Document ID: SEC-2015-1877-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2015-11-12T05:00Z

[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70000-70002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28687]

[[Page 70000]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76367; File No. SR-BOX-2015-35]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adopt Business Continuity and Disaster Recovery Plans (``BC/DR plans'') 
Testing Requirements for Certain Options Participants in Connection 
With Regulation Systems Compliance and Integrity (``Regulation SCI'')

November 5, 2015.
    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 October 26, 2015, 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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to adopt business continuity and disaster 
recovery plans (``BC/DR plans'') testing requirements for certain 
Options Participants in connection with Regulation SCI. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt BOX Rule 2100 (Mandatory 
Participation in Testing of Backup Systems) to establish business 
continuity and disaster recovery plans (``BC/DR plans'') testing 
requirements for certain Options Participants in connection with 
Regulation SCI.
    As adopted by the Commission, Regulation SCI applies to certain 
self-regulatory organizations (including the Exchange), alternative 
trading systems (``ATSs''), plan processors, and exempt clearing 
agencies (collectively, ``SCI entities''), and will require these SCI 
entities to comply with requirements with respect to the automated 
systems central to the performance of their regulated activities. Among 
the requirements of Regulation SCI is Rule 1001(a)(2)(v), which 
requires the Exchange and other SCI entities to maintain ``[b]usiness 
continuity and disaster recovery plans that include maintaining backup 
and recovery capabilities sufficiently resilient and geographically 
diverse and that are reasonably designed to achieve next business day 
resumption of trading and two-hour resumption of critical SCI systems 
following a wide-scale disruption.'' \3\ The Exchange takes pride in 
the reliability and availability of its systems. Historically, Exchange 
systems have been up and available more than 99.9% of the time; yet as 
a precaution, the Exchange has put extensive time and resources toward 
planning for system failures and already maintains robust BC/DR plans 
consistent with the Rule. As set forth below, in connection with 
Regulation SCI, the Exchange is proposing to require certain Members to 
participate in testing of the operation of the Exchange's BC/DR plans.
---------------------------------------------------------------------------

    \3\ 17 CFR 242.1001(a)(2)(v).
---------------------------------------------------------------------------

    With respect to an SCI entity's BC/DR plans, including its backup 
systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI 
entity to: ``[e]stablish standards for the designation of those members 
or participants that the SCI entity reasonably determines are, taken as 
a whole, the minimum necessary for the maintenance of fair and orderly 
markets in the event of the activation of such plans.'' \4\ Paragraph 
(b) of Rule 1004 further requires each SCI entity to ``[d]esignate 
members or participants pursuant to the standards established in 
paragraph (a) of [Rule 1004] and require participation by such 
designated members or participants in scheduled functional and 
performance testing of the operation of such plans, in the manner and 
frequency specified by the SCI entity, provided that such frequency 
shall not be less than once every 12 months.'' \5\ In order to comply 
with Rule 1004 of Regulation SCI, the Exchange proposes to adopt Rule 
2100, governing mandatory participation in testing of Exchange backup 
systems, as described below.
---------------------------------------------------------------------------

    \4\ 17 CFR 242.1004(a).
    \5\ 17 CFR 242.1004(b).
---------------------------------------------------------------------------

    First, in paragraph (a) of Rule 2100, the Exchange proposes to 
include language from paragraph (a) of Rule 1004 of Regulation SCI to 
summarize the Exchange's obligation pursuant to such rule. 
Specifically, the Exchange proposes to state that ``[p]ursuant to 
Regulation SCI and with respect to the Exchange's business continuity 
and disaster recovery plans, including its backup systems, the Exchange 
is required to establish standards for the designation of Members that 
the Exchange reasonably determines are, taken as a whole, the minimum 
necessary for the maintenance of fair and orderly markets in the event 
of the activation of such plans.'' The Exchange further proposes that 
paragraph (a) indicate that the ``Exchange has established standards 
and will designate Participants according to those standards'' as set 
forth in the proposed Rule. In addition, the Exchange proposes to make 
clear that all Members are permitted to connect to the Exchange's 
backup systems as well as to participate in testing of such systems. 
Proposed paragraph (a) is consistent with the Commission's adoption of 
Regulation SCI, which encouraged ``SCI entities to permit non-
designated members or participants to participate in the testing of the 
SCI entity's BC/DR plans if they request to do so.'' \6\
---------------------------------------------------------------------------

    \6\ See SCI Adopting Release, supra note 4[sic] at 72350.
---------------------------------------------------------------------------

