[Federal Register Volume 81, Number 181 (Monday, September 19, 2016)]
[Notices]
[Pages 64250-64253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22421]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78828; File No. SR-BOX-2016-43]


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 
To Change the Fees and Credits for Facilitation and Solicitation 
Transactions

September 13, 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 August 31, 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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[[Page 64251]]

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 
make a number of changes to the fees and credits for Facilitation and 
Solicitation Transactions 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 
September 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 amend the Fee Schedule for trading on BOX 
to make a number of changes to the fees and credits for Facilitation 
and Solicitation Transactions.\5\
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    \5\ Transactions executed through the Solicitation Auction 
mechanism and Facilitation Auction mechanism.
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Exchange Fees
    The Exchange proposes to remodel the fee structure for Facilitation 
and Solicitation Transactions. Currently, Facilitation and Solicitation 
transactions are assessed per contract fees based upon account type and 
whether the order is a: (i) Agency Order; \6\ (ii) Facilitation Order 
or Solicitation Order; \7\ or (iii) Response in the Solicitation or 
Facilitation Auction Mechanisms.
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    \6\ An Agency Order is a block-size order that an Order Flow 
Provider seeks to facilitate as agent through the Facilitation 
Auction or Solicitation Auction mechanism. Agency Orders can be 
submitted by all BOX account types.
    \7\ Facilitation and Solicitation Orders are the matching contra 
orders submitted on the opposite side of the Agency Order.
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    First, the Exchange proposes to restructure the Facilitation and 
Solicitation Transactions fee schedule to differentiate between fees 
assessed in Penny and Non-Penny Pilot Classes. The Exchange then 
proposes to adjust certain fees throughout the Facilitation and 
Solicitation Transactions fee structure. Specifically, the Exchange 
proposes to increase the fees assessed for Non-Public Customers \8\ for 
Agency Orders and Facilitation and Solicitation Orders to $0.15 from 
$0.00. Public Customer fees for Agency Orders and Facilitation and 
Solicitation Orders will remain at $0.00. The Exchange then proposes to 
adjust the fees assessed for Responses in the Solicitation or 
Facilitation Auction Mechanisms. Specifically, the Exchange proposes to 
assess a $0.25 fee in Penny Pilot Classes and a $0.40 fee in Non-Penny 
Pilot Classes, regardless of account type. Under the current fee 
structure, Public Customers are assessed $0.15, Broker Dealers and 
Professional Customers are assessed $0.27 and Market Makers are 
assessed $0.20 for Responses in the Solicitation or Facilitation 
Auction Mechanisms.
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    \8\ Non-Public Customers are defined within the BOX Fee Schedule 
as Professional Customers, Broker Dealers and Market Makers.
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    The proposed Facilitation and Solicitation Transactions fee 
structure will be as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Agency order                Facilitation order or       Responses in the solicitation
                                                         --------------------------------       solicitation order            or facilitation auction
                                                                                         --------------------------------           mechanisms
                      Account type                          Penny pilot      Non-penny                                   -------------------------------
                                                              classes      pilot classes    Penny pilot      Non-penny      Penny pilot      Non-penny
                                                                                              classes      pilot classes      classes      pilot classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public Customer.........................................           $0.00           $0.00           $0.00           $0.00           $0.25           $0.40
Professional Customer or Broker Dealer..................            0.15            0.15            0.15            0.15            0.25            0.40
Market Maker............................................            0.15            0.15            0.15            0.15            0.25            0.40
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Next, the Exchange proposes to establish Section I.C.1, 
Facilitation and Solicitation Transaction Rebate which will provide a 
$0.10 per contract rebate to Agency Orders executed through the 
Facilitation and Solicitation Auction Mechanisms where at least one 
party is a Non-Public Customer. For example, a Public Customer Agency 
Order that executes against a Non-Public Customer Order through the 
Facilitation Auction mechanism would receive a $0.10 rebate. Further, a 
Public Customer Agency Order that executes against a Public Customer 
Order through the Facilitation Auction mechanism would not receive a 
rebate.
Liquidity Fees and Credits
    The Exchange then proposes to amend Section II.B. of the BOX Fee 
Schedule, (Liquidity Fees and Credits for Facilitation and Solicitation 
Transactions). Specifically, the Exchange proposes to decrease the fees 
and credits for Facilitation and Solicitation transactions in both 
Penny and Non-Penny Pilot Classes. The Exchange proposes to decrease 
the fees for adding liquidity in Facilitation and Solicitation 
transactions to $0.75 from $0.95 in Non-Penny Pilot Classes, and to 
$0.25 from $0.40 in Penny Pilot Classes. The Exchange also proposes to 
decrease the credits for removing liquidity in Facilitation and 
Solicitation transactions. Specifically, the Exchange proposes to 
decrease the credit to $0.75 from $1.00 in Non-Penny Pilot Classes, and 
$0.25 from $0.45 in Penny Pilot Classes.
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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[[Page 64252]]

