Document ID: SEC-2016-0298-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2016-02-22T05:00Z

[Federal Register Volume 81, Number 34 (Monday, February 22, 2016)]
[Notices]
[Pages 8803-8805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03527]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77144; File No. SR-BOX-2016-07]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility

February 16, 2016.
    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 February 5, 2016, BOX Options 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 
make two changes to the Volume Based Rebates for Market Makers in Non-
Auction

[[Page 8804]]

Transactions. First, the Exchange proposes to specify that transactions 
which are not the result of a Market Maker quotation will be considered 
exempt from the Tiered Volume Rebate for Market Makers in Non-Auction 
Transactions. Additionally, the Exchange proposes to amend the 
structure and distinguish between whether the Market Maker is a 
liquidity provider or a liquidity taker within the transactions. Market 
Makers will no longer be eligible for a rebate on their Non-Auction 
Transactions which take liquidity. Market Maker transactions which take 
liquidity or are not the result of a Market Maker quote will continue 
to count toward the Market Maker's overall executed volume on BOX each 
month. 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 Web site 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 I.A.1 of the BOX Fee 
Schedule (Tiered Volume Rebate for Non-Auction Transactions).
    The Exchange currently provides tiered rebates to Public Customers 
and Market Makers in Non-Auction Transaction who achieve certain volume 
based thresholds. The Exchange calculates percentage thresholds on a 
monthly basis by totaling the Market Maker or Public Customer's 
executed volume on BOX, relative to the total national Market Maker or 
Customer volume in multiply-listed options classes.
    The Exchange proposes to make two changes to the Volume Based 
Rebates for Market Makers in Non-Auction Transactions. First, the 
Exchange proposes to specify that transactions which are not the result 
of a Market Maker quotation will be considered exempt from the Tiered 
Volume Rebate for Market Makers in Non-Auction Transactions. 
Additionally, the Exchange proposes to amend the structure and 
distinguish between whether the Market Maker is a liquidity provider or 
a liquidity taker within the transactions. Market Makers will no longer 
be eligible for a rebate on their Non-Auction Transactions which take 
liquidity. Market Maker transactions which take liquidity or are not 
the result of a Market Maker quote will continue to count toward the 
Market Maker's overall executed volume on BOX each month.
    The new per contract rebate for Market Makers in Non-Auction 
Transactions as set forth in Section I.A.1. of the BOX Fee Schedule 
will be as follows:

----------------------------------------------------------------------------------------------------------------
                                                    Percentage thresholds of            Per contract rebate
                                                 national market maker volume in -------------------------------
                     Tier                        multiply-listed options classes
                                                            (monthly)                  Maker           Taker
----------------------------------------------------------------------------------------------------------------
1.............................................  0.000%-0.069%...................           $0.00           $0.00
2.............................................  0.070%-0.249%...................         ($0.03)           $0.00
3.............................................  0.250%-0.299%...................         ($0.05)           $0.00
4.............................................  0.300% and Above................         ($0.10)           $0.00
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                   Percentage                           Per contract rebate
                                  thresholds of  ---------------------------------------------------------------
                                    national            Penny pilot classes           Non-Penny pilot classes
                                 customer volume ---------------------------------------------------------------
             Tier                 in multiply-
                                 listed options
                                     classes           Maker           Taker           Maker           Taker
                                    (monthly)
----------------------------------------------------------------------------------------------------------------
1.............................  0.000%-0.129%...           $0.00           $0.00           $0.00           $0.00
2.............................  0.130%-0.339%...         ($0.15)         ($0.15)         ($0.40)         ($0.40)
3.............................  0.340%-0.549%...         ($0.25)         ($0.25)         ($0.50)         ($0.50)
4.............................  0.550% and Above         ($0.40)         ($0.40)         ($0.90)         ($0.70)
----------------------------------------------------------------------------------------------------------------

