Document ID: SEC-2018-0009-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2018-01-02T05:00Z

[Federal Register Volume 83, Number 1 (Tuesday, January 2, 2018)]
[Notices]
[Pages 182-184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28309]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82407; File No. SR-BOX-2017-39]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule To Adjust the QOO Order Rebate

December 27, 2017.
    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 December 22, 2017, 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 
amend the Fee Schedule [sic]. While changes to the fee schedule 
pursuant to this proposal will be effective upon filing, the changes 
will become operative on January 2, 2018. The text of the proposed rule 
change is available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's internet 
website at http://boxexchange.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX 
to amend section II.C, QOO Order Rebate. Specifically, the Exchange 
proposes to adjust the QOO Order Rebate from $0.05 per contract to 
$0.075 per contract for all QOO Orders presented to the Trading Floor. 
The Exchange notes that it is not making any other changes to the 
rebate and that the QOO rebate will continue to apply to both sides of 
the QOO Order. The rebate will not apply to Public Customer executions, 
executions subject to the Strategy QOO Order Fee Cap, and Broker Dealer 
executions where the Broker Dealer is facilitating a Public Customer. 
Further, the total monthly rebate for Broker Dealer executions will 
continue to be capped at $30,000 per month per Broker Dealer.
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 change to the QOO Order 
Rebate for Floor Brokers is reasonable, equitable and not unfairly 
discriminatory.
    The Exchange notes that it does not offer a front-end order entry 
on the Trading Floor, unlike some competing exchanges. The Exchange 
notes that Participants have two possible means of bringing orders to 
the Exchange's Trading Floor for possible execution: (1) They can 
invest in the technology, systems and personnel to participate on the 
Trading Floor and deliver the order to the Exchange matching engines 
for validation and execution; or (2) they can utilize the services of 
another Participant acting as a Floor Broker. The Exchange believes 
that increasing the rebate will allow Floor Brokers to price their 
services at a level that would enable them to attract QOO order flow 
from participants who would otherwise utilize the front-end order entry 
mechanism offered by the Exchange's competitors instead of incurring 
the cost in time and resources to install and develop their own 
internal systems to deliver QOO orders directly to the Exchange system. 
As such, the Exchange believes it is necessary from a competitive 
standpoint to continue to offer this rebate to the executing Floor 
Broker on a QOO Order. Further, the Exchange believes that the QOO 
Order Rebate is reasonable as it is similar to a rebate program offered 
to Floor Brokers

[[Page 183]]

on a competing exchange.\6\ Similar to the Floor Broker Rebate for 
Executed QCC Transactions on Arca, BOX's QOO Order Rebate is applied to 
both sides of the paired order and is directed to the Floor Broker, and 
not to the Participant who is assessed the QOO Order fee. Finally, 
similar to the BOX QOO Rebate, the NYSE Arca QCC rebate is only applied 
when the Floor Broker executes the QCC Order manually on the NYSE Arca 
trading floor. No rebate is given when the QCC Order is executed 
electronically.
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    \6\ See NYSE Arca, Qualified Contingent Cross (``QCC'') 
Transactions Fees and Rebate. The Floor Broker Rebate for Executed 
Orders is a flat rebate and is applied to both sides of the QCC 
Order except when a Customer is on both sides of the QCC 
transaction.
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    The Exchange believes that this rebate structure is appropriate as 
it allows Floor Brokers to price their services at a level that would 
enable them to attract QOO order flow from participants who would 
otherwise utilize the front-end order entry mechanism offered by the 
Exchange's competitors instead of incurring the cost in time and 
resources to install and develop their own internal systems to deliver 
QOO orders directly to the Exchange system.
    Lastly, the Exchange believes that the increased rebate is 
reasonable and appropriate. The BOX Trading Floor is a new 
functionality for the Exchange, and assessing a higher rebate will help 
generate additional trading on the BOX Trading Floor. The Exchange 
believes that the proposed rebate reflects a competitive environment 
and falls in line with rebate levels assessed on another options 
exchange in the industry.\7\
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    \7\ See NASDQ [sic] PHLX LLC (``Phlx'') Pricing Schedule. Phlx 
assesses a per contract rebate for QCC transactions ranging from 
$0.00 to $0.11.
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to only apply the rebate to Floor Brokers and not to 
Floor Market Makers. Floor Market Makers only represent their own 
interest on the Trading Floor and therefore do not need additional 
incentive. Further, the Exchange believes it is equitable and not 
unfairly discriminatory to not apply the rebate to Public Customer 
executions or Broker Dealer executions where the Broker Dealer is 
facilitating a Public Customer, as these executions are not assessed a 
fee for their QOO Orders. Further, the Exchange believes it is 
equitable and not unfairly discriminatory to continue to not apply the 
rebate to executions subject to the Strategy QOO Order Fee Cap because 
additional incentives for these orders are not necessary.

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 notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, the Exchange believes that the degree to which fee changes in 
this market may impose any burden on competition is limited. For the 
reasons discussed above, the Exchange believes that the proposed 
changes do not impose an undue burden on competition.
    Further, the Exchange does not believe that offering a rebate to 
Floor Brokers will impose an undue burden on intra-market competition 
because all Floor Brokers are eligible to transact QOO Orders and 
receive a rebate. Further, the Exchange believes that the rebate will 
promote competition by allowing Floor Brokers to competitively price 
their services and for the Exchange to remain competitive with other 
exchanges that offer front-end order entry on their trading floors.

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 \8\ and Rule 19b-4(f)(2) 
thereunder,\9\ because it establishes or changes a due, or fee.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 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 [email protected]. Please include 
File Number SR-BOX-2017-39 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-2017-39. 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-2017-39, and should be submitted on 
or before January 23, 2018.
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    \10\ 17 CFR 200.30-3(a)(12).

[[Page 184]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Brent J. Fields,
Secretary.
[FR Doc. 2017-28309 Filed 12-29-17; 8:45 am]
 BILLING CODE 8011-01-P