Document ID: SEC-2017-1028-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2017-06-19T04:00Z

[Federal Register Volume 82, Number 116 (Monday, June 19, 2017)]
[Notices]
[Pages 27920-27925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12589]

[[Page 27920]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80917; File No. SR-BOX-2017-20]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
BOX Rule 7240 (Complex Orders) To Expand the Price Range Within Which 
Complex Orders Can Trade

June 13, 2017.
    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 June 2, 2017, BOX Options Exchange LLC (the ``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 Exchange. The Exchange filed the proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange proposes to amend BOX Rule 7240 (Complex Orders) to 
expand the price range within which Complex Orders can trade. 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 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
    The Exchange proposes to amend BOX Rule 7240 (Complex Orders) to 
expand the price range within which Complex Orders can trade by 
allowing the execution of Complex Order trades on BOX Market LLC 
(``BOX''), the options trading facility of the Exchange, at prices 
equal to or better than the Extended cNBBO, as described below.
Background
    Currently, on BOX, all inbound Complex Orders are filtered to 
ensure that each leg of a Complex Order will be executed at a price 
that is equal to or better than the National Best Bid or Offer 
(``NBBO'') and the BOX Best Bid or Offer (``BOX BBO'') for each of the 
component series. Specifically, if an inbound Complex Order is 
executable (against either opposite side Complex Orders on the Complex 
Order Book or interest on the BOX Book) on BOX, BOX will determine if 
the potential execution price is equal to or better than both cNBBO \5\ 
and cBBO.\6\ If so, the inbound Complex Order will be executed to the 
extent possible according to the priority described in Rule 7240(b)(3).
---------------------------------------------------------------------------

    \5\ The term ``cNBBO'' means the best net bid and offer price 
for a Complex Order Strategy based on the NBBO for the individual 
options components of such Strategy. See Rule 7240(a)(3).
    \6\ The term ``cBBO'' means the best net bid and offer price for 
a Complex Order Strategy based on the BBO on the BOX Book for the 
individual options components of such Strategy. See Rule 7240(a)(1).
---------------------------------------------------------------------------

Proposal
    The Exchange is now proposing that, with an inbound Complex Order 
on BOX, BOX will determine if the potential execution price is equal to 
or better than both Extended cNBBO, as described in greater detail 
below, and cBBO. If so, the inbound Complex Order will be executed to 
the extent possible according to the priority described in Rule 
7240(b)(3). The Exchange notes that the Complex Order Filter was 
initially established to protect Participants from extreme or erroneous 
executions. \7\ In practice, however, BOX Participants have expressed 
that the existing Complex Order Filter is too restrictive and prevents 
executions that would be allowed to execute on competing exchanges. The 
expanded price range proposed below is designed to support a fair and 
orderly market addressing these concerns while continuing to mitigate 
the potential risk of executions at prices that are extreme or 
potentially erroneous. BOX will also continue to ensure that each leg 
of a Complex Order be executed at a price that is equal to or better 
than the BOX BBO for each of the component series but, as a result of 
the Extended cNBBO, BOX will no longer require that each leg of a 
Complex Order be executed at a price that is equal to or better than 
the NBBO.\8\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 69419 (April 19, 
2013), 78 FR 24449 (April 25, 2013) (Order Approving SR-BOX-2013-
01).
    \8\ See proposed Rule 7240(b)(3)(iii). Complex Orders will 
continue to be execute [sic] in accordance with the priority rules 
in BOX Rule 7240(b)(2).
---------------------------------------------------------------------------

