Document ID: SEC-2018-0753-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2018-05-15T04:00Z

[Federal Register Volume 83, Number 94 (Tuesday, May 15, 2018)]
[Notices]
[Pages 22567-22569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10257]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83197; File No. SR-BOX-2018-15]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility 
To Amend Connectivity Fees and Establish Port Fees

May 9, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 27, 2018, BOX Options Exchange LLC (the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 May 1, 2018. 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://boxexchange.com.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend Section VI. (Technology Fees) of the 
Fee Schedule to establish Port Fees assessed to BOX Participants 
connecting to BOX systems. The Exchange does not currently charge 
Participants to access the BOX System through ports. The Exchange is 
now proposing to assess fees for these connections.\5\ The Exchange 
notes that these types of fees are commonly assessed within the 
industry. Additionally, the Exchange proposes to amend Section VI.A. 
(Connectivity Fees) to delete the table and applicable language and add 
language that BOX will pass-through any connectivity fees to 
Participants and non-Participants that are assessed to BOX by third-
party external vendors on behalf of a Participant or non-Participant.
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    \5\ See Securities Exchange Act Release No. 66871 (April 27, 
2012), 77 FR 26323 (May 3, 2012) (In the Matter of the Application 
of BOX Options Exchange LLC for Registration as a National 
Securities Exchange). When BOX applied for registration as a 
national securities exchange in 2012, it filed exhibits which 
detailed the operations of the Exchange. Specifically, Exhibit E of 
BOX's application provided an in-depth description of the means in 
which Participants would gain access to the BOX systems through 
certain connections and ports. These connections have been in place 
since BOX's application approval in 2012. The Exhibit E is available 
at https://www.sec.gov/rules/other/2012/boxapplication.htm.
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Connectivity Fees
    The Exchange proposes to delete the table and applicable language 
in Section VI.A (Connectivity Fees). Currently, Section VI.A 
(Connectivity Fees) of the Fee Schedule states that market participants 
are required to connect to the BOX network through datacenters owned 
and operated by third-party vendors. The Fee Schedule includes a table 
of connectivity fees associated with two datacenters, NY4 and 65 
Broadway, where market participants can connect to BOX. The Exchange is 
proposing to delete the table and data center specific language from 
the Fee Schedule. The Exchange notes that no other exchanges include 
this detail within their fee schedules and it has received Participant 
feedback that the inclusion of this information is causing

[[Page 22568]]

confusion about the technology fees assessed by BOX.
    Next, the Exchange proposes to add language to Section VI.A. to 
state that BOX will pass-through any connectivity fees to Participants 
and non-Participants that are assessed to BOX by third-party external 
vendors on behalf of a Participant or non-Participant connecting to BOX 
(including cross-connects).\6\ The Exchange notes that the proposed 
change is similar to fees at another options exchange.\7\
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    \6\ The Exchange notes that market participants will continue to 
be assessed fees by and billed directly by the datacenter pursuant 
to their agreement with the datacenter. The Exchange is proposing 
that any other fees assessed to BOX on behalf of a Participant or 
non-Participant will be passed through to the market participants.
    \7\ See Miami International Securities Exchange LLC (``MIAX'') 
Fee Schedule Section 5(c).
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Port Fees
    The Exchange then proposes to establish fees for access and 
services used by Participants via existing connections known as 
``Ports.'' \8\ BOX currently provides three (3) types of ports, 
including: (i) The Financial Information Exchange (``FIX'') Port, which 
allows Participants to electronically send orders in all products 
traded on the Exchange; (ii) the SOLA[supreg] Access Information 
Language (``SAIL'') Port, which allows Market Makers and other 
Participants to submit electronic quotes and orders to the Exchange; 
and (iii) the Drop Copy Port, which provides a real-time feed 
containing trade execution, trade correction, trade cancellation and 
trade allocation for regular and complex orders on the Exchange. The 
Exchange notes that Participants must connect to a minimum of one port 
via FIX or SAIL and that there is no minimum or maximum number of ports 
required for the Drop Copy Port.
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    \8\ Within the industry, market participant access to an 
Exchange is referred to as ``Ports,'' ``Sessions,'' and 
``Gateways.'' See Securities Exchange Act Release No. 81903 (October 
19, 2017), 82 FR 49450 (October 25, 2017)(SR-ISE-2017-91). In their 
filing, ISE refers to these connections as ``sessions.'' See also 
NYSE American LLC (``American'') Fee Schedule, General Note 4. NYSE 
refers to these connections as customer ``gateways'' that provide 
for order entry.
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    BOX will assess monthly Port Fees on Participants in each month the 
market participant is credentialed to use a Port in the production 
environment and based upon the number of credentialed Ports that user 
is entitled to use.
    The FIX Port Fees will be the following:

