Document ID: SEC-2020-0543-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange LLC
Posted Date: 2020-04-09T04:00Z

[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 19968-19971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07445]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88559; File No. SR-BOX-2020-08]

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 Reflect 
Certain Pricing Changes That Will Be in Effect While the BOX Trading 
Floor Is Inoperable

April 3, 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 April 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

[[Page 19969]]

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
    As a precautionary measure to prevent the potential spread of 
coronavirus (COVID-19), BOX Exchange LLC (BOX) temporarily closed the 
Trading Floor in Chicago after the close of business on Friday, March 
20, 2020. The Exchange proposes to amend the Fee Schedule for trading 
on BOX to govern certain pricing changes that will be in effect while 
the BOX Trading Floor is inoperable.
Facilitation and Solicitation Transaction Fees
    First, the Exchange proposes to amend Section I.C. (Facilitation 
and Solicitation Transactions \5\) to establish a fee structure for 
Facilitation and Solicitation Transactions in lieu of the current fees 
for Facilitation and Solicitation Transactions while the BOX Trading 
Floor is inoperable. Further, the Exchange proposes that the 
Facilitation and Solicitation Transaction Rebate identified in Section 
I.C.1 will not apply when the BOX Trading Floor is inoperable. With the 
Trading Floor inoperable, Floor Participants will no longer be allowed 
to enter Qualified Open Outcry Orders (``QOO'') Orders on BOX. Instead 
these Participants must enter analogous types of electronic orders on 
BOX, which are most similar to orders executed through the Facilitation 
and Solicitation auction mechanism. Because of this, the Exchange 
proposes to mimic the current structure for Facilitation and 
Solicitation Transactions; however the Exchange proposes to make a few 
minor changes to the fees assessed for these transactions when the 
Trading Floor is inoperable. Specifically, the Exchange proposes to 
assess no fees for Agency Orders submitted to the Facilitation and 
Solicitation mechanisms for all Participants, regardless of account 
type.\6\ Second, the Exchange proposes to assess no fees for 
Facilitation and Solicitation Orders \7\ in Penny and Non-Penny Pilot 
Classes. BOX also proposes to assess a $0.50 fee for Responses in the 
Facilitation or Solicitation Auction Mechanisms in Penny Pilot Classes 
and $1.15 for Responses in the Facilitation and Solicitation mechanisms 
in Non-Penny Pilot Classes.\8\ The Exchange believes the proposed fee 
structure will incentivize Participants who would normally execute 
orders on the BOX Trading Floor to instead submit orders to the 
Exchange's Facilitation and Solicitation auction mechanisms.\9\ Once 
the Trading Floor reopens, the Exchange will make necessary changes to 
the BOX Fee Schedule to remove obsolete text.
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    \5\ Transactions executed through the Solicitation Auction 
mechanism and Facilitation Auction mechanism.
    \6\ The Exchange notes that no fees are currently assessed for 
Agency Orders for any account type.
    \7\ Facilitation and Solicitation Orders are the matching contra 
orders submitted on the opposite side of the Agency Order.
    \8\ The Exchange notes that the total fees for Responses in the 
Facilitation and Solicitation auction mechanisms are not changing. 
Currently, Participants are assessed a $0.25 fee for Responses in 
the Facilitation and Solicitation mechanisms for Penny Pilot Classes 
and an additional $0.25 liquidity fee in Section III.B totaling 
$0.50 for their order. For Non-Penny Pilot Classes, Participants are 
assessed a $0.40 fee for Responses in the Facilitation and 
Solicitation mechanisms and an additional $0.75 liquidity fee in 
Section III.B totaling $1.15 for their order. As discussed herein, 
the Exchange proposes to eliminate Liquidity Fees and Credits for 
Facilitation and Solicitation transactions when the Trading Floor is 
inoperable. As such, the current liquidity fees are included in the 
proposed Response fees for the Facilitation and Solicitation 
mechanisms.
    \9\ The Exchange notes that the QOO Orders are paired orders on 
the BOX Trading Floor similar to Facilitation and Solicitation 
orders submitted electronically through the Facilitation and 
Solicitation auction mechanism. The Exchange believes that the 
reduced Facilitation and Solicitation Order fees will incentivize 
Floor Participants (who are also electronic Participants on BOX) to 
execute orders electronically instead of directing this order flow 
to another exchange.
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Liquidity Fees and Credits
    The Exchange proposes to add text to Section III.B. (Liquidity Fees 
and Credits for Facilitation and Solicitation Transactions). 
Specifically, the Exchange proposes to add text which states that 
Participants will not be assessed Liquidity Fees and Credits for 
Facilitation and Solicitation Transactions when the BOX Trading Floor 
is inoperable. Once the Trading Floor reopens, the Exchange will make 
necessary changes to the BOX Fee Schedule to remove obsolete text.
Participant Fees
    The Exchange proposes to add text to Section IX., Participant Fees, 
which states that BOX Participant Fees will not be assessed for Trading 
Floor-only Participants and Trading Floor Permit Fees will not be 
assessed for any Participant while the BOX Trading Floor is 
inoperable.\10\ Once the Trading Floor reopens, the Exchange will make 
necessary changes to the BOX Fee Schedule to remove obsolete text.
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    \10\ Trading Floor Participants who are also electronic 
Participants will continue to be charged the BOX Participant Fee.
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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,\11\ 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 proposed changes are due to the closing of the BOX 
Trading Floor as of March 23, 2020. The Exchange believes the proposed 
changes discussed herein will incentivize Participants to direct order 
flow that that would have otherwise been executed on the BOX Trading 
Floor, to be executed through the Exchange's Facilitation and 
Solicitation auction mechanisms while the Trading Floor is 
inoperable.\12\
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    \11\ 15 U.S.C. 78f(b)(4) and (5).
    \12\ The Exchange notes that the QOO Orders are paired orders on 
the BOX Trading Floor similar to Facilitation and Solicitation 
orders submitted electronically through the Facilitation and 
Solicitation auction mechanism. Under this proposal, Floor 
Participants (who are also electronic Participants on BOX) will be 
able to execute orders electronically despite the Trading Floor 
being closed.
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Facilitation and Solicitation Transaction Fees
    The Exchange believes that the proposed fee structure for 
Facilitation and Solicitation Transactions while the Trading Floor is 
inoperable is reasonable, equitable and not unfairly discriminatory. 
The Exchange notes that assessing no Agency Order fees is in line with 
the Exchange's current fee structure for Facilitation and Solicitation 
Transactions. Further, the Exchange believes that assessing no fees

