Document ID: SEC-2016-1371-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2016-08-05T04:00Z

[Federal Register Volume 81, Number 151 (Friday, August 5, 2016)]
[Notices]
[Pages 51947-51949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18567]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78449; File No. SR-BOX-2016-26]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the BOX Rules Regarding Participants and Associated Persons Who 
Are or Become Subject to a Statutory Disqualification

August 1, 2016.
    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 July 25, 2016, 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 self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the BOX Rules regarding Participants 
and associated persons who are or become subject to a statutory 
disqualification. 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

[[Page 51948]]

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 purpose of the proposed rule change is to amend Rule 2040 
(Restrictions) to add language which provides the Exchange with the 
discretion to determine whether to permit a person to become an Options 
Participant or an associated person of a Participant or continue as a 
Participant or in association with a Participant on the Exchange.
    Currently, Rule 2040 restricts any persons from becoming an Options 
Participant or continuing as an Options Participant where (1) such 
person is other than a natural person and is not a registered broker or 
dealer, (2) such person is a natural person who is not either a 
registered broker or dealer or associated with a registered broker or 
dealer, (3) such person is subject to a statutory disqualification,\3\ 
except that a person may become a Participant or continue as a 
Participant where, pursuant to Rules 19d-1, 19d-2, 19d-3 and 19h-1 of 
the Act, the Commission has issued an order providing relief from such 
a disqualification and permitting such a person to become a 
Participant, or (4) such person is not a member of another registered 
national securities exchange or association.
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    \3\ The Exchange uses the Securities Exchange Act of 1934 
definition of statutory disqualification. See 15 U.S.C. 78c(a)(39).
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    The Exchange notes that the proposed rule changes below are 
substantially similar to the Rules of the International Securities 
Exchange (``ISE'').\4\ The Exchange first proposes to amend the 
language of Rule 2040 to give itself the discretion to determine if a 
restriction on a Participant becoming or continuing on as an Options 
Participant is appropriate.
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    \4\ See Securities Exchange Release No. 42455, 65 FR 11401 
(March 2, 2000) (Order Granting Registration as a National 
Securities Exchange).
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    The Exchange then proposes to amend BOX Rule 2040(a)(3). 
Specifically, the Exchange proposes to add a reference to Section 
3(a)(39) of the Exchange Act for the definition of statutory 
disqualification within BOX Rule 2040(a)(3). The Exchange also proposes 
to delete the language that allows a person to become a Participant or 
continue as a Participant where, pursuant to Rules 19d-1, 19d-2, 19d-3 
and 19h-1 of the Act, the Commission has issued an order providing 
relief from such a disqualification and permitting such a person to 
become a Participant. The Exchange believes that this language is 
obsolete.
    The Exchange then proposes to add three more situations with regard 
to whether a person may become a Participant or continue as a 
Participant in any capacity on the Exchange. The additional 
restrictions are (1) when such person fails to meet any of the 
qualification requirements for becoming a Participant or associated 
with a Participant after approval thereof; (2) such person fails to 
meet any condition placed by the Exchange on such Participant or 
association with a Participant; and (3) such person violates any 
agreement with the Exchange. The Exchange proposes these additions in 
order to allow the Exchange more discretion in its determination as to 
whether a person may become or continue as a Participant or in 
association with a Participant.
    The Exchange also proposes to add language with regard to a 
Participant or associated person that becomes subject to a statutory 
disqualification under the Exchange Act. The proposed rule would allow 
a Participant or associated person who becomes subject to a statutory 
disqualification and who wants to continue as a Participant of the 
Exchange or in association with a Participant, to submit a request to 
the Exchange seeking to continue as a Participant or in association 
with a Participant notwithstanding the statutory disqualification.\5\
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    \5\ The Participant or person associated with a Participant must 
submit the request within thirty (30) days of becoming subject to a 
statutory disqualification.
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    The Exchange also proposes to add language which allows 
Participants and associated persons whose request to become a 
Participant is denied or conditioned, or any person whose association 
with a Participant is denied or conditioned pursuant to the 
restrictions codified in Rule 2040(a), and any Participant or person 
associated with a Participant who is not permitted to continue as a 
Participant or be an associate with a Participant or to which 
association is conditioned to appeal the Exchange's decision under Rule 
1300 (Review of Certain Exchange Actions) of the Rules.
    Lastly, the Exchange proposes to add Interpretive Material which 
allows the Exchange to waive the provisions of Rule 2040 when a 
proceeding is pending before another self-regulatory organization 
(``SRO'') or similar association to determine whether to permit a 
Participant or associated person to become or continue being 
Participant or associated person notwithstanding a statutory 
disqualification. The Exchange notes that this proposed rule change is 
substantially similar to the comparable Rules of the Chicago Board 
Options Exchange (``CBOE'').\6\ Further, in the event the Exchange 
determines to waive the provisions of this Rule with respect to a 
Participant or associated person, the Exchange shall determine whether 
the Exchange will concur in any Exchange Act Rule 19h-1 filing made by 
another SRO or similar association with respect to the Participant or 
associated person.
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    \6\ See Securities Exchange Release No. 43056, 65 FR 46524 (July 
28, 2000) (Order Approving Proposed Rule Change and Notice of Filing 
and Order Granting Accelerated Approval to Amendment No. 3 to the 
Proposed Rule Change by the Chicago Board Options Exchange, Inc. 
Relating to Membership Rules) (SR-CBOE-99-15).
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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,\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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule changes are consistent 
with the requirements above. Specifically, the Exchange believes the 
proposed changes will better enable the Exchange to use its discretion 
in determining whether a person may become or continue as a Participant 
or associated person. Because of the discretionary language and 
additional restrictions, the Exchange may consider additional 
circumstances when determining whether a person may become or continue 
as a Participant or associated person on the Exchange.
    The Exchange believes that Proposed Rule 2040(c) regarding any 
person or Participant's ability to appeal a denied

[[Page 51949]]

or conditioned request to become or continue as a Participant or to 
associate with a Participant is reasonable because it provides a fair 
procedure for the Participants and persons associated with Participants 
pursuant to Rule 11000 (Summary Suspension).
    The Exchange also believes the proposed rule change regarding the 
waiver of the provisions of Rule 2040 will better enable the Exchange 
to focus Exchange resources on other matters while another SRO or 
similar association is determining whether to permit a Participant or 
associated person to become or continue being a Participant or 
associated person on the exchange.
    Lastly, the Exchange believes that amending the language in BOX 
Rule 2040(a)(3) is appropriate, as the added language which defers to 
the Exchange Act for a particular definition, will add clarity to the 
rules. Further, the Exchange believes is it reasonable to remove 
obsolete language in BOX Rule 2040(a)(3) because the Exchange is 
eliminating any potential for confusion by simplifying the Exchange 
Rules, ensuring that Participants, regulators, and the public can more 
easily navigate the Exchange's Rulebook.

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.

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 \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    (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, it has become effective pursuant 
to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
    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-2016-26 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-2016-26. 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-2016-26 and 
should be submitted on or before August 26, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18567 Filed 8-4-16; 8:45 am]
 BILLING CODE 8011-01-P