Extended cNBBO
    The Extended cNBBO is the maximum net bid and offer execution price 
for a Complex Order Strategy.\9\ The Extended cNBBO is calculated by 
subtracting the Extended cNBBO Limit \10\ from the cNBB \11\ and adding 
the Extended cNBBO Limit to the cNBO.\12\ In calculating the Extended 
cNBBO, each side of the Extended cNBBO is rounded to the nearest penny 
within the Extended cNBBO (i.e. the cNBB is rounded up to the nearest 
penny and the cNBO is rounded down to the nearest penny). The Extended 
cNBBO Limit is a percentage or an amount, whichever provides the less 
restrictive range (i.e. the widest range) when calculating the Extended 
cNBBO. The Exchange is proposing to make the parameters configurable, 
with a minimum percentage of 3% and maximum percentage of 50%; and a 
minimum amount of $0.00 and maximum amount of $1.00. However, the 
default Extended cNBBO Limit for all classes will be 5% of the cNBB or 
cNBO as applicable or $0.05 whichever allows for the greater chance of 
execution. The default Extended cNBBO was determined based on industry 
standards and participant feedback.
---------------------------------------------------------------------------

    \9\ See proposed Rule 7240(a)(5).
    \10\ See proposed Rule 7240(a)(6).
    \11\ The term ``cNBB'' means the best net bid price for a 
Complex Order Strategy based on the NBBO for the individual options 
components of such Strategy. See Rule 7420(a)(2).
    \12\ The term ``cNBO'' means the best net offer price for a 
Complex Order Strategy based on the NBBO for the individual options 
components of such Strategy. See Rule 7240(a)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed price protection parameters are 
reasonable and appropriate. The proposed Extended cNBBO filter is 
comparable to the price protections that are currently in place on 
other exchanges. The Exchange's proposal is designed to provide 
flexibility in determining the acceptable execution range by allowing 
the acceptable

[[Page 27921]]

execution range to be calculated using either a percentage amount or a 
dollar amount.\13\ For example, by using a parameter that is a 
percentage of the cNBBO the Exchange is ensuring that the parameter 
accurately reflects the market for the Complex Order. However, this is 
not always an effective protection if the price of the order is 
relatively low because it results in a restrictive range as seen in 
Example 2 below.\14\ Instead, the BOX Trading Host will determine the 
ranges associated with both parameters and apply the least restrictive 
option.
---------------------------------------------------------------------------

    \13\ See e.g., Nasdaq OMX PHLX (``Phlx'') Rule 1098(h)(i) 
Acceptable Complex Execution Parameter and Chicago Board Options 
Exchange (``CBOE'') Rule 6.53C.08(e) Acceptable Range Parameter 
which both apply a percentage defined on an issue by issue basis; 
while MIAX Options Exchange (``MIAX'') Rule 518(c)(1)(iv) applies a 
specific dollar amount.
    \14\ MIAX discussed this concern when justifying its use of a 
dollar value parameter for its comparable complex order price 
protection. See Securities Exchange Act Release No. 80089 (February 
22, 2017), 82 FR 12153 (February 28, 2017) (Notice of Filing and 
Immediate Effectiveness SR-MIAX-2017-06).
---------------------------------------------------------------------------

    The Exchange may modify, based on market conditions (for example, 
volatility) and Participant feedback, the Extended cNBBO Limit with 
prior notice to the Participants via Regulatory Circular, provided that 
the Exchange provides Participants with at least two weeks notice.
Complex Order Filter
    Currently, on BOX, all inbound Complex Orders to BOX are filtered 
to ensure that each leg of a Complex Order will be executed at a price 
that is equal to or better than the NBBO and the BOX BBO for each 
component series.
    The Exchange proposes now to amend the cNBBO filter for the 
component series. Specifically, all inbound Complex Orders to BOX will 
be filtered to ensure that each leg of a Complex Order will be executed 
at a price that is equal to or better than the BOX BBO for each of the 
component series and the Extended cNBBO for the Complex Order Strategy.
    The execution, exposure and cancellation of Complex Orders being 
filtered on BOX pursuant to Rule 7240(b)(3)(iii) will remain unchanged 
from current operations except that the calculation of cNBBO will be 
replaced with the proposed Extended cNBBO, which provides a wider range 
to allow executions.
    The Exchange notes that amending the Complex Order Filter is a 
competitive change, and BOX believes that amending this feature will 
keep the Exchange in line with competing exchanges in the industry that 
have comparable price protections for complex orders.
Implied Orders
    Currently, on BOX, an Implied Order is a Complex Order at the 
cNBBO, derived from the orders at the BBO on the BOX Book for each 
component leg of the Strategy, provided each component leg is at a 
price equal to the NBBO for that series. When an Implied Order is no 
longer at the cNBBO, the Implied Order will be removed and a new 
Implied Order will be generated, provided there is interest on the BOX 
Book to generate an Implied Order at the new cNBBO, provided each 
component leg is at a price equal to the NBBO for that series.
    The Exchange is now proposing that the generation of an Implied 
Order will not be limited only to the cNBBO. Specifically, the Exchange 
is proposing to generate an Implied Order at or within the Extended 
cNBBO, rather than the cNBBO derived from the orders at the BBO on the 
BOX Book for each component leg of the Strategy.\15\ In order to give 
effect to the new Extended cNBBO range, the Exchange will no longer 
require each component leg to be at a price equal to the NBBO for that 
series.
---------------------------------------------------------------------------

