Document ID: SEC-2019-0181-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2019-02-21T05:00Z

[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5538-5540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02893]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85133; File No. SR-BOX-2019-03]

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 Modify Its 
Strategy QOO Order Fee Cap and Rebate

February 14, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 1, 2019, BOX Exchange LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule to 
amend the Fee Schedule [sic] on the BOX Options Market LLC (``BOX'') 
options facility. The text of the proposed rule change is available 
from the principal office of the Exchange, at the Commission's Public 
Reference Room

[[Page 5539]]

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.D (Strategy QOO Order Fee Cap and Rebate). 
Currently, the Exchange caps fees and offers rebates on all reversal, 
conversion, jelly roll, and box spread strategies on the BOX Trading 
Floor. The Exchange is now proposing to cap fees and offer a Floor 
Broker rebate for short stock interest strategy transactions.
    A short stock interest strategy is a transaction done to achieve a 
short stock interest arbitrage involving the purchase, sale, and 
exercise of in-the-money options of the same class. The Exchange 
proposes to include this definition in a footnote in the BOX Fee 
Schedule along with the other definitions of the strategies in Section 
II.D.
    The Exchange proposes to offer a strategy cap for short stock 
interest strategies. Today, Floor Participant transactions are capped 
at $1,000 for all reversal, conversion, jelly roll, and box spread 
strategies executed on the same trading day.\5\ The Exchange proposes 
to include short stock interest strategies in the daily Strategy QOO 
Order Fee Cap and Rebate. As such, Floor Participant transactions will 
also be capped at $1,000 for all short stock interest strategies 
executed on the same trading day. Further, the Exchange proposes to 
include short stock interest strategies in the Floor Broker Strategy 
QOO Rebate. As proposed, on each trading day, Floor Brokers are 
eligible to receive a $500 rebate for presenting certain Strategy QOO 
Orders on the Trading Floor. The rebate will be applied once the $1,000 
fee cap for all short stock interest, reversal, conversion, jelly roll, 
and box spread strategies is met.
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    \5\ Reversal, conversion, jelly roll and box spread transactions 
are not included in the monthly fee cap for Broker Dealers.
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    The Exchange notes that the fee cap discussed herein exists at 
another options exchange in the industry.\6\
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    \6\ See Cboe Exchange Inc. (``Cboe'') Fee Schedule Footnote 13. 
At Cboe, market-maker, Clearing Trading Permit Holder, JBO 
participant, broker-dealer and non-Trading Permit Holder market-
maker transaction fees are capped at $1,000 for all short stock 
interest strategies. Unlike Cboe, BOX does not have a monthly fee 
cap because the Exchange previously removed it for being unnecessary 
due to the fact that if Participants are capped at $1,000 per day, 
they would never reach the previous $25,000 monthly fee cap. See SR-
BOX-2018-11.
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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,\7\ 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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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that including short stock interest 
strategies in Section II.D of the BOX Fee Schedule is reasonable, as 
another exchange offers fee caps for short stock interest strategies, 
namely Cboe.\8\ Moreover, the Exchange believes the proposed fees are 
reasonable in comparison because BOX's fee cap for short stock interest 
strategies is identical to Cboe's fee cap. Further, the Exchange 
believes that including short stock interest strategies in the Strategy 
QOO Order rebate is appropriate as Floor Brokers are eligible to 
receive a $500 rebate for presenting all other strategies to the BOX 
Trading Floor.
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    \8\ See supra note 6.
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    The Exchange believes that the proposed fee cap for short stock 
interest strategies is equitable and not unfairly discriminatory 
because it provides incentives for all Participants to submit these 
types of strategy orders to the BOX Trading Floor, which brings 
increased liquidity and order flow to the floor for the benefit of all 
market participants. Further, the Exchange believes that including 
short stock interest strategies in the Strategy QOO Order rebate is 
equitable and not unfairly discriminatory as the rebate is available to 
all Floor Brokers who submit such orders to the BOX Trading Floor.

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 because the proposed change 
applies uniformly to all Participants that incur transaction fees for 
short stock interest strategies. Further, another options exchange 
today offer caps on short stock interest strategies; therefore, the 
Exchange believes that the proposal is consistent with robust 
competition and does not provide any unnecessary burden on competition. 
Further, because Floor Participants pay Floor Brokers to execute trades 
on the Exchange floor, the Exchange believes that offering fee caps on 
short stock interest strategies to Participants executing floor 
transactions and not electronic executions does not create an 
unnecessary burden on competition because the fee cap defrays brokerage 
costs associated with executing short stock interest strategy 
transactions, similar to other strategies today.
    The Exchange operates in a highly competitive market in which 
market participants can easily and readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or rebates to be inadequate. Accordingly, the fee cap and 
Floor Broker rebate for short stock interest strategies proposed by the 
Exchange, as described in the proposal, are influenced by these robust 
market forces and therefore must remain competitive with fee caps at 
other venues and therefore must continue to be reasonable and equitably 
allocated to those Participants that opt to direct orders to the 
Exchange rather than competing venues.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \9\ and Rule 19b-4(f)(2) 
thereunder,\10\ because it establishes or changes a due, or fee.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may

[[Page 5540]]

temporarily suspend the rule change if it appears to the Commission 
that the action is necessary or appropriate in the public interest, for 
the protection of investors, or would otherwise further the purposes of 
the Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2019-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2019-03. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2019-03, and should be submitted on 
or before March 14, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02893 Filed 2-20-19; 8:45 am]
 BILLING CODE 8011-01-P