Document ID: SEC-2020-0262-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2020-02-25T05:00Z

[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
[Notices]
[Pages 10765-10774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03640]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88236; File No. SR-BOX-2020-04]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
of a Proposed Rule Change To Amend the Provisions of Its Limited 
Liability Company Agreement and Bylaws To Accommodate the Exchange's 
Regulation of Multiple Facilities

February 19, 2020.
    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 February 4, 2020, BOX Exchange LLC (``BOX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II and III below, 
which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the provisions of its limited 
liability company agreement (the ``LLC Agreement'') and bylaws (the 
``Bylaws'') to accommodate the Exchange's regulation of multiple 
facilities. 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://boxoptions.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 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 Exchange is a Delaware limited liability company that therefore 
has an LLC Agreement. The Exchange also has Bylaws. The LLC Agreement 
and Bylaws, collectively, are the Exchange's source of governance and 
operating authority. Currently, the Exchange regulates only one 
facility, BOX Options Market LLC (``BOX Options Market''), which is 
reflected in the existing LLC Agreement and Bylaws. The Exchange 
proposes certain discrete amendments to the LLC Agreement and Bylaws 
that would (i) provide sufficient flexibility in the documents for them 
to contemplate that there may be multiple Exchange facilities under the 
Exchange's regulatory authority, (ii) simplify the structure of the 
defined terms in the LLC Agreement and Bylaws to make

[[Page 10766]]

them easier to read and understand, and (iii) make certain other 
changes to the terms of the LLC Agreement and Bylaws to bring them 
current with the structure of the Exchange and its relationships.
    The proposed rule changes are reflected in the LLC Agreement and 
the Bylaws of the Exchange. The description of the proposed rule 
changes is organized in three parts below. First, the description 
addresses the proposed changes to certain definitions that currently 
appear in the LLC Agreement and the Bylaws. Second, the description 
addresses proposed changes to the LLC Agreement other than the proposed 
changes to the LLC Agreement definitions. Third, the description 
addresses proposed changes to the Bylaws other than the Bylaw 
definitions.
Proposed Changes to Definitions Used in the LLC Agreement and Bylaws
    Article 1, Section 1.1 of the LLC Agreement contains certain 
defined terms that are used in the LLC Agreement. In addition, Article 
1, Section 1.01 of the Bylaws provides that terms that have initial 
capitalization in the Bylaws without further definition have the 
meaning assigned to such terms in the LLC Agreement. The following 
changes are proposed to the definitions that appear in the LLC 
Agreement and the Bylaws. Where appropriate, changes are also proposed 
to reorder the appearance of definitions in Article 1, Section 1.01 of 
the Bylaws based on the proposed additions and deletions.\3\
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    \3\ Such reordering changes are not necessary to the LLC 
Agreement because the definitions that appear in Article 1, Section 
1.1 appear only in alphabetical order without any additional 
subsection numbering or lettering.
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Proposed Changes to Definitions in the LLC Agreement
    BOX Holdings. The Exchange is proposing to remove the definition of 
``BOX Holdings'' from the LLC Agreement. The term is defined to mean 
``BOX Holdings Group LLC, a Delaware limited liability company'' (``BOX 
Holdings''). BOX Holdings is the parent and 100% owner of BOX Options 
Market, which is currently the only facility \4\ of the Exchange. As 
described in more detail below, this change would be made in connection 
with removing BOX Holdings Group LLC as a party to the LLC Agreement 
and providing representation on the Exchange Board to entities that are 
facilities of the Exchange rather than to BOX Holdings through a ``BOX 
Holdings Director'' as that term is defined in the Bylaws.\5\ For the 
reasons explained below, the change is designed to accommodate the 
Exchange's contemplated regulation of multiple facilities as opposed to 
the current structure in which BOX Options Market is the only facility 
of the Exchange.
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    \4\ 15 U.S.C. 78c(a)(2). Section 3(a)(2) of the Exchange Act 
defines the term facility when used with respect to an exchange to 
include ``its premises, tangible or intangible property whether on 
the premises or not, any right to the use of such premises or 
property or any service thereof for the purpose of effecting or 
reporting a transaction on an exchange (including, among other 
things, any system of communication to or from the exchange, by 
ticker or otherwise, maintained by or with the consent of the 
exchange), and any right of the exchange to the use of any property 
or service.''
    \5\ See Bylaws, Section 1.01(b).
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    BOX Options. The Exchange is proposing to remove the term ``BOX 
Options'' from the LLC Agreement. The Exchange is proposing to remove 
the definition because the definition is specific to the regulation by 
the Exchange of the BOX Options Market facility. The Exchange would 
adopt a new defined term ``Exchange Facility'' in the LLC Agreement, as 
described below, to replace the defined term ``BOX Options'' and make 
the defined terms in the LLC Agreement flexible enough to accommodate 
multiple facilities of the Exchange and Exchange rules related thereto. 
For reasons explained below, the change is designed to accommodate the 
Exchange's contemplated regulation of multiple facilities as opposed to 
the current structure in which BOX Options Market is the only facility 
of the Exchange.
    BOX Options Market. The Exchange is proposing to remove the term 
``BOX Options Market'' from the LLC Agreement. The Exchange is 
proposing to remove the definition because the definition is specific 
to the regulation by the Exchange of the BOX Options Market facility. 
The Exchange would use the proposed new defined term ``Exchange 
Facility'' in the LLC Agreement, as described below, to replace the 
defined term ``BOX Options Market'' and make the defined terms in the 
LLC Agreement flexible enough to accommodate multiple facilities of the 
Exchange and Exchange rules related thereto. For reasons explained 
below, the change is designed to accommodate the Exchange's 
contemplated regulation of multiple facilities as opposed to the 
current structure in which BOX Options Market is the only facility of 
the Exchange.
    BOX Options Participant. The Exchange is proposing to remove the 
term ``BOX Options Participant'' from the LLC Agreement. The Exchange 
is proposing to remove the definition because the definition is 
specific to the regulation by the Exchange of the BOX Options Market 
facility. The Exchange would adopt a new defined term ``Exchange 
Facility Participant'' in the LLC Agreement, as described below, to 
replace the defined term ``BOX Options Participant'' and make the 
defined terms in the LLC Agreement flexible enough to accommodate 
multiple facilities of the Exchange and Exchange rules related thereto. 
For reasons explained below, the change is designed to accommodate the 
Exchange's contemplated regulation of multiple facilities as opposed to 
the current structure in which BOX Options Market is the only facility 
of the Exchange.
    BOX Options Products. The Exchange is proposing to remove the term 
``BOX Options Products'' from the LLC Agreement because it is only used 
in the defined term ``Trading'' in the LLC Agreement and, as described 
below, the Exchange is also proposing to delete that term. Upon the 
deletion of the term ``Trading'' in the LLC Agreement, the defined term 
``BOX Options Products'' would no longer be used anywhere in the LLC 
Agreement or in the Bylaws. Therefore, it would be unnecessary and the 
Exchange proposes to delete it as a streamlining change to eliminate 
unnecessary content from the LLC Agreement and to produce a simplified 
structure for the defined terms in the LLC Agreement that is easier to 
read and understand.
    BOX Options Rules. The Exchange is proposing to remove the 
definition of ``BOX Options Rules'' from the LLC Agreement. The 
Exchange is proposing to remove the definition because the definition 
is specific to the regulation by the Exchange of the BOX Options Market 
facility. The Exchange would adopt a new defined term ``Exchange 
Rules'' in the LLC Agreement, as described below, to replace the 
defined term ``BOX Options Rules'' and make the defined terms in the 
LLC Agreement flexible enough to accommodate multiple facilities of the 
Exchange and Exchange rules related thereto.
    Confidential Information. The Exchange is proposing to amend the 
definition of ``Confidential Information'' in the LLC Agreement to 
remove the reference to ``BOX Options Market.'' The definition of 
``Confidential Information'' currently provides that it includes, but 
is not limited to, confidential information as it pertains to the 
Exchange or the BOX Options Market regarding disciplinary matters, 
trading data, trading practices and audit information. The Exchange 
would delete the reference to ``BOX Options Market'' and replace it 
with a reference to the newly proposed defined term