    \15\ See proposed Rule 7240(d).
---------------------------------------------------------------------------

Examples
    The following examples illustrate the effect of the proposed change 
on execution of Complex Orders on BOX.
Example 1
Prior to Proposed Change
 cNBBO for A+B is 137.40-137.60
 Order to sell 10 A+B at 144.00 is received

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             144.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             17.00                10
------------------------------------------------------------------------

    Result: The incoming Complex Order is rejected because it would 
trade at a price (144.00) that is outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53-144.48 (i.e., (137.40*.95)-(137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35-137.65 (i.e., (137.40-.05)-(137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53-144.48)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             144.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             17.00                10
------------------------------------------------------------------------

    Result: The incoming Complex Order is accepted because it would 
trade at a price (144.00) that is less than the maximum price range 
(144.48). The incoming Complex Order trades completely against the 
Complex Order to buy 10 at 144.00 on the Complex Order Book.
Example 2
Prior to the Proposed Change
 cNBBO for A+B is .07-0.10
 Order to sell 10 A+B at 0.12 is received

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10               0.12
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
                                             0.30                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
                                             0.30                10
------------------------------------------------------------------------

    Result: The incoming Complex Order is rejected because it would 
trade at a price (0.12) that is outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 0.07-0.10 (i.e., (0.07*.95)-(0.10*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
0.02-0.15 (i.e., (0.07-.05)-(0.10 + .05))
 Alternative B's calculation of the Extended cNBBO for A+B is 
used (0.02-0.15)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10               0.12
------------------------------------------------------------------------

[[Page 27922]]

 
                          BOX Book Instrument A
------------------------------------------------------------------------
                                             0.30                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
                                             0.30                10
------------------------------------------------------------------------

    Result: The incoming Complex Order is accepted because it trades at 
a price (0.12) that is less than the maximum price range (0.15). The 
incoming Complex Order trades completely against the Complex Order to 
buy 10 at 0.12 on the Complex Order Book.
Example 3
Prior to the Proposed Change
 cNBBO for A+B is 137.40-137.60
 Order to buy 10 A+B at 144.48 is received
 NBBO for A is 124.50-124.60
 NBBO for B is 12.90-13.00

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             16.48                10
------------------------------------------------------------------------

    Result: The incoming Complex Order is exposed by the system at 
137.60 pursuant to Rule 7240 (b)(3)(iii)(B). If interest remains after 
the exposure, it will be posted to the Complex Order Book. If, however, 
the Participant submitting the Complex Order has elected not to have 
the Complex Order exposed, the Complex Order will be posted to the 
Complex Order Book or cancelled in accordance with the Participant's 
instructions.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53 - 144.48 (i.e., (137.40*.95) - (137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35 - 137.65 (i.e., (137.40-.05) - (137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53 - 144.48)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             16.48                10
------------------------------------------------------------------------

    Result: The incoming Complex Order trades at 144.48 against 
interest on the BOX Book for A and B, specifically against the order to 
sell 10 A at 128.00 and the order to sell 10 B at 16.48.
Example 4
Prior to the Proposed Change
 cNBBO for A+B is 137.40 - 137.60
 Market Order to buy 100 A+B

