Document ID: SEC-2015-1130-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2015-07-08T04:00Z

[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Notices]
[Pages 39169-39172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16653]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75350; File No. SR-BOX-2015-24]

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 Options Facility

July 1, 2015.
    Pursuant to Section 19(b)(1) under the Securities Exchange Act of 
1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on June 29, 2015, BOX Options Exchange LLC (the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 on 
the BOX Market LLC (``BOX'') options facility. While changes to the fee 
schedule pursuant to this proposal will be effective upon filing, the 
changes will become operative on July 1, 2015. 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 make a number of changes to Section I.A of 
the BOX Fee Schedule, Exchange Fees for Non-Auction Transactions.
    First, the Exchange proposes to amend certain credits in the 
pricing model outlined in Section I.A. (Non-Auction Transactions).\5\ 
In this section, fees and credits are assessed depending on upon three 
factors: (i) The account type of the Participant submitting the order; 
(ii) whether the Participant is a liquidity provider or liquidity 
taker; and (iii) the account type of the contra party. Non-Auction 
Transactions in Penny Pilot Classes are assessed different fees or 
credits than Non-Auction Transactions in Non-Penny Pilot Classes. The 
Exchange recently adopted this pricing model \6\ and now proposes to 
amend certain credits in this section.
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    \5\ Non-Auction Transactions are those transactions executed on 
the BOX Book.
    \6\ See Securities Exchange Act Release No. 73547 (November 6, 
2014), 79 FR 67520 (November 13, 2014) (Notice of Filing and 
Immediate Effectiveness of SR-BOX-2014-25).
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    Specifically, the Exchange proposes to eliminate the Maker and 
Taker credits for Public Customers interacting with Professional 
Customers/Broker Dealers or Market Makers in both Penny Pilot and Non-
Penny Pilot Classes. Public Customers currently receive a $0.10 credit 
(Penny Pilot Classes) and $0.45 credit (Non-Penny Pilot Classes) when 
interacting with Professional Customers, Broker Dealers or Market 
Makers, regardless of whether they are adding or removing liquidity. 
The Exchange proposes to eliminate both these credits.
    These transactions will remain exempt from the Liquidity Fees and 
Credits outlined in Section II of the BOX Fee Schedule. The revised fee 
structure

[[Page 39170]]

for Non-Auction Transactions will be as follows:

----------------------------------------------------------------------------------------------------------------
                                                        Penny pilot classes           Non-penny pilot classes
                                                 ---------------------------------------------------------------
         Account type             Contra party      Maker fee/      Taker fee/      Maker fee/      Taker fee/
                                                      credit          credit          credit          credit
----------------------------------------------------------------------------------------------------------------
Public Customer...............  Public Customer.           $0.00            0.00            0.00            0.00
                                Professional                0.00            0.00            0.00            0.00
                                 Customer/Broker
                                 Dealer.
                                Market Maker....            0.00            0.00            0.00            0.00
Professional Customer or        Public Customer.            0.60            0.64            0.95            0.99
 Broker Dealer.
                                Professional                0.25            0.40            0.35            0.40
                                 Customer/Broker
                                 Dealer.
                                Market Maker....            0.25            0.44            0.35            0.44
Market Maker..................  Public Customer.            0.51            0.55            0.85            0.90
                                Professional                0.00            0.05            0.00            0.10
                                 Customer/Broker
                                 Dealer.
                                Market Maker....            0.00            0.29            0.00            0.29
----------------------------------------------------------------------------------------------------------------

    For example, if a Public Customer submitted an order to the BOX 
Book in a Penny Pilot Class (making liquidity), the Public Customer 
would now be charged no fee if the order interacted with a Market 
Maker's order and the Market Maker (taking liquidity) would be charged 
$0.55. To expand on this example, if the Market Maker instead submitted 
an order to the BOX Book in a Penny Pilot Class (making liquidity), the 
Market Maker would be charged $0.51 if the order interacted with a 
Public Customer's order and the Public Customer (taking liquidity) 
would again be charged no fee.
    In Section I.A.1., the Tiered Volume Rebate for Non-Auction 
Transactions, the Exchange gives a per contract rebate to Market Makers 
and Public Customers based on their average daily volume (``ADV'') 
considering all transactions executed on BOX by the Market Maker or 
Public Customer, respectively, as calculated at the end of each month. 
In the Public Customer's Monthly ADV section the Exchange proposes to 
adjust the volume tiers and adopt different per contract rebates for 
Penny Pilot Classes and Non-Penny Pilot Classes. The new per contract 
rebates for Public Customers in Non-Auction Transactions as set forth 
in Section I.A.1. of the BOX Fee Schedule will now be as follows:

