[Federal Register Volume 81, Number 148 (Tuesday, August 2, 2016)]
[Notices]
[Pages 50777-50780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18205]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78427; File No. SR-BOX-2016-34]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility

July 27, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 18, 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 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 on 
the BOX Market LLC (``BOX'') options facility. While changes to the fee 
schedule pursuant to this proposal will be effective upon filing, the 
changes will become operative on August 1, 2016. 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 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 make a number of changes to the BOX Fee 
Schedule.
Exchange Fees
PIP and COPIP Transactions
    The Exchange proposes to remodel the current fee structure for PIP 
and COPIP Transactions. Currently, PIP and COPIP transactions are 
assessed fees based upon the account type of the Participant and 
whether the order is a: (i) PIP or COPIP Order; (ii) Improvement Order 
in PIP or COPIP; or (iii) Primary Improvement Order. The current PIP 
and COPIP Transactions fee structure is as follows:

----------------------------------------------------------------------------------------------------------------
                                                                   Account type
                                 -------------------------------------------------------------------------------
                                                         Professional
                                    Public customer        customer          Broker dealer       Market maker
----------------------------------------------------------------------------------------------------------------
PIP Order or COPIP Order \5\....  $0.00.............  $0.15.............  $0.15.............  $0.15.
Improvement Order in PIP or       $0.15.............  $0.37.............  $0.37.............  $0.30.
 COPIP \6\.
Primary Improvement Order \7\...  See Section I. B.1  See Section I. B.1  See Section I. B.1  See Section I.
                                                                                               B.1.
----------------------------------------------------------------------------------------------------------------

    First, the Exchange proposes to restructure the PIP and COPIP 
Transactions fee schedule to differentiate between fees assessed in 
Penny and Non-Penny Pilot Classes. Next, the Exchange proposes to 
adjust the Improvement Order fees assessed for Broker Dealers, 
Professional Customers and Market Makers. Specifically, the Exchange 
proposes to establish a fee of $0.12 for Broker Dealers, Professional 
Customer and Market Maker Improvement Orders in Penny Pilot Classes. 
For Improvement Orders in Non-Penny Pilot Classes, the Exchange 
proposes to establish a fee of $0.38 for Market Makers, Broker Dealers 
and Professional Customers. Public Customer Improvement Order fees will 
remain the same, as well as the PIP and COPIP Order fees for all 
Participants.
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    \5\ A PIP Order or COPIP Order is a Customer Order (an agency 
order for the account of either a customer or a broker-dealer) 
designated for the PIP or COPIP, respectively.
    \6\ An Improvement Order is a response to a PIP or COPIP 
auction.
    \7\ A Primary Improvement Order is the matching contra order 
submitted to the PIP or COPIP on the opposite side of the PIP or 
COPIP order.
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    The proposed PIP and COPIP fee structure will be as follows:

[[Page 50778]]



 
----------------------------------------------------------------------------------------------------------------
                                                     PIP and COPIP orders \8\         Improvement orders \9\
                                                 ---------------------------------------------------------------
                  Account type                      Penny pilot      Non-penny      Penny pilot      Non-penny
                                                      classes      pilot classes      classes      pilot classes
----------------------------------------------------------------------------------------------------------------
Public Customer.................................           $0.00           $0.00           $0.15           $0.15
Professional Customer or Broker Dealer..........            0.15            0.15            0.12            0.38
Market Maker....................................            0.15            0.15            0.12            0.38
----------------------------------------------------------------------------------------------------------------

