Document ID: SEC-2019-1884-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2019-12-16T05:00Z

[Federal Register Volume 84, Number 241 (Monday, December 16, 2019)]
[Notices]
[Pages 68499-68501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26987]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87704; File No. SR-BOX-2019-35]

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 Remove the 
QOO Order Rebate Cap

December 10, 2019.
    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 27, 2019, 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 to 
amend the Fee Schedule on the BOX Options Market LLC (``BOX'') 
facility. While changes to the Fee Schedule pursuant to this proposal 
will be effective upon filing, the changes will become operative on 
December 2, 2019. The text of the proposed rule change is available 
from the principal office of the

[[Page 68500]]

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.C (QOO Order Rebate) of 
the BOX Fee Schedule. Specifically, the Exchange proposes to remove the 
monthly 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 QOO Orders executed on the BOX Trading Floor. 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 notes that it is not making any other changes to the 
QOO Order Rebate, and that the QOO rebate will continue to apply to 
both sides of the paired QOO Order. The rebate will not apply 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.
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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    BOX established the QOO Order Rebate program and the monthly rebate 
cap in August 2017.\6\ As discussed in the 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.
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    \6\ See Securities Exchange Act Release Nos. 34-81504 (August 
30, 2017), 82 FR 42195 (September 6, 2017) (SR-BOX-2017-28).
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    The Exchange now believes that removing the rebate cap is 
reasonable, because 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 offering eligible participants 
greater opportunities to lower their fees related to the execution of 
qualifying QOO transactions.
    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.\7\
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    \7\ 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 NYSEArca, 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 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. The Exchange believes that it is equitable and not unfairly 
discriminatory to remove the QOO Order rebate cap for Floor Brokers, as 
the previous cap only applied to Floor Brokers and not to Floor Market 
Makers. Floor Market Makers only represent their own interest on the 
Trading Floor and thus do not need additional incentives.

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 its 
proposal to remove the QOO Order Rebate cap does not impose a burden on 
competition. The Exchange notes that it operates in a highly 
competitive market in which competitors are free to modify their own 
fee schedules in response, and the Exchange believes that the degree to 
which rebate increases impose any burden on competition is limited. As 
noted above, one of the Exchange's competitors offers QCC credit cap 
that is twelve times higher than the Exchange's QOO Order Rebate 
cap.\8\ In addition, as mentioned above, the Floor Broker Credit for 
QCC Transactions on NYSEArca 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 NYSEArca QCC 
credit is only applied when the Floor Broker

[[Page 68501]]

executes the QCC Order manually on the NYSEArca trading floor.
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    \8\ 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 QOO Order Rebate cap on BOX.
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    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.

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 \9\ and Rule 19b-4(f)(2) 
thereunder,\10\ because it establishes or changes a due, or fee.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2019-35 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-2019-35. 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-2019-35, and should be submitted on 
or before January 6, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-26987 Filed 12-13-19; 8:45 am]
BILLING CODE 8011-01-P