds to 
the advantage of the initiating side for split-price transactions.\27\ 
The Exchange believes that rounding to the advantage of the initiating 
side in certain situations results in the fair and equitable pricing of 
orders among BOX Participants, and provides clarity and transparency in 
the Exchange's rules so that all BOX Participants will be informed as 
to the net price the Participant is entitled to receive as a result of 
rounding. The Exchange believes that rounding to the advantage of the 
initiating side is reasonable and appropriate, as the initiating side 
is providing liquidity to the Exchange and thus adding value to the 
market.
---------------------------------------------------------------------------

    \27\ See supra note 11.
---------------------------------------------------------------------------

    The Exchange notes that order priority rules for Complex QOO Orders 
include that Complex QOO Orders may not trade through any equal or 
better priced Public Customer orders on the Complex Order Book and may 
not trade through any non-Public Customer Complex bids or offers on the 
Complex Order Book that are ranked ahead of such equal or better priced 
Public Customer Complex bids or offers, and may not trade through any 
non-Public Customer bids or offers on the Complex Order Book that are 
priced better than the proposed execution price. Additionally, the 
Complex QOO Order may be executed at a price without giving priority to 
equivalent bids or offers in the individual series legs on the 
initiating side, provided at least one options leg betters the 
corresponding bid or offer on the BOX Book by at least one minimum 
trading increment as set forth in Rule 7240(b)(1).\28\ Order priority 
rules for multi-leg QOO Orders include that each component series of a 
multi-leg QOO Order may not trade through any equal or better priced 
Public Customer bids or offers on the BOX Book for that series or any 
non-Public Customer bids or offers on the BOX Book for that series that 
are ranked ahead of or equal to better priced Public Customer bids or 
offers, and may not trade through any non-Public Customer bids or 
offers for that series on the BOX Book that are priced better than the 
proposed execution price. Specifically, the initiating side component 
legs of a multi-leg QOO Order must execute against the Complex Order 
Book and the BOX Book as provided by Rules 7600(d) and (h) before 
executing against the contra-side multi-leg QOO Order.\29\ These 
priority rules will continue to be applicable, which the Exchange 
believes removes impediments to and perfects the mechanism of a free 
and open market and a national market system, and, in general protects 
investors and the public interest.
---------------------------------------------------------------------------

    \28\ See BOX Rule 7600(c).
    \29\ See BOX Rule 7600(c). The Exchange notes that the 
initiating side of a QOO Order is allocated first against any better 
priced bids or offers on the BOX Book, provided that an adequate 
book sweep size was provided by the Floor Broker pursuant to 
paragraph (h). Next, at the same price as the contra-side of the QOO 
Order, if any contracts of the initiating side remain, the 
initiating side of the QOO Order will match against Public Customer 
Orders on the BOX Book, along with any bids or offers of non-Public 
Customers ranked ahead of such Public Customer Orders on the BOX 
Book, provided that an adequate book sweep size was provided by the 
Floor Broker pursuant to paragraph (h). Multiple bids or offers at 
the same price are matched based on time priority. See BOX Rules 
7600(d)(1) and (2). Further rule 7600(h) provides that a Floor 
Broker may, but is not required to, provide a book sweep size for 
Complex QOO Orders and multi-leg QOO orders.
---------------------------------------------------------------------------

    Lastly, the Exchange notes that the proposed change will result in 
orders being accepted on BOX that BOX's system currently rejects which, 
in turn, could result in increased liquidity on BOX to the benefit of 
all Participants. As such, BOX believes the proposed rule change is in 
the public interest, and therefore, consistent with the Act.

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. As discussed above, the 
proposed change is consistent with the rules on BOX \30\ and will allow 
BOX to accept orders that it currently rejects, which may result in 
increased liquidity to the benefit of all Participants. The Exchange 
also believes that the proposed change will not impose any burden on 
intramarket competition as the proposed change applies equally to all 
Floor Participants who wish to execute Complex QOO Orders or multi-leg 
QOO Orders on the BOX Trading Floor. Further, the Exchange believes 
that the proposed change will not impose any burden on intermarket 
competition as a similar concept currently exists on another exchange 
and other exchanges could choose to adopt similar rules.\31\
---------------------------------------------------------------------------

    \30\ See BOX Rule 7600(i) and IM-7600-7. See also supra note 11.
    \31\ See supra note 18.
---------------------------------------------------------------------------

    As such, 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.

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 (a) 
significantly affect the protection of investors or the public 
interest; (b) impose any significant burden on competition; and (c) 
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) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\34\ the Commission may 
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. The Exchange states 
that waiver of the delay will allow the Exchange to immediately begin 
accepting orders that the Exchange's system currently rejects, which 
will provide investors with the flexibility to express and enter orders 
according to their preferences. Additionally, the Exchange states that 
accepting and executing orders that would otherwise be rejected may 
increase liquidity on the Exchange, which would benefit all Exchange 
Participants. The Exchange notes that although orders may be submitted 
in sub-minimum increments, priority is determined and orders are 
executed in minimum increments of $0.01, and the proposal does not 
change order priority and execution as governed by Exchange Rule 7600, 
including Exchange Rule 7600(c).
---------------------------------------------------------------------------

    \34\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission finds that waiving the 30-day operative delay is 
consistent

[[Page 83189]]

with the protection of investors and the public interest. As described 
above, BOX's system reduces complex QOO and multi-leg QOO orders 
submitted to the Exchange to their simplest form to avoid populating 
the Exchange's Complex Order Book with multiple versions of 
economically equivalent strategies. When this process results in a net 
price for a Complex QOO Order or multi-leg QOO Order that exceeds three 
decimal places, the Exchange's system currently rejects the Complex QOO 
Order or multi-leg QOO Order back to the submitting Participant. Under 
the proposal, the Exchange will round the net price of such an order to 
the third decimal place with the advantage to the initiating side. This 
process will allow the Exchange to accept Complex QOO and multi-leg QOO 
Orders that the Exchange's system currently rejects, which will provide 
investors with an additional venue for trading these orders. The system 
will calculate the quantities and prices, in $0.01 increments, of the 
component legs necessary to achieve the net price of a Complex QOO 
Order or multi-leg QOO Order, and the component legs of the orders will 
execute in $0.01 increments, with their priority based on their 
execution prices.\35\ A Complex QOO Order or multi-leg QOO Order that 
has been reduced to its simplest form will be executed pursuant to 
Exchange Rule 7600, including Exchange Rule 7600(c).\36\ As described 
above, the process for calculating the quantities and execution prices 
of the component legs of a Complex QOO Order or multi-leg QOO Order is 
consistent with the process that the Exchange currently uses for 
executing split price transactions on the Exchange's trading floor.\37\ 
For these reasons, the Commission designates the proposal operative 
upon filing.\38\
---------------------------------------------------------------------------

    \35\ See proposed BOX IM-7600-8.
    \36\ See id.
    \37\ See supra note 21 and accompanying text.
    \38\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 [email protected]. Please include 
file number SR-BOX-2023-28.

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-2023-22. 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 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-2023-28 and should be submitted on 
or before December 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26111 Filed 11-27-23; 8:45 am]
BILLING CODE 8011-01-P