Document ID: SEC-2013-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2013-08-14T04:00Z

[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49584-49586]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19672]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70138; File No. SR-BOX-2013-40

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Fees for Jumbo SPY Option Transactions

August 8, 2013.
    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 August 1, 2013, 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 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 fees for Jumbo SPY Option transactions 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 August 1, 2013. 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.

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

1. Purpose
    The Exchange began listing and trading a new options product, Jumbo 
SPY Options,\5\ on May 10, 2013.\6\ Except for the difference in the 
number of deliverable shares, Jumbo SPY Options have the same terms and 
contract characteristics as regular-sized options contracts (``standard 
options''), including exercise style. The purpose of this filing is to 
amend the transaction fees to further promote trading in Jumbo SPY 
Options.
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    \5\ Option contracts overlying 1,000 shares of the SPDR[supreg] 
S&P[supreg] 500 Exchange-Traded Funds. ``SPDR[supreg],'' ``Standard 
& Poor's[supreg],'' ``S&P[supreg],'' ``S&P 500[supreg],'' and 
``Standard & Poor's 500'' are registered trademarks of Standard & 
Poor's Financial Services LLC. The SPY ETF represents ownership in 
the SPDR S&P 500 Trust, a unit investment trust that generally 
corresponds to the price and yield performance of the SPDR S&P 500 
Index.
    \6\ See Securities Exchange Act Release No. 69511 (May 03, 2013) 
78 FR 27271 (May 9, 2013) (Order Approving SR-BOX-2013-06).
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Section I. Exchange Fees
    The Exchange proposes to remove the Exchange Fees for Jumbo SPY 
Option transactions. Currently the Exchange assesses a distinct fee for 
both Auction and Non-Auction Transactions in Jumbo SPY Options based on 
account type. The Exchange proposes to amend this category and assess a 
$0.00 per Jumbo SPY Option contract fee for all account types. 
Specifically, the Exchange proposes to lower the per-contract fee for 
Professional Customers and Broker-Dealers from $0.25 to $0.00. For 
Market Makers, the Exchange proposes to lower the per-contract fee from 
$0.25 or the tiered per-contract execution fee based upon the 
Participant's monthly average daily volume (``ADV'') to $0.00. The 
$0.00 per contract fee for Public Customers will not change.
    Jumbo SPY Options transactions will continue to count the same as 
standard options transactions for the purposes of ADV under Section 
I.A. and I.B. For example, a Broker-Dealer initiating a Jumbo SPY 
Option Primary Improvement Order would be charged according to the 
proposed Jumbo SPY Options transaction sub-section outlined above, or 
$0.00. However, this transaction would count toward that Broker-
Dealer's ADV in Auction Transactions under Section I.A.
Section II. Liquidity Fees and Credits
    The Exchange currently assesses liquidity fees and credits for all 
options classes traded on BOX (unless explicitly stated otherwise) that 
are applied in addition to any applicable Exchange Fees as described 
above. The Exchange proposes to amend Section II. (Liquidity Fees and 
Credits) to adopt a pricing model for Jumbo SPY Options where the 
Exchange will credit liquidity providers and assess a fee on liquidity 
takers. Specifically, the Exchange proposes to assess a $0.30 credit 
for Jumbo SPY Options transactions that add liquidity and charge a 
$0.50 fee for Jumbo SPY Options transactions that remove liquidity. 
These fees and credits would apply to both Auction and Non-Auction 
transactions in Jumbo SPY Options.
    The Exchange notes that the liquidity pricing proposed for Jumbo 
SPY Options is different from the liquidity pricing currently in place 
under Section II. The pricing model proposed above for Jumbo SPY 
Options is commonly known as a ``Make/Take'' model; for all other 
options classes the Exchange has adopted a ``Take/Make'' model whereby 
orders that add liquidity to the BOX Book are charged a fee, and orders 
that remove liquidity receive a credit. The Exchange believes the 
``Make/Take'' model is more appropriate to promote liquidity for the 
Jumbo SPY Options product. Jumbo SPY Options were designed to help 
institutional investors mitigate the risks inherent in managing large 
portfolios,\7\ and these investors are more familiar with being 
rewarded for providing liquidity.\8\
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    \7\ Id.
    \8\ The ``Make/Take'' model is currently used by the Chicago 
Board Options Exchange Incorporated (``CBOE''), the International 
Securities Exchange LLC.(``ISE') and NASDAQ OMX PHLX LLC. 
(``PHLX'').