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
                                           144.00                10
                                           145.00                10
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             17.00                10
------------------------------------------------------------------------

    Result: The incoming Market Complex Order is exposed by the system 
at 137.60. If, however, the Participant submitting the Complex Order 
elected to not have the Complex Order be exposed, the Complex Order 
will be cancelled to avoid matching with the 10 A+B at 144 which is 
outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53-144.48 (i.e., (137.40*.95) - (137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35-137.65 (i.e., (137.40 - .05) - (137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53-144.48)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
                                           144.00                10
                                           145.00                10
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            128.00                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             17.00                10
------------------------------------------------------------------------

    Result: The incoming Market Order to buy 100 first trades against 
the 10 A+B at 144.00 which is less than the maximum price range 
(144.48). The remaining 90 quantity of the Market Order is exposed at 
144.48, unless the Participant submitting the Complex Order has elected 
not to have the Complex Order exposed. If interest remains after the 
exposure, it will be canceled to avoid matching with the 10 A+B at 145 
which is outside the Extended cNBBO.
Example 5
Prior to the Proposed Change
 cNBBO for A+2B is 150.30-153.70
 Order to sell 10 A+2B at 161.38 is received

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+2B
------------------------------------------------------------------------
          10             161.38
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            127.70                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             16.80                 1
------------------------------------------------------------------------

    Result: The inbound Complex Order is rejected because it would 
trade at a price (161.38) outside the cNBBO.
After the Proposed Change
     Alternative A: The Extended cNBBO for A+2B based on 
percentage is 142.79-161.38 (i.e., (150.30*.95) - (153.70*1.05))
     Alternative B: The Extended cNBBO for A+2B based on amount 
is 150.25-153.75 (i.e., (150.30-.05) - (153.70 + .05))
     Alternative A's calculation of the Extended cNBBO for A+2B 
is used (142.79-161.38)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+2B
------------------------------------------------------------------------
          10             161.38
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
          10             120.00            127.70                10
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
          10              11.00             16.80                 1
------------------------------------------------------------------------

[[Page 27923]]

    Result: The incoming Complex Order is at the calculated Extended 
cNBBO (161.38) and therefore is accepted. The incoming Complex Order 
trades against the resting Complex Order to buy A+2B at 161.38.
Example 6
Prior to the Proposed Change
 cNBBO for A+B is 137.40-137.60
 Order to sell 10 A+B at 142.48 is received

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             150.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order is rejected because it would 
trade at a price (142.48) that is outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53-144.48 (i.e., (137.40*.95) - (137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35-137.65 (i.e., (137.40-.05) - (137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53-144.48)

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             150.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order trades against the resting 
Complex Order. Specifically, the incoming Complex Order executes 
against the resting Complex Order at 144.48 which is equal to the 
Extended cNBBO (144.48).
Example 7
Prior to the Proposed Change
 cNBBO for A+B is 137.40 - 137.60
 Order to sell 10 A+B at 145.00 is received

------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             150.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order is rejected because it would 
trade at a price (145.00) that is outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53 - 144.48 (i.e., (137.40*.95) - (137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35 - 137.65 (i.e., (137.40-.05) - (137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53 - 144.48)

                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
          10             150.00
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order is rejected because it would 
trade against the resting Complex Order at a price (145.00) outside the 
Extended cNBBO (144.48).
Example 8
Prior to the Proposed Change
 cNBBO for A+B is 137.40-137.60
 Order to sell 100 A+B at 130.40 is received

 
------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                     BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             130.60
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order would be exposed by the system 
at 137.40. If the Participant submitting the Complex Order has elected 
to not have the Complex Order exposed, the Complex Order will be 
cancelled. If interest remains after the exposure, it will be canceled 
to avoid matching with the 10 A+B at 130.60 which is outside the cNBBO.
After the Proposed Change
 Alternative A: The Extended cNBBO for A+B based on percentage 
is 130.53 - 144.48 (i.e., (137.40*.95) - (137.60*1.05))
 Alternative B: The Extended cNBBO for A+B based on amount is 
137.35-137.65 (i.e., (137.40 - .05) - (137.60 + .05))
 Alternative A's calculation of the Extended cNBBO for A+B is 
used (130.53 - 144.58)

