Document ID: SEC-2020-1366-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2020-08-26T04:00Z

[Federal Register Volume 85, Number 166 (Wednesday, August 26, 2020)]
[Notices]
[Pages 52654-52656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18679]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89622; File No. SR-BOX-2020-34]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule on the BOX Options Market LLC Facility To Amend the Liquidity 
Fees and Credits for SPY PIP and COPIP Transactions

August 20, 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 August 12, 2020, BOX Exchange LLC (``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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 Options Market LLC (``BOX'') facility. 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 the Fee Schedule for trading on BOX 
to amend Section III., Liquidity Fees and Credits. Specifically, the 
Exchange proposes to amend the liquidity fees and credits for SPY PIP 
and COPIP transactions. Currently, a Public Customer SPY PIP or COPIP 
Order receives a $0.45 ``removal'' credit while the corresponding 
Primary Improvement Order and any Improvement Order are charged a $0.45 
``add'' fee. Further, under the current BOX Fee Schedule, when Non-
Public Customer SPY PIP or COPIP orders do not trade with its Primary 
Improvement Order, the Primary Improvement Order receives a $0.45 
``removal'' credit and any corresponding Improvement Order responses 
are charged a $0.45 ``add'' fee.
    The Exchange now proposes to no longer assess liquidity fees and 
credits for SPY PIP and COPIP transactions as described above, and 
instead proposes to establish that SPY PIP and COPIP Order submitted to 
the PIP and COPIP mechanisms that do not trade with their Primary 
Improvement Order shall receive a ``removal'' credit of $0.45, while 
Improvement Orders to the SPY PIP and COPIP Orders executed in these 
mechanisms shall be charged the ``add'' fee of $0.45. The Exchange 
notes that a similar fee and credit structure is in place for liquidity 
fees and credits for Facilitation and Solicitation transactions on 
BOX.\5\
---------------------------------------------------------------------------

    \5\ See BOX Fee Schedule Section III.B. Agency Orders submitted 
to the Facilitation and Solicitation mechanisms that do not trade 
with their contra order shall receive the ``removal'' credit. 
Responses to Facilitation and Solicitation Orders executed in these 
mechanisms shall be charged the ``add'' fee.
---------------------------------------------------------------------------

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,\6\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes the proposed change to establish new SPY PIP 
and COPIP liquidity fees and credits is reasonable, equitable, and not 
unfairly discriminatory because pricing by symbol is a common practice 
on many U.S. options exchanges as a means to incentivize order flow to 
be sent to an exchange for execution in the most actively traded 
options classes.\7\
---------------------------------------------------------------------------

    \7\ The Exchange is proposing that SPY PIP and COPIP Order 
submitted to the PIP and COPIP mechanisms that do not trade with 
their Primary Improvement Order shall receive a ``removal'' credit 
of $0.45, while responses to the SPY PIP and COPIP Orders executed 
in these mechanisms shall be charged the ``add'' fee of $0.45. 
Further, the Exchange notes that SPY Primary Improvement Orders will 
no longer be assessed the $0.45 ``add'' fee. The Exchange believes 
that the proposed changes will result in increased SPY order flow to 
BOX's PIP and COPIP auction mechanisms.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to Section III of 
the BOX Fee Schedule are reasonable, equitable and not unfairly 
discriminatory. In particular, the Exchange believes the proposed 
change

[[Page 52655]]

is reasonable as a similar ``removal'' credit and ``add'' fee structure 
is in place for liquidity fees and credits for Facilitation and 
Solicitation transactions.\8\ The Exchange believes that mirroring the 
structure in place for liquidity fees and credits for Facilitation and 
Solicitation transactions is reasonable as the Exchange believes that 
the proposed change will incentivize Participants to submit SPY order 
flow through the PIP and COPIP auction mechanisms thereby benefitting 
all market participants through promoting market depth, facilitating 
tighter spreads and enhancing price discovery. Further, the Exchange 
believes that the proposed change is equitable and not unfairly 
discriminatory as the change applies to all Participants, regardless of 
account type.
---------------------------------------------------------------------------

    \8\ See supra note 5.
---------------------------------------------------------------------------

    Under this proposal, Public Customer SPY PIP and COPIP Primary 
Improvement Orders will no longer be assessed the $0.45 ``add'' fee; 
however, responses to the SPY PIP and COPIP Orders will continue to be 
charged the $0.45 ``add'' fee. The Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to charge higher exchange 
fees for responders in the PIP and COPIP mechanisms than for initiators 
of these orders and the contra orders. The Exchange believes it is 
reasonable when compared to a similar practice for Facilitation and 
Solicitation fees at a competing venue.\9\ For example, at Nasdaq ISE 
the fee for both the initiating and contra order for PIM Orders is 
$0.10 for Select Symbols for all account types except Priority 
Customers who are charged no fees. Responses to these orders are 
charged $0.50 for Select Symbols regardless of account type. The 
Exchange notes that a differential of fees between initiators and 
responders currently exists in the Facilitation and Solicitation 
auction mechanisms on BOX. Further, the Exchange continues to believe 
that the proposed differential is reasonable because responders to PIP 
and COPIP Orders are willing to pay a higher fee for liquidity 
discovery. Responders to PIP and COPIP Orders are given the opportunity 
to interact with customer order flow which, in turn, allows for the 
opportunity for increased executions on the Exchange thus benefitting 
all market participants. The Exchange also believes it is reasonable 
and appropriate to charge initiators of PIP and COPIP Orders less than 
responders because initiators bring liquidity to the Exchange which, in 
turn, results in increased opportunity for more executions on BOX. As 
such, the Exchange believes the differential is reasonable and 
appropriate.
---------------------------------------------------------------------------