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[[Page 49585]]

    Accordingly, the Exchange also proposes to remove the statement in 
Section II.E. (Exempt Transactions) which exempts Jumbo SPY Options 
transactions from liquidity fees and credits.
 2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\9\ in general, and Sections 
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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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Exchange Fees
    The Exchange believes it is reasonable and equitable to lower all 
Exchange Fees for Jumbo SPY Options to $0.00. This is a new options 
product and assessing a lower fee than would otherwise apply will help 
generate additional trading in Jumbo SPY Options. The Exchange also 
believes it is equitable and not unfairly discriminatory to charge no 
Exchange Fees for Jumbo SPY Options as this applies equally to all 
Participants on the Exchange.
Liquidity Fees and Credits
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to adopt liquidity fees and credits for Jumbo SPY 
Options because pricing by symbol is a common practice on many U.S. 
options [sic] as a means to incentivize order flow.\11\
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    \11\ See supra, note 8.
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    The Exchange's proposed Jumbo SPY Options fees and credits, which 
are commonly known as a ``Make/Take'' pricing model, are reasonable 
because the Exchange desires to incentivize market participants to 
transact a greater number of Jumbo SPY Options. The Exchange is 
offering pricing specific to Jumbo SPY Options because this is a new 
options product offered only on the Exchange, and the Exchange believes 
adopting this type of pricing model will increase liquidity in Jumbo 
SPY Options by incentivizing participants to provide more order flow in 
this product, ultimately benefiting all market participants through 
increased liquidity, tighter markets and increased order interaction.
    The Exchange believes it is reasonable for Participants to be 
charged a higher fee for orders removing liquidity in Jumbo SPY Options 
transactions when compared to the credit they will receive for orders 
that add liquidity. As stated above, this is a common model in the 
options industry. Further, the Exchange's proposed pricing model for 
Jumbo SPY Options is equitable and not unfairly discriminatory as these 
liquidity fees and credits apply equally to all Participants and across 
all account types on the Exchange.

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 
removing all Exchange fees and adopting a ``Make/Take'' pricing model 
for Jumbo SPY Options will encourage order flow to be directed to the 
Exchange, which will benefit all market participants by increasing 
liquidity on the Exchange. Specifically, the Exchange believes this 
will incentivize market participants to trade this new product and will 
not impose a burden on competition among various market participants on 
the Exchange but rather will continue to promote competition on the 
Exchange.
    The Exchange believes that the adopting of the proposed fees for 
Jumbo SPY Options will not impose any unnecessary burden on intermarket 
competition because even though Jumbo SPY Options are currently only 
listed on the Exchange, the Exchange operates in a highly competitive 
market compromised of eleven exchanges, any of which may determine to 
trade a similar product. Also, Jumbo SPY Options should result in 
increased options volume and greater trading opportunities for all 
market participants.
    The Exchange also believes that adopting fees on Jumbo SPY Options 
will not impose a burden on competition among various market 
participants on the Exchange. The proposed fees apply equally to all 
Participants and across all account types on the Exchange.
    Accordingly, the fees that are assessed by the Exchange described 
in the above proposal are influenced by these robust market forces and 
therefore must remain competitive with fees charged by other venues for 
other products, and therefore must continue to be reasonable and 
equitably allocated.

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 \12\ and Rule 19b-4(f)(2) 
thereunder,\13\ because it establishes or changes a due, or fee, or 
other charge applicable only to a member.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2013-40 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2013-40. 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

[[Page 49586]]

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-2013-40 and should be submitted on or before 
September 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19672 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P