[[Page 19970]]

for Facilitation and Solicitation Orders in the Facilitation and 
Solicitation auction mechanism is reasonable.\13\ As discussed above, 
the Exchange believes that assessing no fees for Facilitation and 
Solicitation Orders will attract order flow to these mechanisms that 
would have otherwise been executed on the BOX Trading Floor. The 
Exchange believes the proposed change will incentivize Participants to 
direct their orders to the Exchange's mechanisms (instead of directing 
these orders that would have normally executed on the BOX Trading Floor 
to other exchanges in the industry) which will result in greater 
liquidity and ultimately benefit all Participants trading on the 
Exchange. Further, the Exchange believes that the proposed change is 
equitable and not unfairly discriminatory, as the proposed change 
applies to all Participants, regardless of account type.
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    \13\ The Exchange notes that it previously did not charge Broker 
Dealers, Professional Customers and Market Makers for Facilitation 
and Solicitation Orders in the Facilitation and Solicitation 
mechanism. See SR-BOX-2015-29.
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    The Exchange believes that the proposed fees for Responses in the 
Facilitation and Solicitation auction mechanisms are reasonable. As 
discussed above, as part of this temporary fee change the Exchange is 
removing Liquidity Fees and Credits for the Facilitation and 
Solicitation mechanisms. With the Liquidity Fees and Credits removed, 
the Exchange is transferring the fee for adding liquidity ($0.25 for 
Penny Pilot Class and $0.75 Non-Penny Pilot Classes) and adding these 
fees to the proposed Response fees. BOX Participants responding to the 
Facilitation and Solicitation orders will not be charged any 
differently than they are today.\14\ Further, the Exchange believes 
that the proposed fees are equitable and not unfairly discriminatory 
because the fees are assessed to all Participants, regardless of 
account type.
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    \14\ See supra note 8.
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    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to charge higher exchange fees for responders 
in the Facilitation and Solicitation auctions than for initiators of 
these orders and the contra orders. The Exchange again notes that the 
total transaction fee for Responses in the Facilitation and 
Solicitation mechanisms is not changing. The Exchange is simply 
including the liquidity fees in Section III.B. to the fees for 
Responses in the Facilitation and Solicitation mechanisms which are 
currently assessed today. While the Exchange is decreasing the fees for 
Facilitation and Solicitation orders and creating a larger disparity 
between the Initiator and Responder, the Exchange believes that the 
differential between what an Initiator will pay compared to what a 
Responder will pay is reasonable because Responders are willing to pay 
a higher fee for liquidity discovery. The Exchange believes that 
assessing no fees for Agency Orders and Facilitation and Solicitation 
Orders will attract more liquidity to these mechanisms ultimately 
providing Responders with increased opportunity for executions on the 
Exchange. Despite the increased differential between the Initiator and 
Responder, the Exchange again notes that Responders are not paying any 
more than what they currently pay for responses in these mechanisms 
today. Further, the Exchange believes the proposed fees for Responders 
are equitable and not unfairly discriminatory as they apply to all 
Participants, regardless of account type.
    The Exchange further believes it is reasonable to establish 
different fees for Responses to Facilitation and Solicitation 
transactions in Penny Pilot Classes compared to transactions in Non-
Penny Pilot Classes. The Exchange makes this distinction throughout the 
BOX Fee Schedule, including the Exchange Fees for PIP and COPIP 
Transactions. The Exchange believes it is reasonable to establish 
higher fees for Non-Penny Pilot Classes because these Classes are 
typically less actively traded and have wider spreads.
Liquidity Fees and Credits
    Currently, the Liquidity Fees and Credits fee structure for 
Facilitation and Solicitation transactions, in particular the credit 