    The Exchange is also proposing to remove the Primary Improvement 
Order row in the schedule which references the Tiered Fee Schedule for 
Initiating Participants in Section 1.B.1 as well as amend the footnotes 
in the PIP and COPIP Transactions subsection to reflect to revised fee 
structure.
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    \8\ A PIP Order or COPIP Order is a Customer Order (an agency 
order for the account of either a customer or a broker-dealer) 
designated for the PIP or COPIP, respectively.
    \9\ An Improvement Order is a response to a PIP or COPIP 
auction.
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Tiered Fee Schedule for Initiating Participants
    The Exchange proposes to rename Section I.B.1 from ``Tiered Fee 
Schedule for Initiating Participants'' to ``Primary Improvement Order'' 
to clarify that this section reflects the per contract execution fees 
for Primary Improvement Orders. The Exchange is also proposing to amend 
the footnotes in proposed Section I.B.1 to include the definition of a 
Primary Improvement Order.
BOX Volume Rebate
    The Exchange proposes to amend the BOX Volume Rebate (``BVR'') in 
Section I.B.2 of the Fee Schedule.
    Under the current BVR, the Exchange offers a tiered per contract 
rebate for all PIP Orders and COPIP Orders of 100 contracts and under. 
PIP and COPIP executions of 100 contracts and under are awarded a per 
contract rebate calculated on a monthly basis by totaling the 
Participant's PIP and COPIP volume submitted to BOX, relative to the 
total national Customer volume in multiply-listed options classes. The 
current per contract rebate for Participants in PIP and COPIP 
Transactions under the BVR is:

 
----------------------------------------------------------------------------------------------------------------
                                                    Percentage thresholds of         Per contract rebate (all
                                                   national customer volume in            account types)
                     Tier                        multiply-listed options classes -------------------------------
                                                            (monthly)                   PIP            COPIP
----------------------------------------------------------------------------------------------------------------
1.............................................  0.000% to 0.159%................         ($0.00)         ($0.00)
2.............................................  0.160% to 0.339%................         ($0.04)         ($0.02)
3.............................................  0.340% to 0.999%................         ($0.11)         ($0.04)
4.............................................  1.000% to 1.249%................         ($0.14)         ($0.06)
5.............................................  1.250% and Above................         ($0.18)         ($0.06)
----------------------------------------------------------------------------------------------------------------

    First, the Exchange is proposing to lower the per contract rebate 
for PIP and COPIP Orders of 100 and under that trade solely with their 
contra order. Specifically, the Exchange is proposing to lower the 
rebate to $0.03 per contract from $0.05 per contract. Next, the 
Exchange proposes to lower the per contract rebates associated with 
each volume tier in PIP transactions. The per contract rebates 
associated with COPIP Orders remain unchanged. The new BVR set forth in 
Section I.B.2 of the BOX Fee Schedule will be as follows:

 
----------------------------------------------------------------------------------------------------------------
                                                    Percentage thresholds of         Per contract rebate (all
                                                   national customer volume in            account types)
                     Tier                        multiply-listed options classes -------------------------------
                                                            (monthly)                   PIP            COPIP
----------------------------------------------------------------------------------------------------------------
1.............................................  0.000% to 0.159%................         ($0.00)         ($0.00)
2.............................................  0.160% to 0.339%................         ($0.02)         ($0.02)
3.............................................  0.340% to 0.999%................         ($0.04)         ($0.04)
4.............................................  1.000% to 1.249%................         ($0.07)         ($0.06)
5.............................................  1.250% and Above................         ($0.10)         ($0.06)
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Liquidity Fees and Credits
    The Exchange then proposes to amend Section II.A. of the BOX Fee 
Schedule, liquidity fees and credits for PIP and COPIP transactions. 
Specifically, the Exchange proposes to increase the fees and credits 
for PIP and COPIP transactions in Penny and Non-Penny Pilot Classes. 
The Exchange proposes to raise the fees for adding liquidity in PIP and 
COPIP Transactions to $0.77 from $0.75 in Non-Penny Pilot Classes, and 
to $0.38 from $0.35 in Penny Pilot Classes. The Exchange also proposes 
to increase the credits for removing liquidity in PIP and COPIP 
Transactions. Specifically, the Exchange proposes to increase the 
credit to $0.77 from $0.75 in Non-Penny Pilot Classes, and to $0.38 
from $0.35 in Penny Pilot Classes.
    Lastly, the Exchange also proposes to make non-substantive 
technical chances

[[Page 50779]]