[[Page 10767]]

``Exchange Facility.'' Because the proposed definition of ``Exchange 
Facility'' in the LLC Agreement would include the ``BOX Options 
Market,'' the definition of ``Confidential Information'' would continue 
to cover the same information that it does today in respect of the 
Exchange and BOX Options Market. However, the revised definition that 
is proposed would also cover the same information as it pertains to any 
facility of the Exchange.
    Exchange Facility. The Exchange is proposing to add the definition 
of ``Exchange Facility'' to the LLC Agreement. The definition would 
cover any ``facility'' of the Exchange as that term is defined in 
Section 3 of the Exchange Act.\6\ This change is designed to 
accommodate the Exchange's contemplated regulation of multiple 
facilities as opposed to the current structure in which BOX Options 
Market is the only facility of the Exchange. The addition of this 
defined term would create a structure in the LLC Agreement that would 
pertain to every facility regulated by the Exchange, and the Exchange 
believes that this would promote readability and comprehension of the 
LLC Agreement and would thereby promote the protection of investors and 
the public interest.
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    \6\ See supra note 4.
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    Exchange Facility Participant. The Exchange is proposing to add the 
definition of ``Exchange Facility Participant'' to the LLC Agreement. 
The definition would mean ``a firm or organization that is registered 
with the Exchange pursuant to the Exchange Rules for purposes of 
participating in trading on any Exchange Facility.'' As described 
immediately above, the newly proposed term Exchange Facility would mean 
``any facility of the Exchange as the term `facility' is defined in 
Section 3 of the Exchange Act.'' Therefore, the term ``Exchange 
Facility Participant'' would create a defined term in the LLC Agreement 
that would be used to refer generally to any firm or organization that 
is registered with the Exchange for purposes of participating in 
trading on any ``Exchange Facility.'' Because the BOX Options Market is 
currently the only facility of the Exchange, the only participant 
definition maintained in the LLC Agreement is the definition of ``BOX 
Options Participant,'' which, as described above, the Exchange is 
proposing to delete. Therefore, the term ``Exchange Facility 
Participant'' would be defined broadly enough to refer to a current BOX 
Options Participant and any other type of ``Exchange Facility 
Participant'' as may become relevant in the future. Currently, the 
definition of ``BOX Options Participant'' in the LLC Agreement refers 
to a firm or organization registered with the Exchange pursuant to the 
2000 Series of the BOX Options Rules. With the proposed change to 
accommodate the Exchange's contemplated regulation of multiple 
facilities, the Exchange Rules pertaining to participants on various 
facilities may be addressed in different series of the Exchange Rules 
yet to be enacted. As a consequence, the new definition of Exchange 
Facility Participant does not refer to any specific series in the 
Exchange Rules.
    Exchange Rules. The Exchange is proposing to add the definition of 
``Exchange Rules'' to the LLC Agreement. The term ``Exchange Rules'' 
would mean ``the rules of the Exchange that constitute `rules of an 
exchange' within the meaning of Section 3 of the Exchange Act.'' 
Currently, the LLC Agreement provides this same definition in respect 
of the term ``BOX Options Rules.'' However, as described above, the 
Exchange proposes to delete the term ``BOX Options Rules'' in favor of 
the more general term ``Exchange Rules'' to make the defined terms in 
the LLC Agreement flexible enough to contemplate multiple facilities of 
the Exchange and the rules related thereto. The Exchange notes that as 
a substantive matter the term ``Exchange Rules'' would be defined in 
the same way that ``BOX Options Rules'' is currently defined with the 
exception that it would not also include a specific reference to the 
``BOX Options Market.''
    Individual U.S. Equities. The Exchange is proposing to remove the 
definition of ``Individual U.S. Equities'' from the LLC Agreement. The 
Exchange is proposing to remove the definition because the definition 
is only used in the definition of ``BOX Options Products,'' which the 
Exchange, as described above, is also proposing to remove. Upon the 
deletion of the term ``BOX Options Products'' in the LLC Agreement, the 
defined term ``Individual U.S. Equities'' would no longer be used 
anywhere in the LLC Agreement or in the Bylaws. Therefore, it would be 
unnecessary and the Exchange proposes to delete it as a streamlining 
change to eliminate unnecessary content from the LLC Agreement and to 
create a more simplified set of defined terms.
    MX. The Exchange is proposing to remove the definition of ``MX'' 
from the LLC Agreement. The term ``MX'' is currently defined to mean 
Bourse de Montr[eacute]al, Inc. The Exchange is proposing to remove the 
definition because the term only appears in the defined terms 
``System'' and ``TOSA'' in the LLC Agreement and, as described below, 
the Exchange is also proposing to delete these definitions to achieve a 
more simplified structure of defined terms in the LLC Agreement that 
would be easier to understand.
    Regulatory Funds. The Exchange is proposing to amend the definition 
of ``Regulatory Funds'' in the LLC Agreement to use the proposed 
defined term ``Exchange Facility'' within the definition rather than 
referencing ``a facility of the Exchange.'' The use of the proposed 
defined term rather than the existing text would not change the meaning 
of the definition of ``Regulatory Funds'' as it is currently provided 
for in the LLC Agreement. It is proposed as a conforming change to rely 
on the defined term ``Exchange Facility'' as it would be established in 
the LLC Agreement.
    Related Agreements. The Exchange is proposing to remove the 
definition of ``Related Agreements'' from the LLC Agreement. The 
Exchange is proposing to remove the definition because it is only used 
in one section of the LLC Agreement, Section 15.4 (Ongoing 
Confidentiality Program), and the Exchange believes that the deletion 
of the defined term from the LLC Agreement and deletion of the single 
use of that term in Section 15.4(b) would not change the meaning of 
Section 15.4(b) or any other provision of the LLC Agreement.
    Specifically, Section 15.4(b) is the only provision of the LLC 
Agreement in which the term ``Related Agreements'' is currently used, 
and it provides in relevant part that certain representatives of (i) 
the members of the LLC Agreement, (ii) BOX Options Market and (iii) the 
Exchange will have procedures designed to maintain confidentiality of 
certain information of the Exchange while facilitating business 
activities contemplated by the LLC Agreement and the ``Related 
Agreements.'' In turn, the term ``Related Agreements'' is defined to 
mean the Technical and Operational Services Agreement (``TOSA'') 
between MX and BOX Options Market, as further described below, a 
facility agreement entered into by and between BOX Options and the 
Exchange, dated May 7, 2012, and any other agreement between BOX 
Options Market and the Exchange or any Member, in all cases necessary 
for the conduct of the business of BOX Options. As currently 
formulated, the term ``Related Agreements'' encompasses all agreements 
necessary for the conduct of the business of BOX Options and merely 
lists a few examples thereof. The Exchange proposes to delete the 
reference to the defined term