------------------------------------------------------------------------
                                                Per contract rebate
                                         -------------------------------
       Public customer monthly ADV          Penny pilot      Non-penny
                                              classes      pilot classes
------------------------------------------------------------------------
65,001 contracts and greater............         ($0.40)         ($0.70)
40,001 contracts to 65,000 contracts....         ($0.25)         ($0.50)
15,001 contracts to 40,000 contracts....         ($0.15)         ($0.40)
1 contract to 15,000 contracts..........           $0.00           $0.00
------------------------------------------------------------------------

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. The proposed changes will allow the Exchange to be 
competitive with other exchanges and to apply fees and credits in a 
manner that is equitable among all BOX Participants. Further, the 
Exchange operates within a highly competitive market in which market 
participants can readily direct order flow to any other competing 
exchange if they determine fees at a particular exchange to be 
excessive.
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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes amending the Non-Auction Transaction credits 
for Public Customers is reasonable, equitable and not unfairly 
discriminatory. The fee structure for Non-Auction Transactions has been 
well received by Participants and the industry since it was adopted 
last year, and the Exchange believes it is now appropriate to eliminate 
the credits for Public Customers.\8\ The proposed fee structure is 
intended to attract order flow to the Exchange by offering all market 
participants incentives to submit their Non-Auction orders to the 
Exchange. The practice of providing additional incentives to increase 
order flow is, and has been, a common practice in the options 
markets.\9\ Further, the Exchange believes it is appropriate to provide 
incentives for market participants which will result in greater 
liquidity and ultimately benefit all Participants trading on the 
Exchange.
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    \8\ See supra, note 6. Prior to adopting the Non-Auction 
Transaction fee structure, Public Customers were charged $0.07 for 
each Non-Auction transaction.
    \9\ See BATS Exchange, Inc. (``BATS'') BATS Options Exchange Fee 
Schedule ``Standard Rates''; Chicago Board Options Exchange, Inc. 
(``CBOE'') Fee Schedule ``Volume Incentive Program'' (page 4); ISE 
Gemini, LLC (``Gemini'') Schedule of Fees, Section I. Regular Order 
Fees and Rebates ``Penny Symbols and SPY, and Non-Penny Symbols'' 
(page 4); Miami International Securities Exchange, LLC (``MIAX'') 
Fee Schedule Section I(a)(i) ``Market Maker Transaction Fees'' and 
``Market Maker Sliding Scale'', and Section I(a)(iii) ``Priority 
Customer Rebate Program''; NASDAQ OMX BX, Inc. (``BX Options'') 
Chapter XV, Section 2 BX Options Market--Fees and Rebates; NASDAQ 
OMX PHLX,(``PHLX''), Pricing Schedule Section B, ``Customer Rebate 
Program''; NASDAQ Stock Market LLC (``NOM'') Chapter XV, Section 2 
NASDAQ Options Market--Fees and Rebates; NYSE Amex, Inc. (``AMEX'') 
Fee Schedule Section I.C. NYSE Amex Options Market Maker Sliding 
Scale--Electronic; and NYSE Arca, Inc (``Arca'') Options Fees and 
Charges, ``Customer and Professional Customer Monthly Posting Credit 
Tiers and Qualifications for Executions in Penny Pilot Issues''(page 
4).
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    The Exchange also believes it is equitable, reasonable and not 
unfairly discriminatory to assess fees according to the account type of 
the Participant