    Second, in paragraph (b) of Rule 2100, the Exchange proposes to 
specify that it shall designate those BOX Participants that the 
Exchange reasonably determines are, taken as a whole, the minimum 
necessary for the maintenance of fair and orderly markets in the event 
of the activation of the Exchange's business continuity and disaster 
recovery plans (``Designated BCP/DR Participants''). Designated BCP/DR 
Participants will be identified based on criteria determined by the 
Exchange and announced via Regulatory Circular, which may include the 
amount of volume transacted by the Participant in

[[Page 70001]]

a class or on the Exchange in general, operational capacity, trading 
experience, and historical contribution to fair and orderly markets on 
the Exchange. Designated BCP/DR Participants will participate in 
functional and performance testing in the manner and frequency 
specified by the Exchange, which shall not be less than once every 12 
months.
    The Exchange notes that it encourages all Participants to connect 
to the Exchange's backup systems and to participate in testing of such 
systems. In fact, the Exchange provides connectivity free of charge to 
all Participants that connect to Exchange backup systems in order to 
help reduce the economic burden of maintaining connectivity to Exchange 
backup systems. However, in adopting the requirements of Rule 2100(b) 
the Exchange intends to subject to the Rule only those Participants 
that the Exchange believes are necessary to maintain fair and orderly 
markets at the Exchange.
    In addition to paragraphs (a) and (b) described above, the Exchange 
also proposes to adopt Interpretive Material IM-2100-1, which would 
provide additional detail regarding the notice that will be provided to 
Participants that have been designated pursuant to subparagraph (b). As 
proposed, IM-2100-1 would state that Designated BCP/DR Participants 
will be identified based on criteria determined by the Exchange, 
consistent with proposed paragraph (b)(1), and announced via Regulatory 
Circular. Any changes to the standards by which a market participant 
might be determined to be a Designated BCP/DR Participant would be 
applied prospectively with reasonable advance notice as announced via 
Regulatory Circular. The Exchange would first announce the criteria by 
which market participants would be determined to be Designated BCP/DR 
Participants by November 3, 2015. The Exchange believes the proposed 
notice requirements are necessary to provide Participants with proper 
advance notice in the event they become subject to proposed Rule 
2100(b). The proposed timeframes would also provide Participants with 
adequate time to become compliant with such Rule due to the necessary 
infrastructure changes it may take to connect to the Exchange's backup 
systems for a Participant that is not already connected.
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''),\7\ in general, and Section 6(b)(5) of the Act,\8\ 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 proposal will ensure that the 
Participants necessary to ensure the maintenance of a fair an orderly 
market are properly designated consistent with Rule 1004 of Regulation 
SCI. Specifically, the proposal will adopt criteria with respect to the 
designation of Participants that are required to participate in the 
testing of the Exchange's BC/DR plans, as well as appropriate 
notification regarding such designation. As set forth in the SCI 
Adopting Release, ``SROs have the authority, and legal responsibility, 
under Section 6 of the Exchange Act, to adopt and enforce rules 
(including rules to comply with Regulation SCI's requirements relating 
to BC/DR testing) applicable to their members or participants that are 
designed to, among other things, foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and 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.'' \9\ The Exchange believes 
that this proposal is consistent with such authority and legal 
responsibility.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See SCI Adopting Release, supra note 4 at 72350.
---------------------------------------------------------------------------

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. In this regard and as indicated 
above, the Exchange notes that the proposal is not a competitive 
proposal but rather is necessary for the Exchange's compliance with 
Regulation SCI, and is also consistent with a recent filings submitted 
by BATS and the CBOE.\10\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release Nos. 76162 (October 15, 
2015), 80 FR 63849 (October 21, 2015) (SR-BATS-2015-86); 76203 
(October 20, 2015), 80 FR 65263 (October 20, 2015) (SR-CBOE-2015-
088).
---------------------------------------------------------------------------

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) of the Act \11\ and Rule 19b-4(f)(6)(iii) thereunder.\12\ 
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.\13\ A proposed rule change filed under Rule 
19b-4(f)(6)(iii) \14\ normally does not become operative prior to 30 
days after the date of the filing. However, pursuant to Rule 19b-
4(f)(6)(iii),\15\ the Commission may designate a shorter time if such 
action is consistent with the protection of investors and the public 
interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ In addition, Rule 19b-4(f)(6) 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 Exchange has satisfied this 
requirement.
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
as it will allow the Exchange to incorporate changes required under 
Regulation SCI, such as establishing standards for designating BC/DR 
participants, prior to the November 3, 2015 compliance date. 
Accordingly, the Commission designates the proposed rule change to be 
operative upon filing.\16\
---------------------------------------------------------------------------

    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

---------------------------------------------------------------------------

[[Page 70002]]

    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-2015-35 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-2015-35. 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 Reference Room, on official business days between 
the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2015-35 and should be 
submitted on or before December 3, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28687 Filed 11-10-15; 8:45 am]
BILLING CODE 8011-01-P