[[Page 10768]]

``Related Agreements'' in Section 15.4(b) and to substitute therefor 
the words, ``or the conduct of the business of the Exchange and any 
Exchange Facility,'' which not only fully captures all agreements 
currently contemplated by the defined term ``Related Agreements'' but 
would be coextensive with the proposed new language which further 
extends to all conduct of the business of the Exchange and its Exchange 
Facilities. This change not only eliminates the superfluous defined 
term but fully preserves the scope and substantive meaning of Section 
15.4(b).
    Related Person. The Exchange is proposing to amend the definition 
of ``Related Person'' in the LLC Agreement. Specifically, the Exchange 
would replace references in the definition to ``BOX Options 
Participant'' with references to ``Exchange Facility Participant'' to 
reflect that the ``Related Person'' definition may apply in respect of 
facilities of the Exchange other than BOX Options Market as proposed 
herein.
    System. The Exchange is proposing to remove the definition of 
``System'' from the LLC Agreement. The Exchange is proposing to remove 
the definition because the defined term is currently of limited use in 
the LLC Agreement and the Exchange believes that where it is used it 
results in a definitional structure that may be difficult for a user to 
understand. The definition of ``System'' is only used in the LLC 
Agreement in the defined term ``Trading,'' which the Exchange is also 
proposing to delete for similar reasons related to streamlining as 
described below. The interrelationship between the defined term 
``System'' and the defined term ``Trading'' requires a reader to refer 
to and understand both of these definitions to be able to understand 
the meaning of the defined term ``Trading'' as it is used in the 
defined terms ``BOX Options Participant'' and ``BOX Options Products.'' 
The Exchange believes that this structure is unnecessarily complex and 
that using the plain meaning of the word ``trading'' in the LLC 
Agreement instead, such as the Exchange proposes to do in the newly 
proposed defined term ``Exchange Facility Participant,'' would not 
materially change the meaning of any provisions in the LLC Agreement or 
the Bylaws and that the change would also support the existence of 
multiple facilities of the Exchange given that the current definition 
of ``Trading'' is specific to ``BOX Options Products.''
    TOSA. The Exchange is proposing to remove the definition of 
``TOSA'' from the LLC Agreement. The term ``TOSA'' means the Technical 
and Operational Services Agreement entered into by and between ``MX'' 
and ``BOX Options'' dated September 25, 2005 and amended as of January 
1, 2007. The Exchange is proposing to remove the definition because it 
is an unnecessary defined term that is not used or relied upon outside 
of the defined terms of the LLC Agreement. Currently, the only use of 
the defined term ``TOSA'' appears in the defined term ``Related 
Agreements.'' For the reasons described above, the Exchange is 
proposing to remove that defined term from the LLC Agreement. 
Accordingly, the defined term ``TOSA'' would no longer be used in the 
LLC Agreement and the Exchange therefore proposes to remove the 
definition as a streamlining change to eliminate unnecessary content 
from the LLC Agreement and to create a more simplified set of defined 
terms.
    Trading. The Exchange is proposing to remove the definition of 
``Trading'' from the LLC Agreement. The Exchange is proposing to remove 
the definition to create a more simplified structure of defined terms 
in the LLC Agreement, as described above, in connection with the 
proposed deletion of the defined term ``System.''
Proposed Changes to Definitions in the Bylaws
    BOX Holdings Director. The Exchange is proposing to remove the 
definition of ``BOX Holdings Director'' from the Bylaws.\7\ As noted 
above, BOX Holding is the parent and 100% owner of BOX Options Market, 
which is currently the only facility of the Exchange. While BOX 
Holdings and BOX Options Market are separate entities that have 
separate boards of directors, the composition of each board of 
directors is the same. Because BOX Holdings is the 100% owner of BOX 
Options Market and the composition of the board of directors for each 
entity is the same, the Exchange believes that this close alignment 
between the entities and their interests has allowed BOX Options Market 
to be fairly represented on the Board of the Exchange through the BOX 
Holdings Director. However, in anticipation of the Exchange continuing 
to regulate BOX Options Market but also potentially other facilities, 
the Exchange believes that it is appropriate to provide direct 
representation on the Exchange Board to the facilities of the Exchange 
to promote their fair representation in the administration of the 
Exchange's affairs and the selection of its directors. The Exchange 
believes this more direct representation is important because not every 
facility of the Exchange would necessarily share the same close 
alignment of interests that currently exists between BOX Holdings and 
BOX Options Market due to BOX Holdings being the 100% owner of the 
facility and given that the composition of the boards of directors of 
the two entities is the same.
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    \7\ See Bylaws, Art. 1, Section 1.01(b).
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    The Exchange is therefore proposing to delete the definition of 
``BOX Holdings Director'' from the Bylaws and to make certain 
conforming changes to the Bylaws that are described below that would 
instead provide representation on the Board and its nominating 
committee (``Nominating Committee'') \8\ to ``Facility Directors'' and 
``Facility Representatives'' as those terms are proposed to be added to 
the Bylaws. Also as described below, the Exchange would make a related 
conforming change to remove the right of BOX Holdings in the LLC 
Agreement to appoint one director to the Board.\9\
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    \8\ The Nominating Committee is not a Board Committee, but 
rather a committee of the Exchange.
    \9\ See infra regarding discussion of Section 4.1(a) of the LLC 
Agreement.
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    BOX Options Participant. The Exchange is proposing to remove the 
term ``BOX Options Participant'' from the Bylaws.\10\ This change is 
proposed because the Exchange believes that it would be more 
appropriate to replace the use of the term ``BOX Options Participant'' 
throughout the Bylaws with the defined term ``Exchange Facility 
Participant'' as defined in the LLC Agreement. As noted above in 
connection with the proposed adoption of the term ``Exchange Facility 
Participant'' in the LLC Agreement, the term would be defined broadly 
enough to refer to a participant in the BOX Options Market and to any 
other type of ``Exchange Facility Participant'' as may become relevant 
in the future. Therefore, the Exchange believes that the deletion of 
the term ``BOX Options Participant'' from the Bylaws and the 
replacement of those references with ``Exchange Facility Participant'' 
would not change the meaning of the relevant Bylaw provisions other 
than to make them flexible enough to contemplate that the Exchange may 
regulate multiple facilities having their own participants. 
Additionally, the Exchange is proposing to delete the term ``BOX 
Options Participant'' from the LLC Agreement, as described above.
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    \10\ See Bylaws, Art. 1, Section 1.01(c).
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    Facility Director. The Exchange is proposing to add the definition 
of ``Facility Director'' to the Bylaws.\11\ The term ``Facility 
Director'' would mean ``a Director who is a director or senior