------------------------------------------------------------------------
                                                            BOX monthly
                                                           (per port per
                        FIX ports                           month) port
                                                               fees
------------------------------------------------------------------------
1st FIX Port............................................            $500
FIX Ports 2 through 5...................................             250
Additional FIX Ports over 5.............................             150
------------------------------------------------------------------------

    The Exchange notes that the proposed FIX Port fees are similar to 
fees assessed at options exchanges within the industry.\9\
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    \9\ See MIAX Fee Schedule. MIAX assesses the 1st FIX Port a fee 
of $550 per month, FIX Ports 2 through 5 $350 per month per port and 
additional FIX Ports over 5 $150 per month per port. See also NYSE 
Arca, Inc. (``Arca'') Fee Schedule. For the Order Entry Port 
(similar to the proposed FIX Port), Arca charges $450 per port per 
month for ports 1 through 40 and assesses $150 per port per month 
for 41 ports and above.
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    The SAIL Port Fees will be the following:

------------------------------------------------------------------------
               SAIL ports                     BOX monthly port fees
------------------------------------------------------------------------
Market Makers..........................  $1000 per month for all Ports.
Other Participants.....................  500 per port per month (1-5
                                          Ports).
                                         $150 per month for each
                                          additional Port.
------------------------------------------------------------------------

    The Exchange also notes that the proposed SAIL Port fees are 
similar to fees assessed at options exchanges in the industry.\10\
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    \10\ See Nasdaq ISE, LLC (``ISE'') Fee Schedule. ISE assesses a 
Specialized Quote Interface (``SQF'') Port Fee of $1,100 per port 
per month for ISE Market Makers. The Exchange believes that the 
proposed SAIL Port is similar to ISE's SQF Port because both Ports 
allow Market Makers to directly connect to the respective Exchanges' 
systems in order to provide quotes to the market. The Exchange notes 
that BOX's SAIL Port differs from ISE's in that other Participants, 
like Order Flow Providers (``OFP''), have the ability to connect to 
the SAIL Port to enter orders to the BOX system. See also MIAX Fee 
Schedule. MIAX assesses MIAX Express Interface (``MEI'') Port Fees 
on Market Makers. Like ISE, MIAX's MEI Port is designated for Market 
Maker quotes only. As mentioned above, BOX's proposed SAIL Port is 
available to Market Makers and other Participants who wish to enter 
orders through the SAIL Port.
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    Further, BOX will assess Drop Copy Port Fees of $500 per port per 
month for each month a Participant is credentialed to use a Drop Copy 
Port. The Exchange notes that the proposed Drop Copy Port Fee is 
similar to fees at another options exchange in the industry; \11\ and 
that Participants are not required to connect to a minimum or maximum 
amount of Drop Copy Ports.
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    \11\ See MIAX Fee Schedule. MIAX assesses a FIX Drop Copy Port 
Fee of $500 per month.
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Other
    Lastly, the Exchange proposes to make non-substantive changes to 
the Fee Schedule. Specifically, the Exchange proposes to renumber the 
footnotes to reflect the proposed changes discussed above.
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,\12\ 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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    \12\ 15 U.S.C. 78f(b)(4) and (5).
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Connectivity Fees
    The Exchange believes that removing the datacenter specific text 
and table from Section VI.A of the Fee Schedule is reasonable, 
equitable and not unfairly discriminatory. As discussed above, market 
participants will continue to be assessed the applicable fees by and 
billed directly by the datacenter pursuant to their agreement with the 
datacenter. The Exchange believes that removing the table of associated 
fees is reasonable, equitable and not unfairly discriminatory as it has 
caused investor confusion with regard to connectivity fees assessed at 
BOX.
    BOX believes it is reasonable, equitable and not unfairly 
discriminatory to pass-through any connectivity fees that are charged 
to BOX by third-party vendors on behalf of the Participant or non-
Participant. BOX believes it is reasonable and equitable to recover 
these costs that were incurred on BOX for the benefit of the 
Participant or non-Participant. The Exchange believes the proposed 
change is reasonable as another exchange in the industry has a similar 
provision in its fee schedule.\13\ Lastly, the Exchange believes that 
the proposed change is equitable and not unfairly discriminatory 
because it applies to all market participants, regardless of account 
type.
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    \13\ See supra note 7.
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Port Fees
FIX and SAIL Port Fees
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to assess FIX and SAIL Port Fees on Participants who use 
such services. The FIX Port enables Participants to submit orders 
electronically to the Exchange for processing, while the SAIL Port 
enables Market Makers to submit quotes to the Exchange for processing. 
The SAIL Port also allows other Participants to submit orders 
electronically to the Exchange for

