Document ID: SEC-2020-1909-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2020-12-01T05:00Z

[Federal Register Volume 85, Number 231 (Tuesday, December 1, 2020)]
[Notices]
[Pages 77312-77315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26500]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90522; File No. SR-BOX-2020-37]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the 
Provisions of the Exchange's Second Amended and Restated Limited 
Liability Company Agreement

November 25, 2020.
    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 November 24, 2020, BOX Exchange LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. The Commission is 
publishing this notice to

[[Page 77313]]

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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the provisions of its Second Amended 
and Restated Limited Liability Company Agreement. 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://boxoptions.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 self-regulatory organization 
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 self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Changes to the Exchange LLC Agreement
    The Exchange is a Delaware limited liability company that, 
therefore, is governed by its charter in the form of a limited 
liability company agreement. Pursuant to the Exchange LLC Agreement, 
MXUS2 was designated as the party to interact with certain governmental 
taxing authorities on behalf of the Exchange. MXUS2 has notified the 
Exchange that it will no longer serve in this capacity.\3\ The Exchange 
desires to substitute an officer of the Exchange to represent the 
Exchange when interacting with applicable taxing authorities. 
Accordingly, the Exchange proposes certain discrete amendments to the 
Exchange LLC Agreement that would replace MXUS2 with an officer of the 
Exchange for purposes of tax matters. In addition, the Exchange 
proposes to replace the defined term ``Tax Matters Member'' with ``Tax 
Matters Representative'' in order to accurately identify the new tax 
matters representative. These amendments to the Exchange LLC Agreement 
are proposed to become effective by the adoption of a written amendment 
in the form attached as Exhibit 5A.
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    \3\ No other changes to the status of MXUS2 as a Member of the 
Exchange is being proposed at this time.
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    The proposed amendment to the Exchange LLC Agreement would insert a 
new defined term ``Tax Matters Representative'' into Section 1.1 of the 
Exchange LLC Agreement to replace the now obsolete term ``Tax Matters 
Member'' to ease the reader's access to the new term used in the 
document.
    The proposed amendment to the Exchange LLC Agreement would delete 
the following language contained in Section 11.6 of the Exchange LLC 
Agreement, which currently designates MXUS2 as the tax matters member:
    ``11.6 Tax Matters Member. MXUS2 shall be the tax matters Member of 
the Exchange for purposes of the Code, and shall be entitled to take 
such actions on behalf of the Exchange in any and all proceedings with 
the Internal Revenue Service as it, in its absolute discretion, deems 
appropriate without regard to whether such actions result in a 
settlement of tax matters favorable to some Members and adverse to 
other Members. Notwithstanding the foregoing, MXUS2 shall (a) promptly 
deliver to the other Members copies of any notices, letters or other 
documents received by MXUS2 as the tax matters Member of the Exchange, 
(b) keep the other Members informed with respect to all matters 
involving MXUS2 as the tax matters Member of the Exchange, and (c) 
consult with the other Members and obtain the approval of the other 
Members prior to taking any actions as the tax matters Member of the 
Exchange. The tax matters Member shall not be entitled to be paid by 
the Exchange any fee for services rendered in connection with any tax 
proceeding, but shall be reimbursed by the Exchange for all third-party 
costs and expenses incurred by it in connection with any such 
proceeding and shall be indemnified by the Exchange with respect to any 
action brought against it in connection with the settlement of any such 
proceeding by applying, mutatis mutandis, the provisions of Article 
13.''
    The proposed amendment to the Exchange LLC Agreement would replace 
the deleted text above with the following, which designates an officer 
of the Exchange as its tax matters representative:
    ``11.6 Tax Matters Representative. The president of the Exchange, 
or another officer of the Exchange designated by its chief executive 
officer, shall be the tax matters representative of the Exchange (the 
``Tax Matters Representative'') for purposes of the Code, and shall be 
entitled to take such actions on behalf of the Exchange in any and all 
proceedings with the Internal Revenue Service and any corresponding 
provision of state or local income tax law as such officer deems 
appropriate without regard to whether such actions result in a 
settlement of tax matters favorable to some Members and adverse to 
other Members. Notwithstanding the foregoing, the Exchange shall (a) 
promptly deliver to the Members copies of any notices, letters or other 
documents received by it as the Tax Matters Representative, (b) keep 
the Members informed with respect to all matters involving the Tax 
Matters Representative, and (c) consult with the Members and obtain the 
approval of the Members prior to taking any actions as the Tax Matters 
Representative. The Tax Matters Representative shall be reimbursed by 
the Exchange for all costs and expenses incurred by the Tax Matters 
Representative in connection with such role and shall be indemnified by 
the Exchange with respect to any action brought against the Tax Matters 
Representative in connection with the settlement of any proceeding by 
applying, mutatis mutandis, the provisions of Article 13.''
    The Exchange notes, the proposal makes two substantive changes to 
the Exchange LLC Agreement. First, the proposed provision would provide 
that the president of the Exchange, or another officer of the Exchange 
(if designated by its chief executive officer), will be the tax matters 
representative of the Exchange in order to take action on behalf of the 
Exchange and represent the Exchange in all matters with the Internal 
Revenue Service or any other state or local tax officials. Second, the 
tax matters representative may be entitled to be paid by the Exchange a 
fee for services rendered in connection with representing the Exchange 
in any tax proceeding because officers of the Exchange are compensated 
for their services.
Changes to the Holdings LLC Agreement
    BOX Holdings is a Delaware limited liability company that, 
therefore, is governed by its charter in the form of a limited 
liability company agreement. Pursuant to the Holdings LLC Agreement, 
MXUS2 was designated as the party to interact with certain governmental 
taxing authorities on behalf of BOX Holdings. MXUS2 has notified BOX 
Holdings that it will no