[[Page 10769]]

executive officer of an Exchange Facility.'' The use of the term 
``Director'' in the definition refers to that term as it is defined in 
the LLC Agreement because it is a capitalized term that is not defined 
in the Bylaws, and Section 1.01 of the Bylaws states that any such 
capitalized term used in the Bylaws without definition has the meaning 
assigned to it in the LLC Agreement.\12\ Accordingly, the proposed 
definition of ``Facility Director'' in the Bylaws refers to an 
individual who is both a ``Director'' on the Board and a director or 
senior executive officer of an ``Exchange Facility,'' as the Exchange 
proposes to add that defined term to its Bylaws.
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    \11\ See Bylaws, proposed Section 1.01(j).
    \12\ The term ``Director'' in the LLC Agreement states that it 
has the meaning set forth in Section 4.1 of the LLC Agreement. 
Section 4.1 provides that ``[e]xcept as provided in this [LLC 
Agreement], the business and affairs of the Exchange shall be 
managed by, or under the direction of, a board of directors (the 
`Board' and each member thereof, a `Director').''
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    Facility Representative. The Exchange is proposing to add the 
definition of ``Facility Representative'' to the Bylaws.\13\ The term 
``Facility Representative'' would mean ``an individual who is a 
director or senior executive officer of an ``Exchange Facility,'' as 
the Exchange proposes to add that defined term to its LLC Agreement. In 
contrast to a ``Facility Director'' as described above, an individual 
who is a ``Facility Representative'' would not also be a ``Director'' 
of the Exchange.
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    \13\ See Bylaws, proposed Section 1.01(k).
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    LLC Agreement. The Exchange is proposing to update the definition 
of ``LLC Agreement'' in the Bylaws.\14\ The definition would be changed 
to mean the Second Amended and Restated BOX Exchange LLC Limited 
Liability Company Agreement. The Exchange proposes this change in 
connection with the proposed changes to the LLC Agreement that are 
described herein because they would cause the LLC Agreement to be 
amended and restated a second time.
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    \14\ See Bylaws, Section 1.01(q).
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    Participant Representative. The Exchange is proposing to amend the 
defined term ``Participant Representative.'' \15\ It would be modified 
to provide that the term means an officer, director or employee of an 
``Exchange Facility Participant'' rather than only applying to a ``BOX 
Options Participant.\16\ The proposed change would accommodate the 
Exchange's potential regulation of multiple facilities by providing a 
broader definition. Additionally, the proposed change to the definition 
conforms to the language changes made throughout to change ``BOX 
Options Participant'' to ``Exchange Facility Participant.''
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    \15\ See Bylaws, Section 1.01(v).
    \16\ See proposed changes to Article 1 of the LLC Agreement to 
introduce the terms ``Exchange Facility'' and ``Exchange Facility 
Participant.''
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    Public Director. The Exchange is proposing to amend the definition 
of Public Director.\17\ Specifically, the references in the definition 
to ``BOX Options Participant'' would be removed and replaced with the 
newly proposed defined term ``Exchange Facility Participant'' from the 
LLC Agreement. As described above in connection with the proposed 
deletion of the term ``BOX Options Participant'' from the Bylaws, the 
Exchange believes that the replacement of those references with 
``Exchange Facility Participant'' would not change the meaning of the 
defined term ``Public Director'' other than to make it flexible enough 
to contemplate that the Exchange may regulate multiple facilities 
having their own participants.
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    \17\ See Bylaws, Section 1.01(w).
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    System. The Exchange is proposing to remove the definition of 
``System'' from the Bylaws.\18\ The term is defined to mean ``the 
electronic system operated by the Exchange that receives and 
disseminates quotes, executes orders and reports transactions.'' The 
Exchange is proposing to remove the definition because it is only used 
in the Bylaws in two places--the definition of ``BOX Options 
Participant'' and in Section 5.03(b) of the Bylaws. For the reasons 
described above, the Exchange is also proposing to delete the 
definition of ``BOX Options Participant'' and therefore the only 
remaining use of the defined term ``System'' would appear in Section 
5.03(b) of the Bylaws as proposed to be revised. However, the Exchange 
is also proposing to delete the use of ``System'' from Section 5.03(b) 
of the Bylaws because it believes that using the plain meaning of the 
word system is more efficient and would not materially change the 
meaning of any provisions in the Bylaws. Therefore, the Exchange 
proposes to delete the defined term ``System'' as a streamlining change 
to eliminate unnecessary content from the Bylaws and to produce a 
simplified structure for the definitions in the Bylaws that is easier 
to read and understand.
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    \18\ See Bylaws, Section 1.01(z).
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Proposed Changes to the LLC Agreement
    In addition to the proposed changes to the definitions in the LLC 
Agreement described above, the Exchange is also proposing to make the 
following changes to the LLC Agreement.
    BOX Holdings Group LLC is proposed to be removed as a party to the 
LLC Agreement. The current parties to the LLC Agreement are the 
Exchange, BOX Holdings, and the Exchange's Members, who are each unit 
holders of the Exchange. BOX Holdings is not a Member of the Exchange 
and is only a party to the LLC Agreement with respect to its rights to 
appoint individuals to serve on the Exchange's Board and Nominating 
Committee. As described above in connection with the description of the 
proposed changes to delete the defined term ``BOX Holdings'' from the 
LLC Agreement and the defined term ``BOX Holdings Director'' from the 
Bylaws, Section 4.1(a) of the LLC Agreement currently provides that BOX 
Holdings ``shall have the right to appoint one (1) (but not more than 
one (1)) Director who is also an officer or director of BOX Holdings or 
an Affiliate of BOX Holdings.'' Because the Exchange is proposing to 
transfer this right from BOX Holdings directly to the facility, BOX 
Options Market, for the reasons that are explained above in connection 
with the proposed removal of the defined term ``BOX Holdings 
Director,'' there would no longer be any substantive provisions in the 
LLC Agreement applicable to BOX Holdings that would be relevant for BOX 
Holdings to continue to be a party to the LLC Agreement. When the LLC 
Agreement was first approved, BOX Holdings was a holding company which 
wholly owned the Exchange's only facility, BOX Options Market, and was 
therefore merely the alter ego of the facility. Since that time, 
however, BOX Holdings has grown to become the owner of multiple 
subsidiaries in addition to BOX Options Market. In addition, the 
Exchange now proposes to be permitted to regulate multiple facilities, 
each of which would have similar representation on the Exchange and its 
Board. The right to appoint a director to the Exchange Board is 
proposed to reside in each Exchange Facility. Therefore, the Exchange 
believes it is in keeping with the original intent of the LLC Agreement 
with respect to BOX Options Market to have BOX Options Market's rights 
reside directly in BOX Options Market, rather than with its upstream 
owner, and that similar rights will reside directly with any other new 
Exchange Facility as proposed herein. Accordingly, the Exchange is 
proposing that BOX Holdings be removed as a party as it is no longer 
relevant. The Exchange would remain fully authorized to regulate BOX 
Options Market, and its parent, BOX Holdings,