Exchange Fees
    The Exchange believes that remodeling the fee structure for 
Facilitation and Solicitation Transactions is reasonable, equitable and 
not unfairly discriminatory. In particular, the proposed revisions will 
allow the Exchange to apply separate fees for certain transactions in 
Penny and Non-Penny Pilot Classes, a distinction that is made in many 
other sections 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 Non-Public 
Customers for Agency Orders and Facilitation and Solicitation Orders in 
Penny or Non-Penny Pilot Classes are reasonable, equitable and not 
unfairly discriminatory. Professional Customers and Broker Dealers and 
Market Makers are not currently charged for Agency Orders and 
Facilitation and Solicitation Orders. The proposal increases the fees 
for all Non-Public Customers to $0.15 for both Agency Orders and 
Facilitation and Solicitation Orders in Penny and Non-Penny Pilot 
Classes. The Exchange believes these fees are reasonable as they are in 
line with another exchange in the industry.\10\ For example, at the 
ISE, the fee for both the initiating order and contra order in a 
Crossing Order \11\ is $0.20 for Market Makers, Broker Dealers and 
Professional Customers, and $0.00 for Public Customers in Penny Pilot 
Classes. In Non-Penny Pilot Classes, the fees for the initiating order 
and contra order in a Crossing Order is $0.20 for Professional 
Customers and Broker Dealers, $0.25 for Market Makers and $0.00 for 
Public Customers.
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    \10\ See International Securities Exchange (``ISE'') Fee 
Schedule Section I available at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
    \11\ Under the ISE Fee Schedule Crossing Orders are any orders 
executed in the Exchange's auction mechanisms, including the 
Facilitation and Solicitation mechanisms.
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    The Exchange believes that charging Professional Customers and 
Broker Dealers and Market Makers more than Public Customers for Agency 
Orders and Facilitation and Solicitation Orders is reasonable, 
equitable and not unfairly discriminatory. The securities markets 
generally, and BOX in particular, have historically aimed to improve 
markets for investors and develop various features within the market 
structure for Public Customer benefit. The Exchange believes that 
charging lower fees to Public Customers in Facilitation and 
Solicitation transactions is reasonable and, ultimately, will benefit 
all Participants trading on the Exchange by attracting Public Customer 
order flow.
    The Exchange also believes the proposed fees for Responses in the 
Solicitation or Facilitation Auction Mechanisms in Penny and Non-Penny 
Pilot Classes are reasonable, and equitable. The proposal changes the 
fees to $0.25 and $0.40 in Penny and Non-Penny Pilot Classes, 
respectively, regardless of account type. Moreover, the proposed fees 
are competitive with fees charged by another options exchange.\12\ For 
example, at the ISE, fees for Responses to Crossing Orders are $0.50, 
regardless of Participant type, in both Penny and Non-Penny Pilot 
Classes. The Exchange also notes that the proposed fees for Responses 
to Facilitation or Solicitation Orders are not unfairly discriminatory 
because they apply equally to all Participants.
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    \12\ See supra note 10.
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    The Exchange believes it is reasonable to establish different fees 
for Facilitation and Solicitation transactions in Penny Pilot Classes 
compared to transactions in Non-Penny Pilot Classes. The Exchange makes 
this distinction throughout the BOX Fee Schedule, including the 
Exchange Fees for PIP and COPIP Transactions. The Exchange believes it 
is reasonable to establish higher fees for Non-Penny Pilot Classes 
because these Classes are typically less actively traded and have wider 
spreads.
    The Exchange also believes that establishing a $0.10 per contract 
rebate to Agency Orders executed through the Facilitation and 
Solicitation Auction Mechanisms where at least one party is a Non-
Public Customer is reasonable, equitable and not unfairly 
discriminatory. The Exchange believes that it is reasonable and 
equitable to provide the opportunity to receive a rebate to incentivize 
Participants to direct Facilitation and Solicitation order flow to the 
Exchange, which will result [sic] ultimately benefit all Participant 
[sic] trading on the Exchange. The Exchange believes it is reasonable 
and appropriate that ``Public Customer to Public Customer'' 
transactions do not receive the proposed rebate, as these orders are 
never assessed Facilitation and Solicitation transaction fees and 
therefore should not also receive the benefit of the rebate. Further, 
the Exchange believes that the rebate is reasonable and equitable 
because other exchanges offer a similar distinction in Facilitation and 
Solicitation rebates.\13\ Finally, the Exchange believes that the 
proposed changes are not unfairly discriminatory because the rebate 
would be uniformly applied to all Agency Orders where at least one 
party is a Non-Public Customer.
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    \13\ See the ISE Fee Schedule, Section IV.A. (QCC and 
Solicitation Rebates). ISE offers a per contract rebate for agency 
orders in its Facilitation and Solicitation Auction Mechanisms. A 
higher rebate is given to Non-Customer to Customer Facilitation and 
Solicitation Transactions ($0.00 to $0.11 depending on volume) than 
Customer to Customer Facilitation and Solicitation Transactions 
($0.00 to $0.03 depending on volume). See also Chicago Board Options 
Exchange (``CBOE'') Fee Schedule, QCC Rate Table available at http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf. CBOE offers a 
per contract $0.10 credit for the equivalent of Facilitation and 
Solicitation transactions that occur between Non-Customer to 
Customer executions; however, no credit is offered for Customer to 
Customer executions.
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Liquidity Fees and Credits
    The Exchange believes that lowering the liquidity fees and rebates 
for Facilitation and Solicitation transactions is reasonable and 
equitable. Under the proposed change the fee for adding liquidity will 
be lowered to $0.75 from $0.95 (Non-Penny Pilot Class) and to $0.25 
from $0.40 (Penny Pilot Class). Accordingly, the credit for removing 
liquidity will be lowered to $0.75 from $1.00 (Non-Penny Pilot Class) 
and to $0.25 from $0.45 (Penny Pilot Class). The Exchange also notes 
that the proposed liquidity fees and credits for Facilitation or 
Solicitation transactions are not unfairly discriminatory because they 
apply equally to all Participants.
    BOX believes that the changes to Facilitation and Solicitation 
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 will simply allow BOX to provide the credit 
incentive to Participants to attract order flow. The Exchange believes 
it is appropriate to provide incentives to market participants to use 
the Facilitation and Solicitation auction mechanisms, because doing so 
may result in greater liquidity on BOX which would benefit all market 
participants. Further, the Exchange believes that the proposed changes 
are reasonable as they are in line with another exchange in the 
industry.\14\
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    \14\ Id.
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    Finally, the Exchange believes it is reasonable to establish 
different fees and credits for Facilitation and Solicitation 
transactions in Penny Pilot Classes compared to transactions in Non-
Penny Pilot Classes. The Exchange makes this distinction throughout the 
BOX Fee