[[Page 77314]]

longer serve in this capacity.\4\ BOX Holdings desires to substitute an 
officer of BOX Holdings to represent BOX Holdings when interacting with 
applicable taxing authorities. Accordingly, the Exchange proposes 
certain discrete amendments to the Holdings LLC Agreement that would 
replace MXUS2 with an officer of BOX Holdings for purposes of tax 
matters. In addition, the Exchange proposes to replace the defined term 
``Tax Matters Member'' with ``Tax Matters Representative'' in order to 
accurately identify the new tax matters representative. These 
amendments are proposed to become effective by the adoption of a 
written amendment to the Holdings LLC Agreement in the form attached as 
Exhibit 5B.
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    \4\ No other changes to the status of MXUS2 as a Member of BOX 
Holdings is being proposed at this time.
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    The proposed amendment to the Holdings LLC Agreement would replace 
the term ``Tax Matters Member'' with a new term, ``Tax Matters 
Representative'' everywhere it appears in the Holdings LLC Agreement, 
which is two instances in Section 1.1 and one instance in Section 11.5. 
The first change in Section 1.1 is where the term appears as part of 
the defined term, ``Depreciation;'' the second is the current 
definitional cross reference for the term ``Tax Matters Member'' in 
Section 1.1 and the third is where the term appears in the discussion 
of tax elections in Section 11.5. The purpose of these changes is to 
adopt a new defined term and use it consistently throughout the 
document.
    The proposed amendment to the Holdings LLC Agreement would delete 
the following language contained in Section 11.6 of the Holdings LLC 
Agreement, which currently designates MXUS2 as the tax matters member:
    ``11.6 Tax Matters Member. MXUS2 shall be the tax matters partner 
of BOX Holdings for purposes of the Code, and shall be entitled to take 
such actions on behalf of BOX Holdings in any and all proceedings with 
the Internal Revenue Service and any corresponding provision of state 
or local income tax law (the ``Tax Matters Member''). Notwithstanding 
the foregoing, the Tax Matters Member shall (a) promptly deliver to the 
other Members copies of any notices, letters or other documents 
received by it as the Tax Matters Member, and (b) keep the other 
Members informed with respect to all matters involving it as the Tax 
Matters Member of BOX Holdings. Each Member shall have the right to 
participate in any tax audits, controversies and litigations involving 
BOX Holdings (``Tax Claims'') at its own expense. The Tax Matters 
Member shall not settle any material Tax Claim without the prior 
written consent of all Members that may be adversely affected by such 
settlement, which consent shall not be unreasonably conditioned, 
delayed or withheld. The Tax Matters Member shall not be entitled to be 
paid by BOX Holdings any fee for services rendered in connection with 
any tax proceeding, but shall be reimbursed by BOX Holdings for all 
third-party costs and expenses incurred by it in connection with any 
such proceeding and shall be indemnified by BOX Holdings with respect 
to any action brought against it in connection with the settlement of 
any such proceeding by applying, mutatis mutandis, the provisions of 
Article 13. If needed to have Subchapter C of Chapter 63 of the Code 
apply to BOX Holdings, the Tax Matters Member shall make an election on 
behalf of BOX Holdings pursuant to Code Section 6231(a)(1)(B)(ii).''
    The proposed amendment to the Holdings LLC Agreement would replace 
the deleted text above with the following, which designates an officer 
of BOX Holdings as its tax matters representative:
    ``11.6 Tax Matters Representative. The president of BOX Holdings, 
or another officer of BOX Holdings designated by its senior executive 
officer, shall be the tax matters representative of BOX Holdings (the 
``Tax Matters Representative'') for purposes of the Code, and shall be 
entitled to take such actions on behalf of BOX Holdings in any and all 
proceedings with the Internal Revenue Service and any corresponding 
provision of state or local income tax law. Notwithstanding the 
foregoing, the Tax Matters Representative shall (a) promptly deliver to 
the Members copies of any notices, letters or other documents received 
by it as the Tax Matters Representative, and (b) keep the Members 
informed with respect to all matters involving it as the Tax Matters 
Representative. Each Member shall have the right to participate in any 
tax audits, controversies and litigations involving BOX Holdings (``Tax 