[[Page 10770]]

would not have any ability or incentive to disregard the Exchange's 
regulatory authority. All of the existing Members and the Exchange 
would continue to be parties to the LLC Agreement.
    The Exchange does not believe the removal of BOX Holdings from the 
LLC Agreement will change the obligations of BOX Holdings. Although 
Sections 15.1 and 15.4 of the LLC Agreement currently include 
references to the ``parties'' to the LLC Agreement, these references do 
not impose any ongoing obligations upon BOX Holdings or otherwise bind 
BOX Holdings. In addition, a reference to the Confidential Information 
of BOX Holdings appears in Section 15.5, which obligates the Exchange 
to keep such information confidential. BOX Holdings currently has no 
obligations under Section 15.5 and the Exchange believes it is unlikely 
to include any Confidential Information of BOX Holdings in its books 
and records. As a result, the Exchange believes the removal of BOX 
Holdings as a party to the LLC Agreement will have no effect upon the 
confidentiality provisions in Article 15 thereof. However, the Exchange 
notes that BOX Holdings remains obligated, under Section 15.6 of the 
BOX Holdings limited liability company agreement, to protect and not 
disclose any confidential information of the Exchange of which BOX 
Holdings may become aware. The Exchange further notes that BOX Holdings 
remains obligated, under Section 11.1 of the BOX Holdings limited 
liability company agreement, to allow the Exchange to access, inspect 
and copy its books and records and to maintain those books and records 
in the United States. The Exchange does not propose to alter any 
provisions of the limited liability company agreement of BOX 
Holdings.\19\
---------------------------------------------------------------------------

    \19\ The Exchange notes that the limited liability company 
agreement of BOX Holdings currently contains a number of provisions 
intended to provide protections for a regulated market, including, 
for example, Sections 4.12 and 11.1, Article 15, and Section 18.6 
thereof. The changes proposed by this rule filing will not disrupt 
any of these provisions and will not change going forward.
---------------------------------------------------------------------------

    In Section 2.2 of the LLC Agreement, the Exchange proposes an 
update to reflect a factual change in the address of its registered 
agent in Delaware.
    The Exchange is proposing to change certain references to ``BOX 
Options Market'' throughout the LLC Agreement to the newly proposed 
defined term ``Exchange Facility.'' \20\ The proposed changes would 
modify the relevant provisions to create a structure in the LLC 
Agreement that contemplates the Exchange's contemplated regulation of 
multiple facilities.
---------------------------------------------------------------------------

    \20\ See proposed changes to Articles 2.5(d), 5.6, 5.7, and 8.1 
of the LLC Agreement.
---------------------------------------------------------------------------

    In Article 3 of the LLC Agreement, the Exchange is proposing to 
replace ``an options market'' with ``securities markets.'' Article 3 of 
the LLC Agreement describes the purpose of forming the Exchange. The 
proposed change would provide that the purpose of the Exchange is, in 
part, to support the operation, regulation, and surveillance of 
securities markets--not just an options market as is currently stated. 
The proposed change would support the Exchange's contemplated 
regulation of potential new facilities that would facilitate trading in 
securities instruments that are not options.
    The Exchange is proposing to amend Section 4.1(a) of the LLC 
Agreement to remove the requirement that BOX Holdings shall have the 
right to appoint one director. As described above, this change is 
proposed in connection with the Exchange's proposals to remove BOX 
Holdings as a party to the LLC Agreement, remove the defined term ``BOX 
Holdings Director'' from the Bylaws and provide direct representation 
on the Exchange Board to the facilities of the Exchange to promote 
their fair representation in the administration of the Exchange's 
affairs and the selection of its directors.
    The Exchange is proposing to change references to ``BOX Options 
Participant'' to ``Exchange Facility Participant'' throughout the LLC 
Agreement.\21\ The proposed change would contemplate the Exchange's 
potential regulation of multiple facilities and conform the LLC 
Agreement in response to the related changes in the definitions 
section.
---------------------------------------------------------------------------

    \21\ See proposed changes to Articles 7.3(f), 7.3(g), and 7.3(i) 
of the LLC Agreement.
---------------------------------------------------------------------------

    The Exchange is proposing to change references to ``BOX Options'' 
to ``any Exchange Facility'' throughout the LLC Agreement.\22\ The 
proposed change would contemplate the Exchange's potential regulation 
of multiple facilities and conform the LLC Agreement in response to the 
related changes in the definition section.
---------------------------------------------------------------------------

    \22\ See proposed changes to Articles 15.2(a), 15.3, 15.4(a), 
and 15.5 of the LLC Agreement.
---------------------------------------------------------------------------