[[Page 64253]]

Schedule, including the liquidity fees and credits for PIP and COPIP 
Transactions. The Exchange believes it is reasonable to establish 
higher fees and credits for Non-Penny Pilot Classes because these 
Classes are typically less actively traded and have wider spreads. The 
Exchange believes that offering a higher rebate will incentivize order 
flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting 
all Participants trading on BOX.

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 that the proposed adjustments to the 
Facilitation and Solicitation Transaction fees will not impose a burden 
on competition among various Exchange Participants. Rather, BOX 
believes that the changes will result in the Participants being charged 
appropriately for their Facilitation and Solicitation Transactions and 
are designed to enhance competition in these auction mechanisms. 
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 believes that the proposed rebate for Facilitation and 
Solicitation transactions will not impose a burden on competition among 
various Exchange Participants. The Exchange believes the proposed 
rebate is attractive to market participants and is similar to rebates 
offered by other exchanges.\15\ Further, the Exchange does not believe 
that the proposed rule change to not offer a rebate for ``Public 
Customer to Public Customer'' transactions will burden intramarket 
competition because although ``Public Customer to Public Customer'' 
transactions will not receive a rebate, these transactions are not 
assessed Facilitation and Solicitation transaction fees (unlike Non- 
``Customer to Customer'' Facilitation and Solicitation transactions). 
The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed rule change applies only to BOX and because other Exchanges 
have similar exclusions.\16\
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    \15\ See supra note 13. CBOE does not offer a rebate (credit) 
for Customer to Customer executions.
    \16\ Id.
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    The Exchange also believes that amending the proposed liquidity 
fees and credits for Facilitation and Solicitation Transactions will 
not impose a burden on competition among various Exchange Participants. 
The Exchange believes that the proposed changes will result with these 
Participants being charged or credited appropriately for these 
transactions.
    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.

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 \17\ and Rule 19b-4(f)(2) 
thereunder,\18\ because it establishes or changes a due, or fee.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-2016-43 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-2016-43. 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-2016-43, and should be 
submitted on or before October 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-22421 Filed 9-16-16; 8:45 am]
 BILLING CODE 8011-01-P