Document ID: SEC-2021-0613-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2021-05-03T04:00Z

[Federal Register Volume 86, Number 83 (Monday, May 3, 2021)]
[Notices]
[Pages 23458-23460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09020]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91670; File No. SR-BOX-2021-05]

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

April 26, 2021.
    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 April 15, 2021, 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.
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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 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 Section II.C (QOO Order Rebate) of 
the BOX Fee Schedule. Specifically, the Exchange proposes to reinstate 
the monthly rebate cap of $30,000 per month per Broker Dealer. The 
Exchange notes that the proposed rebate cap was previously in place 
when BOX established fees for the Trading Floor in 2017.\5\
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    \5\ See Securities Exchange Act Release Nos. 81504 (August 30, 
2017), 82 FR 42195 (September 6, 2017) (SR-BOX-2017-28) 
(Establishing Fees and Rebates for the Trading Floor on the BOX 
Market LLC Options Facility).
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    Currently, Floor Brokers are eligible to receive a $0.075 per 
contract rebate for all Broker Dealer and Market Maker QOO Orders 
presented on the Trading Floor and $0.05 per contract rebate for all 
Professional Customer QOO Orders presented on the Trading Floor. The 
rebate is not applied to Public Customer executions, executions subject 
to the Strategy QOO Order Fee Cap, or Broker Dealer executions where 
the Broker Dealer is facilitating a Public Customer. Under this 
proposal, Floor Brokers will continue to be eligible to receive a per 
contract rebate for all applicable QOO Orders; however, the total 
monthly rebate for Broker Dealer orders will now be capped at $30,000 
per month per Broker Dealer.\6\
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    \6\ The Exchange notes that all Broker Dealer QOO Orders that 
are eligible for the rebate will also be subject to the rebate cap.
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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,\7\ 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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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    BOX established the QOO Order Rebate program and the monthly rebate 
cap in August 2017. As discussed in BOX's 2017 proposal to establish 
the QOO Order Rebate program and rebate

[[Page 23459]]

cap, the rebate was created to incentivize order flow to the BOX 
Trading Floor. Further, the QOO Order Rebate program was established to 
attract order flow by rewarding Floor Brokers with rebates for 
directing qualifying orders to the BOX Trading Floor.\8\ The Exchange 
notes that it is not making any changes to the amount of the QOO Order 
Rebate, and that the QOO rebate will continue to apply to both sides of 
the qualifying paired QOO Order.\9\
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    \8\ Unlike competing exchanges, the Exchange does not offer a 
front-end order entry system to its Floor Brokers to submit orders 
on the BOX Trading Floor. Instead, Floor Brokers use their own 
proprietary front-end order entry systems on the BOX Trading Floor. 
Given this, Participants have two possible means of bringing orders 
to the Exchange's Trading Floor for possible execution: (1) They can 
invest in the technology, systems and personnel to participate on 
the Trading Floor and deliver the order to the Exchange matching 
engines for validation and execution; or (2) they can utilize the 
services of another Participant acting as a Floor Broker. The 
Exchange notes that the investment in the technology, systems and 
personnel to establish a front-end order entry system on the BOX 
Trading Floor is substantial. As such, the Exchange established the 
QOO Order Rebate program to incentivize Participants to (1) make 
such an investment to become a Floor Broker on the BOX Trading Floor 
and (2) allow Floor Brokers to price their services at a level that 
would enable them to attract QOO order flow from participants who 
would otherwise utilize the front-end order entry mechanism offered 
by the Exchange's competitors instead of incurring the cost in time 
and resources to install and develop their own internal systems to 
deliver QOO orders directly to the Exchange system.
    \9\ As noted above, currently the rebate does not apply to 
Public Customer executions, executions subject to the Strategy QOO 
Order Fee Cap, or Broker Dealer executions where the Broker Dealer 
is facilitating a Public Customer.
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    The Exchange notes that the rebate cap was removed in December 2019 
to further incentivize Floor Brokers to bring QOO Order flow to the BOX 
Trading Floor.\10\ The Exchange now believes the same level of 
incentive is no longer necessary for Floor Brokers to bring additional 
order flow to the BOX Trading Floor and, as such, believes the proposed 
change to reinstate the rebate cap is reasonable and appropriate at 
this time.\11\ Further, the Exchange notes that Floor Brokers will 
continue to be offered the per contract rebate for applicable QOO 
Orders (subject to the proposed rebate cap) and fees for Broker Dealers 
will continue to be capped at $75,000 per month per Broker Dealer.\12\ 
The Exchange believes that, despite the reinstatement of the proposed 
rebate cap, the current per contract rebate for Floor Brokers and fee 
cap for Broker Dealer QOO Orders will continue to incentivize Floor 
Brokers to bring Broker Dealer QOO order flow to the Exchange. The 
Exchange also believes the proposed rebate cap is reasonable as it was 
previously in place on the BOX Trading Floor.\13\ For the foregoing 
reasons, the Exchange believes it is appropriate to reinstate the 
rebate cap for Broker Dealer orders on the BOX Trading Floor.
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    \10\ See Securities Exchange Act Release No. 87704 (December 10, 
2019), 84 FR 68499 (December 16, 2019) (SR-BOX-2019-35).
    \11\ As with any incentive, there are multiple ways to reduce or 
raise the level. The Exchange notes it could have lowered the QOO 
Rebate amount, but instead decided to reinstate the QOO rebate cap 
that had already previously been in place on the Exchange.
    \12\ The Exchange notes that QOO Order fees are capped for 
Broker Dealers only on the BOX Trading Floor--Market Maker and 
Professional Customer order fees are not subject to any such fee 
cap. As such, the Exchange believes that reinstating the rebate cap 
for Broker Dealer orders is reasonable and appropriate at this time.
    \13\ See supra note 5.
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    Lastly and as noted above, the Exchange further believes that the 
$30,000 rebate cap for Broker Dealer orders is equitable and not 
unfairly discriminatory as Broker Dealer QOO Order execution fees are 
currently capped at $75,000 per month and other QOO Order fees are not. 
Further, all similarly situated Floor Brokers on the BOX Trading Floor 
who receive rebates on Broker Dealer orders will be uniformly capped at 
$30,000 per month per Broker Dealer.

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 believes the 
proposed rebate cap will not impose an unfair burden on intramarket 
competition because all similarly situated Floor Brokers who receive 
rebates on Broker Dealer orders on the BOX Trading Floor would be 
uniformly capped at $30,000 per month per Broker Dealer.\14\ Further, 
the Exchange believes the proposed rule change does not impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act as the Exchange operates in a 
highly competitive market in which market participants can readily 
choose to send their orders to other exchanges with trading floors if 
they deem rebate opportunities at other trading floors to be more 
favorable. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and rebates to remain 
competitive within the industry. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.
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    \14\ As mentioned above, the Exchange believes that reinstating 
the rebate cap for Broker Dealer orders is reasonable and 
appropriate because Broker Dealer orders are the only executions 
currently capped at $75,000 per month (Market Maker and Professional 
Customer orders are not subject to any fee cap).
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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 \15\ and Rule 19b-4(f)(2) 
thereunder,\16\ because it establishes or changes a due, or fee.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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
exception occurred on : 2021-09020.htm
exception occurred on : 2021-09020.htm
     Send an email to rule-comme[email protected]. Please include 
File Number SR-BOX-2021-05 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-2021-05. 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

[[Page 23460]]

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-
2021-05, and should be submitted on or before May 24, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09020 Filed 4-30-21; 8:45 am]
BILLING CODE 8011-01-P