    As described above, the Exchange is proposing to amend Section 
15.4(b) of the LLC Agreement to remove a reference to ``Related 
Agreements'' because the Exchange is proposing to remove the defined 
term ``Related Agreements'' from the LLC Agreement. The Exchange would 
also add the words ``or related to'' in Section 15.4(b). Specifically, 
Section 15.4(b) currently provides in relevant part that certain 
representatives of (i) the members of the LLC Agreement, (ii) BOX 
Options Market and (iii) the Exchange will have procedures designed to 
maintain confidentiality of certain information of the Exchange while 
facilitating business activities contemplated by the LLC Agreement and 
the ``Related Agreements.'' In connection with deleting the reference 
to ``Related Agreements,'' the Exchange would insert language to state 
that representatives of the relevant parties would be required to have 
procedures designed to maintain confidentiality of certain information 
of the Exchange while facilitating any business activities contemplated 
by ``or related to'' the LLC Agreement ``or the conduct of the business 
of the Exchange and any Exchange Facility.'' This change would not bear 
on the substantive requirements that obligate representatives of the 
relevant parties to have procedures designed to maintain 
confidentiality of certain information of the Exchange.
    The Exchange is proposing to amend Section 15.5 of the LLC 
Agreement to contemplate the potential regulation of multiple 
facilities. Section 15.5 currently provides in relevant part that 
certain confidential information of BOX Holdings, BOX Options Market or 
the Exchange pertaining to regulatory matters of BOX Holdings, BOX 
Options Market or the Exchange that is contained in the books and 
records of the Exchange or any of its subsidiaries shall be subject to 
certain confidential treatment. The Exchange is proposing to replace 
references to BOX Holdings and BOX Options Market with ``any Exchange 
Facility, any Affiliate thereof.'' The result of this change would be 
that the confidentiality protections in Section 15.5 pertaining to 
regulatory matters would continue to apply to BOX Options Market as an 
``Exchange Facility'' and would continue to apply to BOX Holdings as an 
affiliate of BOX Options Market. However, the confidentiality 
protections would also be broadened to apply to any new ``Exchange 
Facility'' as that term is proposed to be defined in the LLC Agreement 
and any affiliate thereof. The Exchange believes that these expanded 
confidentiality protections regarding certain information in the books 
and records of the Exchange or any of its subsidiaries is appropriate 
to promote strong commercial relationships between the Exchange and its 
facilities.
    The Exchange is proposing to amend Section 18.3 of the LLC 
Agreement. Specifically, the Exchange would remove a provision 
applicable to providing notice to BOX Holdings

[[Page 10771]]

because for the reasons described above the Exchange is proposing to 
remove BOX Holdings as a party to the LLC Agreement.
Proposed Changes to the Bylaws
    The Exchange is proposing to change references to ``BOX Options 
Participant'' to ``Exchange Facility Participant'' throughout the 
Bylaws \23\ The proposed change would contemplate the Exchange's 
potential regulation of multiple facilities and conform the LLC 
Agreement in response to the related changes in the definition section.
---------------------------------------------------------------------------

    \23\ See proposed changes to Sections 4.02, 4.04(c), 4.06(d), 
5.03(b)-(h), and 6.08(a)-(b) of the Bylaws.
---------------------------------------------------------------------------

    The Exchange is proposing to change references to ``BOX Holdings 
Director'' to ``Facility Representative'' or ``Facility Director'' 
throughout the Bylaws.\24\ For the reasons described above in 
connection with the proposed removal of the definition of ``BOX 
Holdings Director'' from the Bylaws, the proposed change is a 
conforming change to accommodate the Exchange's contemplated regulation 
of multiple facilities as opposed to regulating only a single 
facility--BOX Options Market. While the same individual may 
simultaneously fill the roles of Facility Director and Facility 
Representative, the proposed change allows each facility the 
flexibility, if the facility deems it prudent and convenient, to have 
one individual serve as the Facility Director on the Exchange Board and 
a different individual to serve as the Facility Representative on the 
Nominating Committee. The qualifications of individuals to serve as a 
Facility Director and/or a Facility Representative are the same--that 
such individual be a director or senior executive officer of the 
Exchange Facility--provided that a Facility Director must also be a 
Director of the Exchange while a Facility Representative need not be.
---------------------------------------------------------------------------

    \24\ See proposed changes to proposed Sections 4.06(c) and 
4.06(d) of the Bylaws and Sections 6.01, 6.06 and 6.07 of the 
Bylaws.
---------------------------------------------------------------------------

    Under existing Section 4.02 of the Bylaws, at least twenty percent 
(20%) of the Board must be comprised of ``Participant Directors.'' \25\ 
The existing definition of a ``Participant Director'' means a 
``Director'' \26\ who is a Participant Representative by virtue of 
being an officer, director or employee of a BOX Options Participant. 
The proposed changes to Section 4.02 would continue to require that at 
least twenty percent (20%) of the Board would be comprised of 
Participant Directors. In order to qualify as a Participant Director, 
any person would be required to be serving as an officer, director or 
employee of an Exchange Facility Participant. The proposed changes 
would also provide that at least one (1) Participant Director shall be 
selected from among the Exchange Facility Participants of each Exchange 
Facility.
---------------------------------------------------------------------------

    \25\ See Bylaws, Section 1.01(u).
    \26\ See LLC Agreement, Article 1, Section 1.1 and Article 4, 
Section 4.1(a).
---------------------------------------------------------------------------