[[Page 39171]]

originating the order and the contra party. This fee structure has been 
in place on the Exchange since last year and the Exchange is simply 
adjusting certain credits within the structure.\10\ The result of this 
structure is that a Participant does not know the fee it will be 
charged when submitting certain orders. Therefore, the Participant must 
recognize that it could be charged the highest applicable fee on the 
Exchange's schedule, which may, instead, be lowered or changed to a 
credit depending upon how the order interacts.
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    \10\ See supra, note 6.
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    The Exchange believes that the proposed fees for Public Customers 
in Non-Auction Transactions are reasonable. Under the proposed Non-
Auction Transaction fee structure Public Customers will never pay a fee 
for their Non-Auction transactions and may be eligible for a per 
contract rebate depending on their monthly ADV for all transactions 
executed on BOX. Therefore the Exchange believes that it is appropriate 
and therefore consistent with the Act to eliminate the credits for 
Public Customers in Section 1.A. The Exchange believes the Non-Auction 
transaction fees for Public Customers are reasonable as they are in 
line with the current fees assessed by other competing exchanges.\11\
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    \11\ Many U.S. Options Exchanges do not differentiate their fees 
between auction and non-auction transactions. However, Public 
Customers are charged anywhere from $0.00 to $0.85 within the 
following options exchange fee schedules. See NASDAQ OMX BX (``BX'') 
Options Pricing, Chapter XV, Sec. 2; NYSE Arca Options (``Arca'') 
Fees and Charges page 3; International Securities Exchange (``ISE'') 
Schedule of Fees, Section I.
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Tiered Volume Rebate for Non-Auction Transactions
    BOX believes it is reasonable, equitable and not unfairly 
discriminatory to adjust the tiered volume based rebates for Public 
Customers in Non-Auction Transactions. The volume thresholds and 
applicable rebates are meant 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. Other exchanges employ similar incentive programs; \12\ 
and the Exchange believes that the proposed changes to the volume 
thresholds and rebates are reasonable and competitive when compared to 
incentive structures at other exchanges.
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    \12\ 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). CBOE's Volume Incentive Program (``VIP'') pays 
certain tiered rebates to Trading Permit Holders for electronically 
executed multiply-listed option orders which include AIM orders. 
Note that some of these exchanges base these rebate programs on the 
percentage of total national Public Customer volume traded on their 
respective exchanges, which the Exchange is not proposing to do.
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    The Exchange continues to believe it is equitable and not unfairly 
discriminatory to offer these rebate structures to Public Customers in 
Non-Auction transactions. The practice of incentivizing increased 
Public Customer order flow is common in the options markets. The 
Exchange believes the proposed changes to the tiers and per contract 
rebates are reasonable, as Public Customers will benefit from the 
opportunity to obtain a greater rebate in most situations. For example, 
under the current schedule a Public Customer with an ADV of 17,000 
would receive a per contract rebate of $0.12. Under the proposed 
schedule this same Public Customer would receive a per contract rebate 
of $0.15 for Penny Pilot Classes and $0.40 for Non-Penny Pilot Classes.
    The Exchange believes it is reasonable to offer a higher per 
contract rebate for transactions in Penny Pilot Classes [sic] compared 
to Non-Penny Pilot Classes [sic] because Non-Penny Pilot Classes are 
typically less actively traded and have wider spreads. The Exchange 
believes that offering a higher rebate will incentivize Public Customer 
order flow in Non-Penny Pilot issues on the Exchange, ultimately 
benefitting 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 the proposed adjustments to fees and 
rebates in the Non-Auction Transactions fee structure will not impose a 
burden on competition among various Exchange Participants. Rather, BOX 
believes that the changes will result in the Participants being charged 
appropriately for these transactions and are designed to enhance 
competition in Non-Auction transactions on BOX. Submitting an order is 
entirely voluntary and Participants can determine which type of order 
they wish to submit, if any, to the Exchange. 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.

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 \13\ and Rule 19b-4(f)(2) 
thereunder,\14\ because it establishes or changes a due, or fee.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2015-24 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-2015-24. 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

[[Page 39172]]

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-2015-24, and should be 
submitted on or before July 29, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16653 Filed 7-7-15; 8:45 am]
 BILLING CODE 8011-01-P