    \9\ See Nasdaq ISE LLC (``Nasdaq ISE'') Pricing Schedule Section 
3. (Regular Order Fees and Rebates).
---------------------------------------------------------------------------

    Currently, if a non-Public Customer PIP or COPIP Order does not 
trade with its Primary Improvement Order, the Primary Improvement Order 
receives the $0.45 ``removal'' credit and any corresponding Improvement 
Order responses are charged the $0.45 ``add'' fee. Now, under this 
proposal, all SPY PIP and COPIP Orders submitted to the PIP and COPIP 
mechanisms that do not trade with their Primary Improvement Order shall 
receive a ``removal'' credit of $0.45. Improvements Orders submitted to 
the SPY PIP and COPIP Orders executed in these mechanisms will continue 
to be charged the ``add'' fee of $0.45. The Exchange believes this is 
reasonable and competitive when compared to similar fees and credits 
for SPY transactions at a competing venue.\10\ Further, as discussed 
herein, the Exchange believes the proposed change will incentivize 
Participants to submit SPY order flow through the PIP and COPIP auction 
mechanisms thus increasing liquidity on the Exchange and increasing the 
opportunity for executions thus benefitting all market participants.
---------------------------------------------------------------------------

    \10\ See Phlx Pricing Schedule, Section 3, Part A. The Exchange 
notes that Phlx offers rebates ranging from $0.12 to $0.32 to Lead 
Market Makers and Market Makers for adding liquidity in SPY. 
Further, Phlx assesses a $0.48 fee for Market Makers, Broker Dealers 
and Professionals and a $0.42 fee for Public Customers for removing 
liquidity in SPY.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to Section III are 
equitable and not unfairly discriminatory in that the fees and credits 
apply to all categories of Participants and across all account types. 
The Exchange notes that liquidity fees and credits on BOX are meant to 
offset one another in any particular transaction. The liquidity fees 
and credits do not directly result in revenue to BOX, but simply allows 
BOX to provide incentives to Participants to attract order flow. The 
Exchange believes it is equitable and not unfairly discriminatory to 
charge lower exchange fees for initiators in the PIP and COPIP 
mechanisms than for responders because initiators bring liquidity to 
the Exchange which, in turn, allows responders to interact with 
customer orders thus increasing the opportunity for more executions on 
BOX. The Exchange believes that structuring the proposed fees and 
credits will incentivize initiators to bring order flow to the Exchange 
thus benefitting all market participants. Further, the Exchange 
believes it is equitable and not unfairly discriminatory to charge 
higher exchange fees for responders in the PIP and COPIP mechanisms 
than for initiators because, as discussed herein, responders to PIP and 
COPIP Orders are willing to pay a higher fee for liquidity discovery 
and, in turn, are given the opportunity to interact with customer order 
flow on BOX.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing exchanges. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and credits to 
remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed rule change reflects 
this competitive environment.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed liquidity fees and credits will burden competition by 
creating such a disparity between the fees an initiating Participant in 
the PIP and COPIP auction pays and the fees a competitive responder 
pays that would result in certain Participants being unable to compete 
with initiators. In fact, the Exchange believes that these changes will 
not impair these Participants from adding liquidity and competing in 
PIP and COPIP auction transactions and will help promote competition by 
providing incentives for market participants to submit customer order 
flow to BOX and thus, create a greater opportunity for customers to 
receive additional price improvement.
    Further, the Exchange believes that the proposed liquidity fees and 
credits for SPY PIP and COPIP transactions will not impose a burden on 
competition. Rather, BOX believes that the changes will result in 
Participants being charged or credited appropriately for their PIP and 
COPIP transactions and is designed to enhance competition in auction 
transactions on BOX. Submitting an order is entirely voluntary and 
Participants can determine which type of order they wish to submit, if 
any, to the Exchange. The Exchange also believes that the proposed 
change will not impose an undue burden on intermarket competition as 
the proposed change will allow BOX to better compete for SPY order 
flow. Further, as stated above the fees and credits

[[Page 52656]]

proposed are in line with the facilitation and solicitation fees and 
credits currently on 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 \11\ and Rule 19b-4(f)(2) 
thereunder,\12\ because it establishes or changes a due, or fee.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2020-34 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-2020-34. 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-2020-34, and should be submitted on 
or before September 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18679 Filed 8-25-20; 8:45 am]
BILLING CODE 8011-01-P