    Section 4.02 of the Bylaws currently provides that the Board 
includes one (1) director who is a ``BOX Holdings Director.'' The 
Exchange proposes to remove this provision and replace it with a 
requirement that a number of directors that is equal to the number of 
Exchange Facilities shall be ``Facility Directors'' and that one (1) 
such ``Facility Director'' would be selected by each Exchange Facility. 
The existing provision provides the existing Exchange Facility (in this 
case, through its alter-ego parent entity, BOX Holdings) with 
representation on the Exchange Board, which fosters cooperation and 
communication between the Board and the Exchange Facility. The 
allowance of a single representative from the Exchange Facility to sit 
on the Exchange's Board is appropriate but does not permit the Exchange 
Facility to exert control over the Exchange.
    The proposed change here would accomplish two things. First, the 
change would allow each Exchange Facility to have the same 
representation on the Exchange Board. This would promote equal 
treatment of each Exchange Facility regulated by the Exchange. Second, 
since each potential new Exchange Facility may have a different 
ownership structure, this proposed change would uniformly require that 
each such representative would come from the leadership of, and be 
directly designated by, the actual Exchange Facility rather than a 
parent organization. This would create the best and closest 
representation to the Exchange for each Exchange Facility. The proposed 
change would apply to the existing Exchange Facility, BOX Options 
Market (and its parent, BOX Holdings), and would move the existing BOX 
Holdings Director to be a Facility Director. The Exchange believes this 
change is not substantive with respect to the BOX Options Market and 
BOX Holdings because, as described above, the two entities are under 
common control.
    The proposed change would ensure that each Exchange Facility would 
have one (1) Facility Director serving on the Board. In order to 
qualify as a Facility Director, any person would be required to be 
serving as a director or senior executive officer of an Exchange 
Facility. This proposal is the same as currently applies to BOX Options 
Market through its parent, BOX Holdings.
    The existing BOX Holdings Director serves on committees of the 
Board but is prohibited from serving on the Exchange Board's 
Compensation Committee and Regulatory Oversight Committee. This 
existing prohibition helps to ensure that the existing Exchange 
Facility, BOX Options Market (or its parent, BOX Holdings), will not 
have access to the confidential information considered by these 
committees and to eliminate any influence by BOX Options Market (or its 
parent, BOX Holdings) with respect to the matters decided by these 
committees, including regulatory matters related to BOX Options Market 
and compensation paid to Exchange directors, officers and employees who 
have supervisory authority over BOX Options Market. The proposed change 
provides that one (1) Facility Director from each Exchange Facility 
would serve on Board committees but would continue to prohibit Facility 
Directors from serving on the Compensation and Regulatory Oversight 
Committees. This proposed prohibition would continue to help ensure 
that no Exchange Facility would have access to the confidential 
information considered by these committees and to help prevent any 
Exchange Facility from exercising influence with respect to the matters 
decided by these committees, including regulatory matters related to an 
Exchange Facility and compensation paid to Exchange directors, officers 
and employees who have supervisory authority over Exchange Facilities. 
In the event an Executive Committee is appointed by the Board, each 
Exchange Facility would have the right to have one (1) of its Facility 
Directors sit on the Executive Committee, pursuant to Section 6.04 of 
the Bylaws.
    As proposed in Section 4.02 of the Bylaws, as soon as practicable 
after a new Exchange Facility begins operating as an Exchange Facility, 
a Participant Director and a Facility Director of the new facility 
would be appointed by the Board and would serve until the next annual 
meeting of the Members, when the regular selection processes shall 
govern. The process for selecting, appointing and electing Participant 
Directors and Facility Directors to serve on the Board would remain 
essentially the same--with the only difference being that each Exchange 
Facility would be represented.
    In accordance with Section 4.06 of the Bylaws, at least twenty 
percent (20%) of the Nominating Committee must be comprised of 
``Participant

[[Page 10772]]

Representatives,'' \27\ which, as described above, would be defined in 
the Bylaws to mean officers, directors or employees of firms or 
organizations that are registered with the Exchange for purposes of 
participating in trading on the Exchange's existing facility as an 
order flow provider or market maker. In order to qualify as a 
Participant Representative, any person would be required to be serving 
as an officer, director or employee of an Exchange Facility 
Participant. The proposed changes would continue to ensure that at 
least twenty percent (20%) of the Nominating Committee would be 
comprised of ``Participant Representatives'' but Section 4.06(a) would 
also provide that at least one (1) Participant Representative would be 
selected from each Exchange Facility.
---------------------------------------------------------------------------

    \27\ See Bylaws, Section 1.01(v).
---------------------------------------------------------------------------

    Section 4.06(a) of the Bylaws also provides that the Nominating 
Committee currently includes one ``BOX Holdings Director'' unless that 
director declines to serve. The Exchange is proposing to delete this 
provision for the reasons described above regarding the proposed 
removal of the defined term ``BOX Holdings Director'' from the Bylaws. 
In order to qualify as a Facility Representative, any person would be 
required to be serving as a director or senior executive officer of an 
Exchange Facility. This proposal is the same as currently applies to 
BOX Options Market through its parent, BOX Holdings. In addition, the 
Exchange is proposing changes that would ensure that each Exchange 
Facility would have one (1) Facility Representative serving on the 
Nominating Committee.
    As generally proposed in Section 4.02 of the Bylaws, as soon as 
practicable after a new Exchange Facility begins operating as a 
facility of the Exchange, a ``Participant Representative'' \28\ and a 
``Facility Representative'' \29\ of the new Exchange Facility would be 
appointed by the Board and would serve until the next annual meeting of 
the Members, when the regular selection processes shall govern. The 
process for selecting, appointing and electing ``Participant 
Representatives'' and ``Facility Representatives'' to serve on the 
Nominating Committee would remain essentially the same--with the only 
difference being that each Exchange Facility would be represented.
---------------------------------------------------------------------------

    \28\ See Bylaws, proposed Section 1.01(v).
    \29\ See Bylaws, proposed Section 1.01(k).
---------------------------------------------------------------------------