    The Exchange also proposes to make non-substantive technical 
changes to the date and volume based fees and rebates within the BOX 
Fee Schedule. Specifically, the Exchange proposes to relabel the 
highest tier within each structure to clarify what percentage of volume 
is needed to qualify for the tier. The Exchange also proposes to remove 
the reference date at the beginning of the BOX Fee Schedule.
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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    The Exchange believes that the proposed changes to the Tiered 
Volume Rebates for Market Makers in Non-Auction Transactions are 
reasonable, equitable and not unfairly discriminatory.
    Specifically, the Exchange believes that exempting transactions 
which are not the result of Market Maker quote from the Market Maker 
Tiered Volume Rebate is reasonable, equitable and not unfairly 
discriminatory. BOX provides these volume based rebates to incentivize 
Market Makers to direct order flow to the Exchange to obtain the 
benefit of the rebate, which will in turn benefit all market 
participants by increasing liquidity on the Exchange. The Exchange 
believes by providing a rebate to only those transactions that are the 
result of a quote, Market Makers will

[[Page 8805]]

be further encouraged to direct liquidity to BOX.
    The Exchange believes it is reasonable to amend the structure of 
the Tiered Volume Rebates for Market Makers in Non-Auction Transactions 
to distinguish whether the Market Maker is a liquidity provider or 
liquidity taker, and remove the rebate for Market Makers that take 
liquidity. As stated above, the volume thresholds and applicable 
rebates are meant to incentivize Market Makers to direct order flow to 
the Exchange to obtain the benefit of the rebate, which will in turn 
benefit all market participants by increasing liquidity on the 
Exchange. The Exchange notes that, while certain Market Maker 
transactions will no longer receive a rebate, Market Maker Non-Auction 
transaction fees remain lower than other account types and are in line 
with the Market Maker fees at other exchanges.\6\
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    \6\ Market Makers are charged anywhere from to $0.05 to $0.29 on 
the Miami International Securities Exchange, LLC (``MIAX''), See the 
MIAX Fee Schedule Section I(a)(i) ``Market Maker Transaction Fees'' 
and ``Market Maker Sliding Scale''; and charged $0.39 to $0.95 on 
the NASDAQ OMX BX, Inc. (``BX Options'') Chapter XV, Section 2 BX 
Options Market--Fees and Rebates; and charged $0.35 to $1.10 on 
NASDAQ Stock Market LLC (``NOM'') Chapter XV, Section 2 NASDAQ 
Options Market--Fees and Rebates.
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    In summary, the proposed changes to the Market Maker Tiered Volume 
Rebate are intended to attract order flow to the Exchange by 
incentivizing Market Makers to post liquidity on BOX. The practice of 
providing incentives to increase order flow is, and has been, a common 
practice in the options markets. Further, the Exchange believes it is 
appropriate to provide incentives for Market Makers which will result 
in greater liquidity and ultimately benefit all Participants trading on 
the Exchange.
    The Exchange believes that the non-substantive technical changes to 
the BOX Fee Schedule are reasonable, equitable and not unfairly 
discriminatory. Specifically, the Exchange believes it is reasonable 
and appropriate to clarify the parameters of those tiers in order for 
Participants to better understand what percentage of volume qualifies 
for a rebate. The Exchange also believes it is reasonable to remove the 
reference date, as doing so will reduce investor confusion.

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 amending the proposed rebate structure 
for Marker [sic] Maker Non-Auction Transactions will not impose a 
burden on competition among various Exchange Participants. The Exchange 
believes that the proposed changes will result in Market Makers being 
rebated appropriately for these transactions. 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.
    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 and credits to 
remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed rule change reflects 
this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act\7\ and Rule 19b-4(f)(2) 
thereunder,\8\ because it establishes or changes a due, or fee.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 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-2016-07 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-2016-07. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2016-07, and should be 
submitted on or before March 14, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Brent J. Fields,
Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-03527 Filed 2-19-16; 8:45 am]
 BILLING CODE 8011-01-P