Document ID: SEC-2017-1561-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2017-09-20T04:00Z

[Federal Register Volume 82, Number 181 (Wednesday, September 20, 2017)]
[Notices]
[Pages 44018-44020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19967]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81615; File No. SR-BOX-2017-30]

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

September 14, 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 September 1, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 on 
the BOX 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 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 the Fee Schedule for trading on BOX. 
Specifically, the Exchange proposes to (1) amend the BOX Volume Rebate 
(``BVR'') in Section I.B.2; (2) modify the fees and rebate for 
Qualified Contingent Cross \5\ (``QCC'') Transactions in Section I.D.; 
and (3) make a clarifying change to in [sic] a footnote regarding the 
definition of ``Broker Dealer facilitating a Public Customer'' in 
Section II (Manual Transactions).
---------------------------------------------------------------------------

    \5\ A QCC Order is an originating order (Agency Order) to buy or 
sell at least 1,000 standard option contracts, or 10,000 mini-option 
contracts, that is identified as being part of a qualified 
contingent trade, coupled with a contra side order to buy or sell an 
equal number of contracts.
---------------------------------------------------------------------------

BVR
    First, the Exchange proposes to adjust a rebate within the BVR. 
Under the BVR, the Exchange offers a tiered per contract rebate for all 
Public Customer PIP Orders and COPIP Orders of 100 and under contracts 
that do not trade solely with their contra order. Percentage thresholds 
are calculated on a monthly basis by totaling the Participant's PIP and 
COPIP volume submitted to BOX, relative to the total national Customer 
volume in multiply-listed options classes. The Exchange proposes to 
raise the rebate for COPIP Orders in Tier 4 from $0.06 to $0.08. The 
Exchange notes that is it not proposing any changes to the percentage 
thresholds within the BVR. The quantity submitted will continue to be 
calculated on a monthly basis by totaling the Participant's PIP and 
COPIP volume submitted to BOX, relative to the total national Customer 
volume in multiply-listed options classes.
    The Exchange also proposes to amend the BVR to remove the flat 
$0.03 rebate for those Public Customer COPIP Orders of 100 and under 
contracts that trade solely with their contra order. Public Customer 
PIP Orders of 100 and under contracts that trade solely with their 
contra order will continue to receive a $0.03 rebate per contract, 
regardless of tier.
QCC Transactions
    The Exchange then proposes to amend the QCC Transaction fees and 
rebate. Specifically, the Exchange proposes to decrease the fees for 
all non-Public Customer (Professional Customers, Broker Dealers and 
Market Makers) QCC Orders from $0.20 to $0.17 per contract side.\6\ In 
addition, the Exchange proposes to decrease the QCC Rebate from $0.15 
to $0.14 per contract.
---------------------------------------------------------------------------

    \6\ The Exchange notes that no changes will be made to Public 
Customer QCC Order fees.
---------------------------------------------------------------------------

Manual Transaction Fees
    Finally, the Exchange also proposes to amend the footnote that 
defines a ``Broker Dealer facilitating a Public Customer'' in Section 
II (Manual Transactions) to clarify that the ``Broker Dealer 
facilitating a Public Customer'' account type and applicable fees will 
be applied, regardless of if the Broker Dealer clears in the customer 
range, or clears as a Broker Dealer. To do this, the Exchange proposes 
to amend the

[[Page 44019]]

definition to state that a ``Broker Dealer facilitating a Public 
Customer'' applies to any Manual transaction executed using the open 
outcry process involving Broker Dealer that has a Public Customer of 
that same Broker Dealer on the contra side of the transaction, or where 
the Broker Dealer and the Public Customer both clear through the same 
clearing firm and the Broker Dealer clears in the customer range. The 
additional language is intended to eliminate any potential for investor 
confusion with regard to the definition of ``Broker Dealer facilitating 
a Public Customer.'' A Broker Dealer who facilitates a Public Customer 
QOO Order for submission to the BOX Trading Floor will be eligible for 
this account type and applicable fee of $0.00, regardless of if the 
Broker Dealer cleared solely as a Broker Dealer or a Broker Dealer/
Customer. The Exchange notes that clarifying language is substantially 
similar with the language at another exchange with an open outcry 
trading floor.\7\
---------------------------------------------------------------------------

    \7\ See NYSE Arca, Inc (``Arca'') Fee Schedule. The Exchange 
notes, however, that Arca's similar language includes reference to 
``Firm Facilitation.'' Because BOX does not use or define the term 
``Firm'' within the Fee Schedule and instead uses the term Broker 
Dealer. BOX does not intend to include ``Firm Facilitation'' within 
this definition.
---------------------------------------------------------------------------

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,\8\ 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

BVR
    The Exchange believes the proposed amendments to the BVR in Section 
I.B.2 of the BOX Fee Schedule are reasonable, equitable and not 
unfairly discriminatory. The BVR was adopted to attract Public Customer 
order flow to the Exchange by offering these Participants incentives to 
submit their Public Customer PIP and COPIP Orders to the Exchange and 
the Exchange believes it is appropriate to now amend the BVR. The 
Exchange believes it is equitable and not unfairly discriminatory to 
amend the COPIP Rebate in Tier 4 of the BVR, as all Participants have 
the ability to qualify for a rebate, and rebates are provided equally 
to qualifying Participants. Other exchanges employ similar incentive 
programs; \9\ and the Exchange believes that the proposed rebate change 
is reasonable and competitive when compared to rebate for the PIP in 
Tier 4 of the BVR and the rebates on other exchanges.
---------------------------------------------------------------------------