for removing liquidity, aims to attract order flow to the BOX auction 
mechanisms. The Exchange believes that eliminating the Liquidity Fees 
and Credits for Facilitation and Solicitation Transactions when the 
Trading Floor is inoperable is reasonable as the Exchange has, pursuant 
to this proposal, eliminated Facilitation and Solicitation Order 
fees.\15\ Market participants no longer need the incentive of a credit 
for removing liquidity when there are no fees assessed for Agency 
Orders and Facilitation and Solicitation Orders in the Facilitation and 
Solicitation auction mechanism. Further, the Exchange believes the 
proposed change is equitable and not unfairly discriminatory in that 
the change will apply to all categories of Participants and across all 
account types.
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    \15\ The Exchange again notes that no fees are assessed for 
Agency Orders for any account type.
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Participant Fees
    The Exchange believes that waiving BOX Participant Fees and Trading 
Floor Permit Fees for Trading Floor Only Participants is reasonable and 
appropriate because the BOX Trading Floor is inoperable due to the 
precautionary measure to prevent the potential spread of COVID-19. The 
Exchange believes waiving these fees is equitable and not unfairly 
discriminatory because the fees are waived for all Floor Participants, 
regardless of account type. The Exchange believes it is reasonable and 
appropriate to continue to assess Participant Fees to Floor 
Participants who are also an electronic Participant as those 
Participants will still be able to execute transactions on the 
Exchange's electronic market.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing exchanges. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes to the Facilitation and Solicitation Transaction fees 
will not impose a burden on competition among various Exchange 
Participants. Rather, BOX believes that the change will result in the 
Participants being charged appropriately for these transactions and are 
designed to enhance competition in the Facilitation and Solicitation 
mechanisms. Submitting an order is entirely voluntary and Participants 
can determine which order type they wish to submit, if any, to the 
Exchange. Further, the Exchange believes that this proposal will 
enhance competition between exchanges because it is designed to allow 
the Exchange to better compete with other exchanges for order flow. The 
Exchange does not believe that the proposed change will burden 
competition by creating a disparity between the fees an initiator pays 
and the fees a competitive responder pays that would result in certain 
Participants being unable to compete with initiators. In fact, the 
Exchange believes that these changes will not impair these

[[Page 19971]]

Participants from adding liquidity and competing in the Facilitation 
and Solicitation mechanisms, and will help promote competition by 
providing incentives for market participants to submit Facilitation and 
Solicitation Orders, and thus benefit all Participants trading on the 
Exchange by attracting customer order flow.
    Lastly, the Exchange believes that eliminating the Liquidity Fees 
and Credits for Facilitation and Solicitation Transactions will not 
burden competition as the proposed change applies to all market 
participants. As discussed above, the Exchange believes that 
eliminating the Liquidity Fees and Credits for Facilitation and 
Solicitation Transactions is reasonable as the Exchange, pursuant to 
this proposal, has eliminated Facilitation and Solicitation Order fees. 
Therefore, the credit for removing liquidity is no longer needed to 
incentivize Participants to submit order flow to the Facilitation and 
Solicitation auction mechanisms.

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 \16\ and Rule 19b-4(f)(2) thereunder,\17\ because it 
establishes or changes a due, or fee.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 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-2020-08 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-2020-08. 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-2020-08, and should be submitted on 
or before April 30, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07445 Filed 4-8-20; 8:45 am]
 BILLING CODE 8011-01-P