Document ID: SEC-2023-1027-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2023-09-20T04:00Z

[Federal Register Volume 88, Number 181 (Wednesday, September 20, 2023)]
[Notices]
[Pages 64936-64939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20304]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98385; File No. SR-BOX-2023-23]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule for Trading on the BOX Options Market LLC Facility To Amend 
Certain Qualification Thresholds of Section IV.A.1 (Tiered Volume 
Rebate for Non-Auction Transactions)

September 14, 2023.
    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 September 1, 2023, BOX Exchange LLC (``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 certain qualification thresholds of Section IV.A.1, (Tiered 
Volume Rebate for Non-Auction Transactions) 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 and also on the Exchange's internet 
website at http://boxexchange.com.

[[Page 64937]]

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 certain qualification thresholds of Section IV.A.1, (Tiered 
Volume Rebate for Non-Auction Transactions).
    Currently, Public Customers \5\ receive a per contract rebate for 
Electronic Non-Auction Transactions according to the Tier achieved by 
the Public Customer as provided in the Percentage Thresholds of 
National Customer Volume in Multiply-Listed Options Classes table in 
Section IV.A.1 of the BOX Fee Schedule. Percentage thresholds are 
calculated on a monthly basis by totaling the Public Customer's 
executed Auction and Non-Auction transaction volume on BOX, relative to 
the total national Customer volume in multiply-listed options classes.
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    \5\ The Exchange notes that Public Customers do not initiate 
transactions on BOX directly. BOX Participants initiate electronic 
Non-Auction Transactions on behalf of Public Customers and these BOX 
Participants are assessed fees or provided rebates by the Exchange 
for such transactions.
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    The Exchange notes that Non-Auction Transactions where a Public 
Customer order interacts with another Public Customer order are exempt 
from a per contract rebate. However, these transactions still count 
toward the Public Customer's monthly volume on BOX. The current 
thresholds and rebates are as follows:

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                                                                                                         Per contract rebate
                                                                           -----------------------------------------------------------------------------
                                         Percentage thresholds of national   Penny Interval Classes      Non-Penny Interval                SPY
                 Tier                   customer volume in multiply-listed --------------------------          Classes         -------------------------
                                            options classes  (monthly)                               --------------------------
                                                                               Maker        Taker        Maker        Taker        Maker        Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................................  0.000%-0.129%.....................        $0.00        $0.00        $0.00        $0.00        $0.00        $0.00
2.....................................  0.130%-0.339%.....................       (0.05)       (0.15)       (0.15)       (0.27)       (0.05)         0.00
3.....................................  0.340%-0.549%.....................       (0.10)       (0.20)       (0.30)       (0.32)       (0.10)         0.00
4.....................................  0.550% and Above..................       (0.27)       (0.27)       (0.60)       (0.40)       (0.27)         0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange now proposes to raise the percentage thresholds within 
the Percentage Thresholds of National Customer Volume in Multiply-
Listed Options Classes table. The proposed rebate structure is as 
follows:

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                                                                                                         Per contract rebate
                                                                           -----------------------------------------------------------------------------
                                         Percentage thresholds of national   Penny Interval Classes      Non-Penny Interval                SPY
                 Tier                   customer volume in multiply-listed --------------------------          Classes         -------------------------
                                             options classes (monthly)                               --------------------------
                                                                               Maker        Taker        Maker        Taker        Maker        Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................................  0.000%-0.249%.....................        $0.00        $0.00        $0.00        $0.00        $0.00        $0.00
2.....................................  0.250%-0.499%.....................       (0.05)       (0.15)       (0.15)       (0.27)       (0.05)         0.00
3.....................................  0.500%-0.749%.....................       (0.10)       (0.20)       (0.30)       (0.32)       (0.10)         0.00
4.....................................  0.750% and Above..................       (0.27)       (0.27)       (0.60)       (0.40)       (0.27)         0.00
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    The Exchange notes that the percentage thresholds in Tiers 1 
through 4 will be adjusted, however the rebate amounts will not change. 
For example, the Tier 2 rebates remain at $0.05 for Makers in Penny 
Interval Classes and $0.15 for Takers in Penny Interval Classes, but 
will require 0.250%-0.499% of national customer volume in multiply-
listed options classes for Public Customers to qualify for the rebate. 
Similarly, the Tier 3 rebates remain at $0.10 for Makers in Penny 
Interval Classes and $0.20 for Takers in Penny Interval Classes, and 
the Tier 4 rebates in Penny Interval Classes remain at $0.27 but the 
thresholds required to qualify for those rebates will be 0.500%-0.749% 
and 0.750% and above of national customer volume in multiply-listed 
options classes, respectively.
    Although, the new volume thresholds will require greater volumes to 
qualify for such rebates, the Exchange believes that Public Customers 
will still benefit from the opportunity to obtain a rebate for their 
transactions.\6\ The Exchange recently reviewed its Tiered Volume 
Rebate structure for Non-Auction Transactions and determined that 
raising the percentage thresholds is appropriate at this time. The 
Exchange has not modified these volume thresholds since November of 
2015 \7\ and the current rebate amounts have been in place since June 
of 2018.\8\ Further, the Exchange believes that the proposed volume 
tiers remain competitive with other exchanges \9\ and notes that Public 
Customers may receive a rebate and will continue to pay no fees

