Document ID: SEC-2022-0365-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Exchange, LLC
Posted Date: 2022-03-21T04:00Z

[Federal Register Volume 87, Number 54 (Monday, March 21, 2022)]
[Notices]
[Pages 16039-16040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05839]

[[Page 16039]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94416; File No. SR-BOX-2022-09]

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

March 15, 2022.
    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 March 1, 2022, 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 to 
amend Section II.D (Strategy QOO Order Fee Cap and Rebate) on the BOX 
Options Market LLC (``BOX'') options 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.D (Strategy QOO Order Fee 
Cap and Rebate) of the BOX Fee Schedule. Specifically, the Exchange 
proposes to decrease the daily fee cap for short stock interest, long 
stock interest, merger, reversal, conversion, jelly roll, and box 
spread strategies \5\ executed on the same trading day from $1,000 to 
$500. Lastly, the Exchange notes that the daily fee cap for dividend 
strategies \6\ will continue to be $1,000 per day per customer. As 
such, the Exchange proposes to add clarifying language to the Fee 
Schedule that states that for dividend strategies, the rebate of $500 
per customer will apply once the $1,000 fee cap is met.\7\
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    \5\ A ``short stock interest strategy'' is defined as a 
transaction done to achieve a short stock interest arbitrage 
involving the purchase, sale, and exercise of in-the-money options 
of the same class. A ``long stock interest strategy'' is defined as 
a transaction done to achieve long stock involving the purchase, 
sale, and exercise of in-the-money options of the same class. A 
``merger strategy'' is defined as transactions done to achieve a 
merger arbitrage involving the purchase, sale and exercise of 
options of the same class and expiration date, each executed prior 
to the date on which shareholders of record are required to elect 
their respective form of consideration, i.e., cash or stock. A 
``reversal strategy'' is established by combining a short security 
position with a short put and a long call position that shares the 
same strike and expiration. A ``conversion strategy'' is established 
by combining a long position in the underlying security with a long 
put and a short call position that shares the same strike and 
expiration. A ``jelly roll strategy'' is created by entering into 
two separate positions simultaneously. One position involves buying 
a put and selling a call with the same strike price and expiration. 
The second position involves selling a put and buying a call, with 
the same strike price, but with a different expiration from the 
first position. A ``box spread strategy'' is a strategy that 
synthesizes long and short stock positions to create a profit. 
Specifically, a long call and short put at one strike is combined 
with a short call and long put at a different strike to create 
synthetic long and synthetic short stock positions, respectively.
    \6\ A ``dividend strategy'' is defined as a transaction done to 
achieve a dividend arbitrage involving the purchase, sale and 
exercise of in-the-money options of the same class, executed the 
first business day prior to the date on which the underlying stock 
goes ex-dividend.
    \7\ The Exchange notes that the daily fee cap for dividend 
strategies is similar to a fee cap at another options exchange in 
the industry. See Nasdaq Phlx LLC (``Phlx'') Fee Schedule. On Phlx, 
Lead Marker Makers, Market Makers, Professionals, Firms and Broker-
Dealers receive a fee cap of $1,100 for dividend strategies executed 
on the same trading day in the same options class when such members 
are trading in their own proprietary account or on an agency basis.
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    The intent of the above change is to increase order flow in certain 
strategy QOO Orders on the BOX Trading Floor, which will benefit all 
market participants. The Exchange notes that these changes will apply 
equally to all Participants, regardless of Participant type or size of 
the Participant. The Exchange notes that similar fee caps exist at 
other options exchanges for these order types.\8\
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    \8\ See NYSE American LLC (``NYSE American'') Options Fee 
Schedule Section I.J. At NYSE American, there is a $1,000 cap on 
transaction fees for options Strategy Executions involving reversals 
and conversions, box spreads, short stock interest spreads, merger 
spreads, and jelly rolls; however, the cap is reduced to $200 on 
transactions fees for qualifying strategies traded on the same 
trading day for those ATP Holders that trade at least 25,000 monthly 
billable contract sides in qualifying Strategy Executions. See also 
Nasdaq Phlx LLC (``Phlx'') Pricing Schedule, Options 7, Section 4. 
Phlx offers merger, short stock interest and box spread strategy 
cap, which is applicable to Lead Market Makers, Market Makers, 
Professionals, Firms and Broker-Dealers, of $1,000 (daily) if more 
than one class of options, and $700 (daily) if only in a single 
class of options. Further, Phlx offers a daily strategy cap for 
reversal and conversion and jelly roll strategies on the same 
trading day of $200 (daily).
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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,\9\ 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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    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to decrease the daily fee cap for short 
stock interest, long stock interest, merger, reversal, conversion, 
jelly roll, and box spread strategies is reasonable as the Exchange 
believes it will incentivize Participants to execute a greater number 
of these strategy types on the BOX Trading Floor for the opportunity to 
qualify for the lower daily strategy cap. Strategy fee caps limit fees 
for Participants executing these strategy types.
    Further, the Exchange's proposal to decrease the daily fee cap for 
short stock interest, long stock interest, merger, reversal, 
conversion, jelly roll, and box spread strategies is equitable and not 
unfairly discriminatory because all account types may qualify for the 
strategy cap provided those strategies are executed on the same trading 
day.
    As discussed above, the Exchange believes the proposed change will 
incentivize order flow in certain QOO Strategy Orders, and the Exchange 
believes that the decreased fee cap will

[[Page 16040]]

result in increased participation in these types of orders on the BOX 
Trading Floor. As such, the Exchange believes that increased 
participation on the Trading Floor will result in increased liquidity 
on the BOX Floor which will benefit all market participants.

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 change burdens competition and will instead help 
promote competition by continuing to provide incentives for market 
participants to submit strategy orders to the BOX Trading Floor. 
Further, the Exchange does not believe that the proposed change will 
impose an undue burden on intra-market competition because all Floor 
Participants are subject to the proposed change, regardless of account 
type.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. 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.

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 \10\ and Rule 19b-4(f)(2) 
thereunder,\11\ because it establishes or changes a due, or fee.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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-2022-09 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-2022-09. 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-2022-09, and should be submitted on 
or before April 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05839 Filed 3-18-22; 8:45 am]
BILLING CODE 8011-01-P