Document ID: SEC-2022-1457-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2022-11-10T05:00Z

[Federal Register Volume 87, Number 217 (Thursday, November 10, 2022)]
[Notices]
[Pages 67980-67982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24507]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96234; File No. SR-BOX-2022-28]

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 To Amend Certain Fees 
and Rebates for Qualified Contingent Cross Transactions

November 4, 2022.
    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, 2022, 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 to 
amend the certain fees and rebates for Qualified Contingent Cross 
(``QCC'') transactions on the BOX Options 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 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 the Fee Schedule for trading on BOX 
to amend the certain fees and rebates for Qualified Contingent Cross 
(``QCC'') transactions.\5\ A QCC Order is defined as an originating 
order (Agency Order) to buy or sell at least 1,000 standard option 
contracts, or 10,000 mini-option contracts, that is identified as being 
part of a qualified contingent trade, coupled with a contra side order 
to buy or sell an equal number of contracts.\6\
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    \5\ BOX was made aware that competing options exchanges intend 
to make similar changes to their respective QCC fees and rebates 
effective for October 3, 2022. As such, the Exchange is filing this 
proposal so that BOX can remain competitive with respect to QCC 
transactions within the options industry.
    \6\ See BOX Rule 7110(c)(6).
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    The Exchange proposes to amend the transactions fees for all Broker 
Dealers and Market Makers for their QCC transactions on BOX. 
Specifically, the Exchange proposes to increase the QCC fees for Broker 
Dealers and Market Makers to $0.20 from $0.17 for both the Agency Order 
and the Contra Order. The Exchange notes that the proposed fees are 
identical to another exchange in the industry.\7\
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    \7\ See Cboe EDGX Exchange, Inc. (``CboeEDGX'') Fee Schedule.
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    The Exchange also proposes to amend certain rebates for QCC 
transactions.\8\ Specifically, the Exchange proposes to amend the 
rebates in Tiers 2, 3, and 4, for both Rebate 1 and Rebate 2 in the QCC 
Rebate subsection. In Tier 2, if a Participant's QCC Agency Order 
Volume on BOX is 1,500,000 to 2,499,999 contracts, the Exchange 
proposes to increase Rebate 1 to $0.16 from $0.15 and increase Rebate 2 
to $0.24 from $0.23. In Tier 3, if a Participant's QCC Agency Order 
Volume on BOX is 2,500,000 to 3,499,999 contracts, the Exchange 
proposes to increase Rebate 1 to $0.16 from $0.15 and increase Rebate 2 
to $0.25 from $0.24. Lastly, in Tier 4, if a Participant's QCC Agency 
Order Volume on BOX is 3,500,000 contracts or above, the Exchange 
proposes to increase Rebate 1 to $0.17 from $0.15 and increase Rebate 2 
to $0.27 from $0.25. The Exchange notes that the proposed rebates are 
in line with (or in some instances higher than) rebates currently 
assessed at another exchange.\9\
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    \8\ The Exchange notes that the order volume thresholds in Tiers 
1 through 4 remain the same.
    \9\ See supra note 7.
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    Lastly, the Exchange proposes to delete the sentence in Section 
IV.D.1 that states that ``if the Participant qualifies for both 
rebates, only the larger rebate will be applied to the QCC 
transaction.'' The Exchange notes that under the current fee schedule, 
a market participant can only qualify for 1 of the 2 rebates set forth 
in Section IV.D.1 and therefore, the Exchange proposes to remove this 
sentence.
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,\10\ 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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    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes to the QCC Rebate 
structure are reasonable because the proposed changes provide 
opportunities for Participants to receive higher rebates for increasing 
the Participant's Agency QCC Order volume on BOX. The Exchange again 
notes that a volume-based incentive structure with similar rebates for 
QCC transactions currently exists at another exchange and that the 
Exchange is filing this proposal so that BOX can remain competitive 
with respect to QCC transactions within the options industry.\11\ The 
Exchange also believes that the proposed QCC Rebates are equitable and 
not unfairly discriminatory as the proposed rebates will apply 
uniformly to the Participants that reach the applicable tiers. Further, 
the Exchange continues to believe that applying the proposed rebates 
where at least one party to the QCC transaction is a Broker Dealer or 
Market Maker is reasonable, equitable, and not unfairly discriminatory 
because Public