[[Page 64938]]

for Electronic Non-Auction transactions on BOX.
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    \6\ The Exchange notes that BOX Participants collect rebates on 
behalf of Public Customers and have independent fee arrangements 
with such Public Customers by which rebates provided by BOX would be 
taken into account.
    \7\ See Securities Exchange Act Release No. 76447 (November 16, 
2015), 80 FR 72758 (November 20, 2015) (SR-BOX-2015-36).
    \8\ See Securities Exchange Act Release No. 83396 (June 8, 
2018), 83 FR 27807 (June 14, 2018) (SR-BOX-2018-21).
    \9\ See infra note 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,\10\ 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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    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to adjust certain percentage thresholds in the volume-
based thresholds for Public Customers in Electronic Non-Auction 
Transactions. The volume-based thresholds and applicable rebates are 
designed to incentivize Public Customers 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. While the Exchange proposes to increase the volume 
thresholds, thus requiring greater volumes to qualify for rebates, the 
Exchange believes that Public Customers will still benefit from the 
opportunity to obtain a rebate. The Exchange notes that other exchanges 
employ similar incentive programs; and the Exchange believes that the 
proposed changes to the volume based rebate thresholds are reasonable 
and competitive when compared to incentive structures at other 
exchanges.\11\ In particular, Nasdaq PHLX's Customer Rebate Program has 
five tiers where Tier 1 is 0.00%-0.60% and Tier 5 is above 2.50% of 
national customer volume in multiply-listed equity and Exchange-Traded 
Fund (``ETF'') options with rebates that range from $0.00 to $0.21.\12\ 
Additionally, CBOE's Volume Incentive Program has five tiers where Tier 
1 is 0%-0.75% and Tier 5 is above 4.00% of national customer volume in 
all underlying symbols excluding certain index symbols, Nanos, and FLEX 
Micros with rebates that range from $0.00 to $0.15.\13\ The Exchange is 
proposing four tiers where Tier 1 is 0.000%-0.249% and Tier 4 is 0.750% 
and above with rebates that range from $0.00 to $0.27 for Penny 
Interval Classes. Thus, the Exchange believes that comparable rebates 
can still be attained on BOX, under the Exchange's proposed thresholds, 
at lower volumes than on CBOE or Nasdaq PHLX.
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    \11\ See Nasdaq PHLX LLC (``Nasdaq PHLX'') Options 7, Section 2 
(Customer Rebate Program) and Cboe Exchange, Inc. (``CBOE'') Fee 
Schedule (Volume Incentive Program). The Exchange notes that these 
programs use different tier structures, volume calculations, and 
rebate amounts, however, their rebate programs operate similarly to 
BOX's.
    \12\ These rebates are referred to in Nasdaq PHLX Options 7, 
Section 2 as Category A rebates. The Exchange believes that Category 
A rebates and the volume used to determine which tiers are attained 
are comparable to BOX's Tiered Volume Rebate for Non-Auction 
Transactions (Percentage Thresholds of National Customer Volume in 
Multiply-Listed Options Classes) with the exception that Nasdaq PHLX 
excludes volume associated with electronic QCC Orders. The Exchange 
also notes that SPY is rebated under Nasdaq PHLX Options 7, Section 
3.
    \13\ These rebates are for simple, Non-AIM transactions in the 
CBOE Fee Schedule, VIP. The Exchange believes that simple, Non-AIM 
transactions and the volume used to determine which tiers are 
attained are comparable to BOX's Tiered Volume Rebate for Non-
Auction Transactions (Percentage Thresholds of National Customer 
Volume in Multiply-Listed Options Classes).
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    The proposed changes to the thresholds in Tiers 1 through 4 are 
equitable and not unfairly discriminatory as they are available to all 
BOX Participants that initiate electronic Non-Auction Transactions on 
the behalf of Public Customers, and Participants may choose whether or 
not to take advantage of the percentage thresholds and their applicable 
rebates on BOX.
    The Exchange continues to believe it is equitable and not unfairly 
discriminatory to have these rebate structures for Public Customers in 
Electronic Non-Auction Transactions. The securities markets generally, 
and BOX in particular, have historically aimed to improve markets for 
investors and develop various features within the market structure for 
Public Customer benefit. Accordingly, the Exchange believes that 
providing a rebate structure for Public Customers is appropriate and 
not unfairly discriminatory. Based on its review of competitor 
exchanges, the Exchange believes that the proposed rebate thresholds, 
although more difficult to obtain, will not disincentivize BOX 
Participants from sending Public Customer order flow to BOX. Rather, 
the Exchange believes that the proposed rebates will continue to help 
attract a high level of Public Customer order flow to the BOX Book and 
create liquidity, which the Exchange believes will ultimately benefit 
all Participants trading on BOX.

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 Public Customer Electronic Non-Auction Transactions will not impose 
a burden on competition among various Participants. The Exchange 
believes that the proposed changes will result in Public Customers 
being rebated appropriately for these transactions. 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. Because competitors are free to modify their own fees and 
rebates in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee or rebate changes in this market may impose any burden on 
competition is extremely limited. The Exchange notes that other 
exchanges provide programs to incentivize customer order flow and that 
the proposed changes to the volume thresholds remain competitive when 
compared to incentive structures at other exchanges.\14\ For the 
reasons described above, the Exchange believes that the proposed rule 
change reflects this competitive environment.
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    \14\ See supra note 11.
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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 \15\ and Rule 19b-4(f)(2) 
thereunder,\16\ because it establishes or changes a due, or fee.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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.

[[Page 64939]]

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BOX-2023-23 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-2023-23. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BOX-2023-23 and should be 
submitted on or before October 11, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20304 Filed 9-19-23; 8:45 am]
BILLING CODE 8011-01-P