Document ID: SEC-2020-0363-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2020-03-16T04:00Z

[Federal Register Volume 85, Number 51 (Monday, March 16, 2020)]
[Notices]
[Pages 14993-14995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05240]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88355; File No. SR-BOX-2020-05]

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 (``BOX'') Facility To Amend 
Section V., Eligible Orders Routed to an Away Exchange

March 10, 2020.
    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 March 2, 2020, BOX Exchange LLC (the ``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'') 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 Section V., Eligible Orders Routed to an Away Exchange.
    Currently, BOX uses third-party broker-dealers to route orders to 
other exchanges and incurs transaction fees for each order routed to 
and executed at an away market, as well as related costs for routing 
such orders. To offset the fees and costs incurred by the Exchange for 
orders routed to other exchanges, the Exchange charges a $0.60 per 
contract fee for customer accounts.\5\ The Exchange is now proposing to 
amend Section V. of the BOX Fee Schedule. Specifically, the Exchange 
proposes to charge $0.85 per contract for Non-Penny Pilot Classes for 
customer accounts. Routing Penny Pilot Classes will continue to be 
charged the current $0.60 per contract fee for customer accounts. The 
Exchange notes that the proposed changes are in line to fees assessed 
at other options exchanges in the industry.\6\
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    \5\ The term Customer accounts includes both Professional 
Customers and Public Customers.
    \6\ The Exchange notes that other exchanges in the industry make 
this distinction between routed order fees for Penny Pilot and Non-
Penny Pilot Classes. See Miami International Securities Exchange LLC 
(``MIAX'') Fee Schedule. On MIAX, routed orders for Priority 
Customers in Penny Pilot Classes are charged $0.15 or $0.65 
(depending on what away market the orders are sent). Routed orders 
for Priority Customers in Non-Penny Pilot Classes are charged $0.15 
or $1.00 (depending on what away market the orders are sent). 
Further, routed orders for Public Customers (that are not a Priority 
Customer) in Penny Pilot Classes are charged $0.65. Routed orders 
for Public Customers (that are not a Priority Customer) in Non-Penny 
Pilot Classes are charged $1.00, $1.15, or $1.25 (depending on what 
away market the orders are sent). See also Cboe Exchange, Inc. 
(``Cboe'') Fee Schedule.
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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. The Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct

[[Page 14994]]

order flow to competing venues or providers of routing services if they 
deem fee levels to be excessive.
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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    When assessing routing fees, the Exchange has generally attempted 
to approximate the cost of routing to other options exchanges, 
including other applicable costs to the Exchange and set a flat routing 
fee. The Exchange believes that the proposed fee change for routing 
Non-Penny Pilot Classes, which is based on the approximate routing 
costs of these contracts, is a reasonable, equitable and not unfairly 
discriminatory approach to pricing. Specifically, the proposed flat 
routing fee for Non-Penny Pilot Classes will continue to provide 
Participants with certainty regarding execution costs for orders routed 
to away markets. Further, the Exchange believes a flat routing fee 
based on an approximation of the routing costs is administratively 
easier for the Exchange to manage for billing purposes and will allow 
the Exchange to avoid continually updating the routing fees every time 
an away market modifies transaction fees. Finally, as discussed above, 
the Exchange believes the proposal is reasonable and appropriate 
because the proposed routing fees are within a comparable range to that 
of its competitors.\8\
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    \8\ See supra note 6.
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    The Exchange believes that its proposal to assess a higher routing 
fee for Non-Penny Pilot Classes compared to the routing fee for Penny 
Pilot Classes is reasonable, equitable and not unfairly discriminatory. 
The Exchange notes that transactions in Non-Penny Pilot Classes are 
generally assessed higher fees than Penny Pilot Classes across the 
industry as they are typically less actively traded and have wider 
spreads. As such, the Exchange believes it is reasonable to charge a 
higher fee for routing such orders, in order to recoup the higher costs 
of routing and executing the Non-Penny Pilot Class orders on behalf of 
Participants.\9\ The Exchange notes that the current $0.60 routing fee 
will remain for executions in Penny Pilot Classes.
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    \9\ The Exchange again notes that another exchange charges 
similar fees for Non-Penny Pilot Classes routed to an away exchange. 
Id.
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    The Exchange believes that the proposed Routing Fees furthers the 
objectives of Section6(b)(5) of the Act and are designed to promote 
just and equitable principles of trade and are not unfairly 
discriminatory because they seek to recoup costs that are incurred by 
the Exchange when routing orders to away markets on behalf of 
Participants. Each destination market's transaction charge varies and 
there is a cost incurred by the Exchange when routing orders to away 
markets. The costs to the Exchange primarily include transaction fees 
assessed by the away markets to which the Exchange routes orders, in 
addition to the Exchange's clearing costs, administrative, regulatory 
and technical costs associated with routing options. The Exchange 
believes that the proposed change would better enable the Exchange to 
recover the costs it incurs to route orders to away markets. The 
Exchange notes that routing through the Exchange is voluntary. The 
Exchange also believes that the proposed fees for orders routed to and 
executed at away options exchanges is fair and equitable and not 
unreasonably discriminatory in that it applies equally to all 
Participants.
    The Exchange reiterates that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels to be excessive or providers 
of routing services if they deem fee levels to be excessive. Finally, 
the Exchange notes that it constantly evaluates its routing fees, 
including profit and loss attributable to routing and would consider 
future adjustments to the proposed fee to the extent it was recouping a 
significant profit or loss from routing to away options exchanges.

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 herein, the 
Exchange's proposed fees are similar to those assessed by other options 
exchanges.\10\ Further, the Exchange believes that the proposed change 
will assist the Exchange in recouping costs for routing orders to other 
options exchanges on behalf of its Participants in a manner that that 
reflects pricing changes by various options exchanges as well as 
increases to other routing costs incurred by the Exchange. The Exchange 
also notes that Participants may choose to designate their orders as 
ineligible for routing to avoid incurring routing fees.\11\
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    \10\ Id.
    \11\ See BOX Rule 15030 (describing the routing process, which 
requires orders to be designated as eligible for routing).
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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 \12\ and Rule 19b-4(f)(2) 
thereunder,\13\ because it establishes or changes a due, or fee.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2020-05 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-2020-05. 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

[[Page 14995]]

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-
2020-05, and should be submitted on or before April 6, 2020.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05240 Filed 3-13-20; 8:45 am]
 BILLING CODE 8011-01-P