 
------------------------------------------------------------------------
     Quantity             Buy               Sell            Quantity
------------------------------------------------------------------------
                          BOX Book for Complex Order A+B
------------------------------------------------------------------------
          10             130.60
------------------------------------------------------------------------
                          BOX Book Instrument A
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          BOX Book Instrument B
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Result: The incoming Complex Order first trades against the resting 
Complex Order for 10 at 130.60 and then the remaining quantity is 
exposed. Specifically, the remaining 90 A+B is exposed at the Extended 
cNBBO (130.53). Any remaining quantity that is not executed at the end 
of the exposure period will be posted to the Complex Order Book.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\16\ in general, and Section 6(b)(5)

[[Page 27924]]

of the Act,\17\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest. In particular, the Exchange proposes 
to allow Complex Orders to be executed on BOX in a wider range of 
prices, which will permit additional executions. As is apparent from 
the examples included in the description of purpose above, a number of 
Complex Order executions that would otherwise be made between willing 
buyers and sellers on BOX, but which are now rejected under the 
Exchange's current rules, will be allowed to execute under this 
proposed rule change.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposal is an improvement over its 
current rules regarding Complex Orders and will benefit all market 
participants submitting Complex Order [sic] to BOX. As discussed above, 
the Exchange found that in practice, the current Complex Order Filter 
is too restrictive and prevents executions that Participants would 
otherwise want. The Exchange believes that the proposed change is 
designed to support a fair and orderly market by addressing the 
concerns expressed by BOX Participants, while continuing to mitigate 
the potential risk of executions at prices that are extreme or 
potentially erroneous. The Exchange believes that this rule filing is 
reasonable, equitable and not unfairly discriminatory to customers and 
Participants because, other than the expanded execution range 
represented by the Extended cNBBO, it follows the existing mechanics of 
the Exchange's existing Complex Order filter mechanism and the 
Exchange's existing Complex Order priority rules, each of which has 
previously been approved by the Commission. The Exchange further 
believes the proposal is not unfairly discriminatory because the 
benefits of the proposal on BOX are equally available to all 
Participants.
    The Exchange believes this proposal will increase opportunities for 
execution of Complex Orders and orders on the BOX Book. Further, the 
Exchange believes the proposed Extended cNBBO will provide greater 
flexibility to Participants trading Complex Orders on BOX. The Exchange 
also believes the proposal will provide additional opportunities for 
Participants to achieve better handling of Complex Orders and result in 
increased opportunities for execution. As a result, adopting this 
proposal to allow executions of Complex Orders within the Extended 
cNBBO will promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and remove impediments to and perfect the 
mechanism of a free and open market and a national market system.
    For the foregoing reasons, the Exchange believes this proposal is a 
reasonable modification to its rules, designed to facilitate increased 
interaction of Complex Orders on BOX, and to do so in a manner that 
maximizes opportunities for trade executions for Complex Orders. The 
Exchange believes it is appropriate and consistent with the Act to 
adopt the proposed rule changes.

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. Implementation of the proposed 
rule change will foster additional executions and enable greater 
competition among other competing exchanges that have comparable 
complex order filter provisions for the reasons set forth above. 
Further, the Exchange does not believe the proposed change will impose 
a burden on intramarket competition as the proposed change will affect 
all Participants equally.

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

    (a) This proposed rule change is filed pursuant to paragraph (A) of 
section 19(b)(3) of the Exchange Act \18\ and Rule 19b-4(f)(6) 
thereunder.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    (b) This proposed rule change does not significantly affect the 
protection of investors or the public interest, does not impose any 
significant burden on competition, and, by its terms, does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest.\20\
---------------------------------------------------------------------------

    \20\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change, along with a brief description and the 
text of 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.
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    At any time within 60 days of the filing of the 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 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-2017-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2017-20. 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

[[Page 27925]]

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-2017-20, and should be submitted on or before July 
10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12589 Filed 6-16-17; 8:45 am]
BILLING CODE 8011-01-P