[[Page 67981]]

Customers and Professional Customers are not assessed fees for these 
transactions and, in turn, do not need the incentive of the rebate.
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    \11\ Id.
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    The Exchange continues to believe that the current rebate structure 
and proposed rebates are reasonable as it provides an incremental 
incentive for Participants to strive for the higher tier levels, which 
provide increasingly higher rebates for incrementally more QCC volume 
achieved, which the Exchange believes is a reasonably designed 
incentive for Participants to grow their QCC order flow to receive the 
enhanced rebates. The Exchange also believes that continuing to have 
two alternative rebates (depending on the capacity of the parties to 
the transaction) is reasonable and appropriate as this is how the 
Exchange assesses the rebates for QCC transactions today.\12\
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    \12\ The Exchange notes that Rebate 1 assesses lower rebates 
than rebates in Rebate 2 because when only one side of the QCC 
transaction is a Broker Dealer or Market Maker then only one side of 
the QCC transaction is assessed a fee, therefore the total fees 
assessed are lower and the corresponding rebate is also lower.
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    The Exchange believes the proposed changes to the QCC transaction 
fees are reasonable as they are identical to fees currently assessed 
for QCC transactions at another exchange.\13\ The Exchange also 
believes that the proposed fees are equitable and not unfairly 
discriminatory as they will apply equally to all Broker Dealers and 
Market Makers on BOX. Further, the Exchange believes that increasing 
QCC transaction fees for Broker Dealers and Market Makers (and not 
Public Customers and Professional Customers) is reasonable, equitable 
and not unfairly discriminatory because Broker Dealers and Market 
Makers are offered increased rebates (as discussed above) for their QCC 
transactions where Public Customers and Professional Customers are not 
assessed fees for these transactions. As such, the Exchange believes 
that continuing to assess no fee to Public Customers and Professional 
Customers is reasonable, equitable, and not unfairly discriminatory.
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    \13\ See supra note 7.
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    Further, the Exchange believes that charging Broker Dealers and 
Market Makers more than Public Customers and Professional Customers for 
QCC Orders is reasonable equitable and not unfairly 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 Public Customer benefit. The Exchange 
believes that continuing to charge no fees to Public Customers and 
Professional Customers in QCC transactions is reasonable and, 
ultimately, will benefit all Participants trading on the Exchange by 
attracting Public Customer and Professional Customer order flow. 
Further, as discussed above, the Exchange believes that the proposed 
fees for Broker Dealers and Market Makers are equitable and not 
unfairly discriminatory as they will be assessed to all Broker Dealers 
and Market Makers on BOX. The Exchange continues to believe that 
charging no fee to Professional Customers is reasonable and, 
ultimately, will benefit all Participants trading on the Exchange by 
attracting additional order flow.

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 changes to the QCC transactions fees will not cause an 
unnecessary burden on intermarket competition as the proposed fees are 
identical to fees at another exchange. Rather, the Exchange believes 
that offering similar fees as another exchange could promote 
competition in the industry. Further, the Exchange notes that the 
proposed QCC transactions fees will be applied uniformly to all 
similarly situated Broker Dealers and Market Makers on BOX and thus 
will not cause any burden on intramarket competition. Further, the 
Exchange believes that the proposed changes to the QCC Rebates will not 
cause an unnecessary burden on intermarket competition as the proposed 
rebates are in line with similar QCC rebates assessed at another 
exchange. The Exchange also notes that the proposed QCC rebates will be 
applied uniformly to the Participants that reach the applicable tiers. 
The Exchange believes that the proposed changes related to QCC 
transactions would not impose any burden on intramarket competition, 
but rather, serves to increase intramarket competition by incentivizing 
market participants to direct their QCC orders to the Exchange which in 
turn may allow market participants to offer more competitive prices for 
their services.
    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 rebates 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 \14\ and Rule 19b-4(f)(2) 
thereunder,\15\ because it establishes or changes a due, or fee.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2022-28 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-2022-28. 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/

[[Page 67982]]

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-2022-28, and should be 
submitted on or before December 1, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24507 Filed 11-9-22; 8:45 am]
BILLING CODE 8011-01-P