    Text that is no longer applicable would be eliminated from the end 
of Section 4.06(b) and (c) of the Bylaws. The text is no longer 
applicable because it is specific to the first annual meeting of the 
Board that occurred after the Exchange was approved as an SRO and so 
the provisions are outdated and no longer relevant. Accordingly, these 
removals are streamlining changes that the Exchange is proposing to 
eliminate unnecessary content from the Bylaws and produce Bylaws that 
are easier to read and understand.
    The Exchange proposes to eliminate the provision in Section 4.11(e) 
of the Bylaws that allows only a ``BOX Holdings Director'' to appoint 
an observer to attend Board meetings in such Director's place. The 
provision would be removed in connection with the proposed removal of 
the defined term ``BOX Holdings Director'' from the Bylaws. This change 
is due to the proposed increased number of individuals serving as 
Facility Directors when multiple facilities are being regulated, 
resulting in a higher administrative burden on the Exchange to monitor 
and vet potential individuals who may only be briefly involved in the 
business of the Exchange. The Exchange believes this change will allow 
the Exchange to maintain its ability to regulate the individuals who 
have access to Exchange confidential information.
    The Exchange is proposing a ministerial change to Section 4.11(f) 
to spell out the full legal name of BOX Holdings Group LLC. While the 
Exchange is proposing to remove the representation of BOX Holdings on 
the Board through the current ``BOX Holdings Director'' as described 
above, the reference to BOX Holdings in this Section 4.11(f) remains 
relevant as the provision establishes more general constraints on who 
may attend meetings of the Board.
    The Exchange is proposing changes to Section 5.03 of the Bylaws 
that would provide rulemaking authority to the Exchange over multiple 
facilities. Specifically, Section 5.03 addresses the Board's authority 
to adopt, amend or repeal rules of the Exchange. Existing references to 
``BOX Options Participants'' would be replaced by references to the 
proposed term ``Exchange Facility Participants'' to contemplate that 
the Exchange may regulate other facilities in the future other than 
only the BOX Options Market and that the Exchange would also have rules 
in place that would apply to participants using those facilities. In 
addition, as described above, the Exchange proposes to eliminate the 
defined term ``System'' from the LLC Agreement and therefore Section 
5.03(b) of the Bylaws is proposed to be revised to replace the term 
``System'' with descriptive text that conveys substantially the same 
meaning.
2. Statutory Basis
    Section 6(b)(5) of the Exchange Act \30\ requires, among other 
things, that the rules of a national securities exchange be designed to 
``foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities'' and ``to protect 
investors and the public interest.'' The Exchange believes that the 
proposed rule change is consistent with these requirements for two 
primary reasons. First, the Exchange is proposing changes to the LLC 
Agreement and Bylaws that are designed to allow the Exchange to 
regulate multiple facilities. As described above, the Exchange 
currently regulates only the BOX Options Market as a facility, but it 
proposes to be able to add other facilities. Therefore, the changes to 
the LLC Agreement and Bylaws would promote the Exchange's ability to 
regulate other facilities and the Exchange believes that this, in turn, 
would foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities traded through the 
facilities of the Exchange by notifying such persons of the potential 
for the Exchange to regulate multiple facilities in the future. Second, 
certain defined terms in the LLC Agreement and the Bylaws would be 
added, modified or removed to produce a simplified set of defined terms 
that is easier to read and understand and that is flexible enough to 
accommodate the potential for multiple facilities of the Exchange and 
rules related thereto. The Exchange believes that simplifying the 
defined terms used throughout the LLC Agreement and the Bylaws and 
making the terms consistent with the Exchange's intent to regulate 
multiple facilities would promote readability and comprehension of the 
LLC Agreement and Bylaws that would promote the protection of investors 
and the public interest by making the related rights and 
responsibilities under the LLC Agreement and Bylaws clear and concise.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    Section 6(b)(3) of the Exchange Act \31\ requires, among other 
things, that the rules of a national securities exchange must ``assure 
a fair representation of its members in the selection of its directors 
and administration of its affairs[.]'' The

[[Page 10773]]

Exchange believes that the proposed rule change is consistent with the 
fair representation requirements of Section 6(b)(3) of the Exchange Act 
because proposed Section 4.02 of the Bylaws would continue to provide 
that ``Participant Directors'' who are officers, directors, or 
employees of an ``Exchange Facility Participant'' would have at least 
twenty percent (20%) representation on the Board. This parallels the 
existing structure of the Bylaws as currently applicable to the BOX 
Options Market (through its parent, BOX Holdings) as the only facility 
of the Exchange. The proposed difference is that the requirements would 
be applied to ``Exchange Facility Participants'' as a more general 
mechanism to achieve fair representation on the Board of ``Exchange 
Facility Participants'' across all potential facilities of the 
Exchange. In addition, the proposed changes provide that each Exchange 
Facility will have at least one representative on the Board so that 
every Exchange Facility would be represented.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    Similarly, the Exchange believes that the proposed rule change with 
respect to Section 4.06 of the Bylaws is also consistent with the fair 
representation requirements of Section 6(b)(3) of the Exchange Act 
because proposed Section 4.06 of the Bylaws would continue to provide 
that ``Participant Representatives'' who are officers, directors, or 
employees of an ``Exchange Facility Participant'' would have at least 
twenty percent (20%) representation on the Nominating Committee. This 
parallels the existing structure of those Bylaw provisions as currently 
applicable to the BOX Options Market as the only facility of the 
Exchange. The proposed difference is that the requirements would be 
applied to ``Exchange Facility Participants'' as a more general 
mechanism to achieve fair representation on the Nominating Committee of 
``Exchange Facility Participants'' across all potential facilities of 
the Exchange. In addition, the proposed changes provide that each 
Exchange Facility will have at least one representative on the 
Nominating Committee so that every Exchange Facility is represented.
    The Exchange believes that the proposed removal of BOX Holdings 
from the LLC Agreement is consistent with Section 6(b)(3) of the 
Exchange Act. As discussed above, BOX Holdings is not a Member of the 
Exchange and is only a party to the LLC Agreement with respect to its 
rights to appoint individuals to serve on the Exchange's Board and 
Nominating Committee. The right to appoint a director to the Exchange 
Board is now proposed to reside in each Exchange Facility, which is 
consistent with the fair representation requirements of Section 6(b)(3) 
of the Exchange Act by providing a more general mechanism to achieve 
fair representation on the Board.
    The Exchange now proposes to be permitted to regulate multiple 
facilities, each of which would have similar representation on the 
Exchange and its Board. As such, removal of BOX Holdings is consistent 
with the requirements of the Act, particularly with Section 
6(b)(1),\32\ which requires, in part, an exchange be so organized and 
have the capacity to carry of the purposes of the Act by providing 
representation of each facility.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(1)
---------------------------------------------------------------------------

    The Exchange believes the removal of BOX Holdings from the LLC 
Agreement is consistent with Section 6(b)(5) of the Exchange Act 
because, as explained above, with the proposed changes to the LLC 
Agreement designed to allow the Exchange to regulate multiple 
facilities it is no longer necessary to include BOX Holdings in the LLC 
Agreement. As such, the proposed change would promote readability and 
comprehension of the LLC Agreement that would promote the protection of 
investors and the public interest by making the related rights and 
responsibilities under the LLC Agreement clear and concise. As such, 
the Exchange believes the proposal to remove BOX Holdings is consistent 
with the requirements of Section 6(b) of the Act in general.

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. As described above, the Exchange is 
proposing certain discrete amendments to the LLC Agreement and Bylaws 
that would (i) provide sufficient flexibility in the documents for them 
to contemplate that there may be multiple Exchange facilities under the 
Exchange's regulatory authority, (ii) simplify the structure of the 
defined terms in the LLC Agreement and Bylaws to make them easier to 
read and understand, and (iii) make certain other changes to the terms 
of the LLC Agreement and Bylaws to bring them current with the 
structure of the Exchange and its relationships. To the extent that the 
proposed changes to the LLC Agreement and the Bylaws would apply to 
Exchange Facilities or participants in an Exchange Facility, the 
proposed changes would apply equally and would therefore not favor any 
particular Exchange Facility over any other or any particular 
participant in any Exchange Facility over any other. For these reasons, 
the Exchange believes that the proposed changes are consistent with the 
Exchange Act because they would not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act.\33\
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2020-04 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-2020-04. 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 10774]]

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 the 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-2020-04, and should be 
submitted on or before March 17,  2020.
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12)

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03640 Filed 2-24-20; 8:45 am]
 BILLING CODE 8011-01-P