Claims'') at its own expense. The Tax Matters Representative shall not 
settle any material Tax Claim without the prior written consent of all 
Members that may be adversely affected by such settlement, which 
consent shall not be unreasonably conditioned, delayed or withheld. The 
Tax Matters Representative shall be reimbursed by BOX Holdings for all 
costs and expenses incurred by the Tax Matters Representative in 
connection with such role and shall be indemnified by the Exchange with 
respect to any action brought against the Tax Matters Representative in 
connection with the settlement of any proceeding by applying, mutatis 
mutandis, the provisions of Article 13. If needed to have Subchapter C 
of Chapter 63 of the Code apply to BOX Holdings, the Tax Matters 
Representative shall make an election on behalf of BOX Holdings 
pursuant to Code Section 6231(a)(1)(B)(ii).''
    The Exchange notes, the proposal makes two substantive changes to 
the Holdings LLC Agreement. First, the Exchange notes the amended 
provision would provide that the president of BOX Holdings, or another 
officer of BOX Holdings (if designated by its senior executive 
officer), will be the tax matters representative of BOX Holdings in 
order to take action on behalf of BOX Holdings and represent BOX 
Holdings in all matters with the Internal Revenue Service or any other 
state or local tax officials. Second, the tax matters representative 
may be entitled to be paid by BOX Holdings a fee for services rendered 
in connection with representing BOX Holdings in any tax proceeding 
because officers of BOX Holdings are compensated for their services.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(1) \5\ of the Act, in that it would enable the 
Exchange to be so organized as to have the capacity to be able to carry 
out the purposes of the Exchange Act and to comply, and to enforce 
compliance by its exchange members and persons associated with its 
exchange members, with the provisions of the Exchange Act, the rules 
and regulations thereunder, and the rules of the Exchange. The proposed 
rule change would contribute to the orderly operation of the Exchange 
and would enable the Exchange to be so organized as to have the 
capacity to be able to carry out the purposes of the Exchange Act and 
to comply, and to enforce compliance by its exchange participants and 
persons associated with its exchange participants, with the provisions 
of the Exchange Act, the rule and regulations thereunder, and the rules 
of the Exchange because it would allow the Exchange to designate an 
officer to deal with tax matters on its behalf. The Exchange believes 
that revising the defined terms used throughout the Exchange LLC 
Agreement and the Holdings LLC

[[Page 77315]]

Agreement and making the terms internally consistent with the other 
proposed changes would promote readability and comprehension of the 
documents, making the language clear and concise.
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    \5\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
burden on competition because it is ministerial in nature and will not 
have any competitive impact. As described above, the Exchange is 
proposing certain discrete amendments to the Exchange LLC Agreement and 
the Holdings LLC Agreement that would (i) provide a replacement tax 
matters representative to replace MXUS2, which is withdrawing from 
service in this role, and (ii) consistently revise the defined terms in 
the Exchange LLC Agreement and the Holdings LLC Agreement to make them 
internally consistent. For these reasons, the Exchange believes that 
the proposed changes are consistent with the Exchange Act as there is 
no impact on competition.

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A)(iii). Rule 19b-4(f)(6)(iii) requires 
a self-regulatory organization to give the Commission written notice 
of its intent to file the proposed rule change at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission notes that the Exchange satisfied this requirement.
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \9\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \9\ 15 U.S.C. 78s(b)(2)(B).
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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-2020-37 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-2020-37. 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 the 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-2020-37 and should be submitted on 
or before December 22, 2020.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-26500 Filed 11-30-20; 8:45 am]
BILLING CODE 8011-01-P