[sic] to renumber the footnotes within the BOX Fee Schedule.
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,\10\ 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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    \10\ 15 U.S.C. 78f(b)(4) and (5).
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Exchange Fees
PIP and COPIP Transactions
    The Exchange believes that remodeling the fee structure for PIP and 
COPIP Transactions is reasonable, equitable, and not unfairly 
discriminatory. In particular, the proposed revisions will allow the 
Exchange to apply separate fees for transactions in Penny and Non-Penny 
Pilot Classes, a distinction that is made in many other section [sic] 
of the BOX Fee Schedule, including Section I.A (Non-Auction 
Transactions) and Section III.A (All Complex Orders).
    The Exchange also believes the proposed fees for Broker Dealers, 
Professional Customer and Market Makers submitting Improvement Orders 
in Penny and Non-Penny Pilot classes are reasonable equitable and not 
unfairly discriminatory. Professional Customers and Broker Dealers are 
currently charged a flat fee of $0.37 for Improvement Orders, while 
Market Makers are charged a flat fee of $0.30. The proposal lowers the 
Improvement Order fees for these Participants to $0.12 for Penny Pilot 
Classes, while slightly raising the fee for Non-Penny Pilot Classes to 
$0.38. The Exchange believes these fees are reasonable as they are in 
line with other exchanges in the industry.\11\
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    \11\ See NASDAQ OMX PHLX, (``PHLX'') Pricing Schedule, where 
Responders to the PIXL are charged $0.25.
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Tiered Fee Schedule for Initiating Participants
    The Exchange believes that the proposal to rename sections [sic] 
I.B.1 to ``Primary Improvement Order is reasonable equitable and not 
unfairly discriminatory, as it will provide further clarity to the fee 
schedule and will eliminate any potential investor confusion.
BOX Volume Rebate
    The Exchange believes the proposed changes to the BVR are 
reasonable, equitable and non-discriminatory. The BVR was adopted to 
attract Public Customer order flow to the Exchange by offering these 
Participants incentives to submit their PIP and COPIP Orders to the 
Exchange. The Exchange believes providing a rebate to Participants that 
reach a certain volume threshold is equitable and non-discriminatory as 
the rebate will apply to all Participants uniformly.
    The Exchange believes it is reasonable, equitable and non-
discriminatory to reduce the flat rebate in the BVR for PIP Orders and 
COPIP Orders of 100 and under contracts that trade solely with their 
contra order. The Exchange recently amended the BVR to introduce the 
flat $0.05 rebate, regardless of tier.\12\ The Exchange now believes it 
is reasonable to lower the flat rebate to $0.03 per contract, 
regardless of tier. The BVR is intended to incentivize Participants to 
direct Customer order flow to the Exchange, and while the Exchange 
believes that the potentially higher BVR rebate tiers are not necessary 
for internalized PIP Orders that only trade against their contra order, 
a flat $0.03 rebate will continue to be the appropriate incentive for 
these orders. The Exchange also believes that the proposed flat $0.03 
rebate for internalized COPIP Orders that only trade against their 
contra order will continue to be a reasonable incentive.
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    \12\ See Securities Exchange Release No. 77694 (April 22, 2016), 
81 FR 25460 (April 28, 2016) (Notice of Filing and Immediate 
Effectiveness SR-BOX-2016-17).
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    The Exchange believes that lowering the rebates associated with 
each volume tier for PIP transactions is reasonable. Once the volume 
threshold is met the Exchange will continue to pay rebates on 
applicable PIP Orders. The Exchange also believes the proposed rebates 
are equitable and not unfairly discriminatory because Participants are 
eligible to receive the rebate provided they meet the volume and order 
type requirements. The Exchange believes that applying the rebate to 
PIP Orders will continue to provide these Participants with an added 
incentive to transact a greater number of Public Customer Orders on the 
Exchange to the benefit of all market participants.
Liquidity Fees and Credits
    BOX believes that the changes to PIP and COPIP transaction 
liquidity fees and credits are equitable and not unfairly 
discriminatory in that they 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 allow BOX to provide incentives to 
Participants to attract order flow. The Exchange also believes the 
liquidity fees and credits are reasonable and competitive when compared 
to similar fees at competing venues.

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 fee changes are reasonably designed to enhance competition in 
BOX transactions, particularly auction transactions.

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 \13\ and Rule 19b-4(f)(2) 
thereunder,\14\ because it establishes or changes a due, or fee.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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:

[[Page 50780]]

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-2016-34 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-2016-34. 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 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, 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; 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-2016-34, and should be 
submitted on or before August 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Robert W. Errett,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-18205 Filed 8-1-16; 8:45 am]
 BILLING CODE 8011-01-P