    \9\ See Section B of the PHLX Pricing Schedule entitled 
``Customer Rebate Program;'' ISE Gemini's Qualifying Tier Thresholds 
(page 6 of the ISE Gemini Fee Schedule); and CBOE's Volume Incentive 
Program (VIP).
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to no longer apply a flat $0.03 rebate to Public 
Customer COPIP Orders that trade solely with their contra order. As 
stated above, the BVR is intended to incentivize Participants to direct 
Customer order flow to the Exchange, and the Exchange believes unlike 
Public Customer PIP Orders, an incentive is not necessary for 
internalized Public Customer COPIP Orders that only trade against their 
contra order. The Exchange believes it is equitable and not unfairly 
discriminatory as all internalized Public Customer COPIP Orders will no 
longer receive a rebate. Additionally, other Exchanges also make this 
distinction when providing rebates for transactions in their complex 
order auction mechanisms.\10\
---------------------------------------------------------------------------

    \10\ See the International Securities Exchange (``ISE'') Fee 
Schedule, Complex Order Fees and Rebates on page 9. Under the ISE 
Fee Schedule the initiator receives a ``break-up'' rebate only for 
contracts that are submitted to their auction mechanism that do not 
trade with their contra order.
---------------------------------------------------------------------------

QCC
    The Exchange believes that the proposed amendments to the QCC Order 
fees are reasonable, as they are in line with the amount assessed at 
another Exchange for similar transactions.\11\ Further, the Exchange 
believes that charging Professional Customers and Broker Dealers and 
Market Makers more than Public Customers for QCC Orders is reasonable, 
equitable and not unfairly discriminatory. 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. The Exchange believes that 
continuing to charge no fees to Public Customers in QCC transactions is 
reasonable and, ultimately, will benefit all Participants trading on 
the Exchange by attracting Public Customer order flow.
---------------------------------------------------------------------------

    \11\ See CBOE Fee Schedule. CBOE charges non-Public Customers 
$0.17 per contract and does not charge Public Customers.
---------------------------------------------------------------------------

    The Exchange believes the proposed QCC Rebate for the originating 
side of the QCC transaction is reasonable, as it is in line with other 
competing exchanges that also provide a rebate on the originating side 
of a QCC Order.\12\ The Exchange believes the proposed rebate is 
equitable and not unfairly discriminatory because it potentially 
applies to all Participants that enter the originating order (except 
for when both the agency order and contra-side orders are Public 
Customers) and because it is intended to incentivize the sending of 
more QCC Orders to the Exchange. The Exchange believes it is 
reasonable, equitable and not unfairly discriminatory to not provide a 
rebate for the originating order for QCC transactions when both the 
originating order and contra side orders are from Public Customers, 
since Public Customers are already incentivized by having no 
transaction fee for QCC Orders.
---------------------------------------------------------------------------

    \12\ CBOE and the Miami International Securities Exchange LLX 
(``MIAX'') offer a $0.10 per contract credit or rebate paid on the 
initiating side of the QCC transaction.
---------------------------------------------------------------------------

Manual Transactions
    Lastly, the Exchange believes that amending the language with 
regard to the definition of ``Broker Dealer facilitating a Public 
Customer'' is reasonable, equitable and not unfairly discriminatory, as 
it intended to clarify that a ``Broker Dealer facilitating a Public 
Customer'' applies to any Manual transaction executed using the open 
outcry process involving a Broker Dealer that has a Public Customer of 
that same Broker Dealer on the contra side of the transaction, or where 
the Broker Dealer and the Public Customer both clear through the same 
clearing firm and the Broker Dealer clears in the customer range. The 
wording of the previous definition unintentionally restricted the 
definition of ``Broker Dealer facilitating a Public Customer'' to those 
Broker Dealers clearing in the customer range. The Exchange is now 
proposing to clarify that the account type will apply regardless of how 
the Broker Dealer clears. The Exchange believes the proposed change is 
reasonable as it is substantially similar to the definition ``Broker 
Dealer facilitating a Public Customer'' account type found on another 
exchange with an open outcry trading floor.\13\ Further, the Exchange 
believes the proposed language is equitable and not unfairly 
discriminatory as it seeks to clarify that ``Broker Dealer facilitating 
a Public Customer'' does not only apply to Broker Dealers who clear in 
the customer range.
---------------------------------------------------------------------------

    \13\ See supra note 7.

---------------------------------------------------------------------------

[[Page 44020]]

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 proposed rule change amends 
the BVR to raise a rebate and no longer apply a rebate when the COPIP 
Order only trades with its contra order. The Exchange does not believe 
that the proposed changes burden competition and will instead help 
promote competition by providing additional incentives for market 
participants to submit customer order flow to BOX and thus, create a 
greater opportunity for retail customers to receive additional price 
improvement.
    The Exchange believes this proposal will not cause unnecessary 
burden on intermarket competition because the proposed changes will 
actually enhance the competiveness of the Exchange relative to other 
exchanges which offer comparable fees and rebates for QCC transactions. 
To the extent that the proposed changes make the Exchange a more 
attractive marketplace for market participants at other exchanges, such 
market participants are welcome to become market participants on the 
Exchange.

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 \14\ and Rule 19b-4(f)(2) 
thereunder,\15\ because it establishes or changes a due, or fee.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-2017-30 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-2017-30. 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-2017-30, and should be 
submitted on or before October 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19967 Filed 9-19-17; 8:45 am]
 BILLING CODE 8011-01-P