[[Page 22569]]

processing. The Exchange believes that the proposed fees for the FIX 
Port are reasonable as they are within the range of comparable fees at 
other competing options exchanges.\14\ Further, the Exchange believes 
that the FIX Port Fees are equitable and not unfairly discriminatory 
because the fees are assessed to all Participants who wish to enter 
orders to the BOX system via the FIX Port, regardless of account type. 
Further, the Exchange believes that the proposed tiered pricing model 
for these fees is reasonable, equitable and not unfairly discriminatory 
as this model is commonly used within the industry for port fees or the 
equivalent.
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    \14\ See supra note 9.
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    The Exchange believes that the SAIL Port Fees are reasonable 
because they are within the range of comparable fees at other competing 
options exchanges.\15\ Further, the Exchange believes that charging 
different fees for Market Makers and other market participants who wish 
to use the SAIL Port is reasonable, equitable and not unfairly 
discriminatory. BOX believes that charging a flat fee of $1,000 per 
month for all SAIL Ports for Market Makers is reasonable as Market 
Makers are required by the Exchange to connect to sixteen (16) SAIL 
Ports while other Participants have the ability to choose whether to 
connect through the FIX Port, the SAIL Port, or both.\16\ As such, the 
Exchange believes that the proposed SAIL Port Fees are reasonable, 
equitable and not unfairly discriminatory.
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    \15\ See supra note 10.
    \16\ The Exchange requires Market Makers to connect to 16 Ports 
in order to satisfy their membership requirements on BOX.
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Drop Copy Port Fee
    The Exchange believes that the Drop Copy Port Fee is equitable and 
not unfairly discriminatory because the Exchange is uniformly assessing 
the Drop Copy Port Fees on all users that wish to subscribe to it, 
regardless of account type. Further, the Exchange believes that the 
proposed Drop Copy Port Fee is reasonable because it is identical to 
fees charged by another exchange.\17\ Further, the Drop Copy Port Fee 
is reasonable because it is offered as an optional service for those 
users who wish to subscribe to it.
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    \17\ See supra note 11.
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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. Unilateral action by BOX in 
establishing fees for services provided to its Participants and others 
using its facilities will not have an impact on competition. As a small 
Exchange in the already highly competitive environment for options 
trading, BOX does not have the market power necessary to set prices for 
services that are unreasonable or unfairly discriminatory in violation 
of the Exchange Act. BOX's proposed fees, as described herein, are 
comparable to and generally lower than fees charged by other options 
exchanges for the same or similar services. Lastly, the Exchange 
believes the proposed change will not impose a burden on intramarket 
competition as the proposed fees are applicable to all Participants who 
connect to BOX.

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 \18\ and Rule 19b-4(f)(2) 
thereunder,\19\ because it establishes or changes a due, or fee.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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 [email protected]. Please include 
File Number SR-BOX-2018-15 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-2018-15. 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 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. 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-2018-15, and should be submitted on 
or before June 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10257 Filed 5-14-18; 8:45 am]
 BILLING CODE 8011-01-P