[Federal Register Volume 82, Number 225 (Friday, November 24, 2017)]
[Notices]
[Pages 55892-55894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25357]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82113; File No. SR-BOX-2017-35]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Rule 7300

November 17, 2017.
    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 November 8, 2017, BOX Options Exchange LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7300. 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://boxoptions.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 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 Exchange proposes to amend Rule 7300. Specifically, the 
Exchange is proposing to amend how the quoting requirements for 
Preferred Market Makers \3\ are calculated. A Preferred Market Maker 
must maintain a continuous two-sided market, pursuant to Rule 
8050(c)(1), throughout the trading day, in 99% of the non-adjusted 
option series of each class for which it accepts Preferenced Orders,\4\ 
for 90% of the time the Exchange is open for trading in each such 
option class.\5\ Compliance with the Preferred Market Maker quoting 
requirement is determined on a monthly basis; however, determining 
compliance with this requirement on a monthly basis does not relieve a 
Preferred Market Maker from meeting this quoting requirement on a daily 
basis, nor does it prohibit the Exchange from taking disciplinary 
action against a Preferred Market Maker for failing to meet this 
requirement each trading day.
---------------------------------------------------------------------------

    \3\ The term ``Preferred Market Maker'' means a Market Maker 
designated as such by a Participant with respect to an order 
submitted by such Participant to BOX. See Rule 7300(a)(2).
    \4\ The term ``Preferenced Order'' means any order, whether on a 
single option instrument or on a Complex Order Strategy, for which a 
Preferred Market Maker is designated with respect to such order, 
upon submission of such order to BOX. See Rule 7300(a)(1).
    \5\ For purposes of this requirement, a Preferred Market Maker 
is not required to quote in intra-day add-on series or series that 
have a time to expiration of nine months or more in the classes for 
which it receives Preferenced Orders and a Market Maker may still be 
a Preferred Market Maker in any such series if the Market Maker 
otherwise complies with the requirements.
---------------------------------------------------------------------------

    Currently, the Exchange applies the quoting requirements on a 
class-by-class basis. The Exchange is now proposing that compliance 
with the quoting requirements apply to all of a Preferred Market 
Maker's classes for which it receives Preferenced Orders collectively. 
This change is being proposed as a competitive response to the rules of 
another exchange.\6\ The Exchange is not proposing any change to the 
actual quoting requirements, only to how the requirements are applied 
to Preferred Market Makers.
---------------------------------------------------------------------------

    \6\ See CBOE Rule 8.13(d).
---------------------------------------------------------------------------

    The Exchange believes that applying the continuous electronic 
quoting requirements for Preferred Market Makers collectively across 
all classes is a fair and efficient way for the Exchange and market 
participants to evaluate compliance with the continuous electronic 
quoting obligation. Applying the continuous electronic quoting 
requirements collectively across all classes rather than on a class-by-
class basis is beneficial to Preferred Market Makers by providing some 
flexibility to choose which series in their appointed classes they will 
continuously electronically quote--increasing the continuous electronic 
quoting in the series of one class while allowing for a decrease in the 
continuous electronic quoting in the series of another class. This 
flexibility, however, does not diminish the Preferred Market Maker's 
obligation to continuously electronically quote in a significant 
percentage of series for a significant part of the trading day. This 
flexibility is especially important for classes that have relatively 
few series and may prevent a Preferred Market Maker from reaching the 
continuous electronic quoting obligation when failing to quote 90% of 
the trading day in more than one series in an appointed class. The 
Exchange believes that the proposed rule change will not diminish, and 
may in fact increase, market making activity on the Exchange, by 
applying continuous electronic quoting obligations in a reasonable 
manner, which is already in place on other options exchanges.\7\
---------------------------------------------------------------------------

    \7\ See e.g., Nasdaq ISE, LLC (``ISE'') Rule 713, Supplementary 
Material .03 and Rule 804(e); and NYSE Arca, Inc. (``NYSE Arca'') 
Options Rule 6.88-O.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the

[[Page 55893]]

requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\8\ in general, and Section 6(b)(5) of the Act,\9\ 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. In particular, the proposed change will more closely 
align how the Exchange applies the quoting requirements for Preferred 
Market Makers with another options exchange.\10\ The Exchange believes 
the proposed change will provide increased flexibility to Preferred 
Market Makers in their ability to provide liquidity, which in turn, 
will benefit the public.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ See supra note 7.
---------------------------------------------------------------------------

    With respect to the application of continuous electronic quoting 
obligations collectively, the Exchange believes that providing 
Preferred Market Makers with flexibility to satisfy their continuous 
electronic quoting obligations collectively across their appointed 
classes will not diminish Preferred Market Makers' obligations to 
provide continuous electronic quotes in a significant percentage of 
series for a significant part of the trading day. BOX believes that the 
balance between the obligations imposed on and benefits provided to 
Preferred Market Makers under the rules is appropriate. The proposed 
rule change does not diminish any of the obligations imposed on 
Preferred Market Makers. Rather, it merely changes how the continuous 
electronic quoting obligation is applied. The Exchange notes that 
Preferred Market Makers are subject to many obligations under the 
rules, including the obligation to satisfy bid/ask differential 
requirements, to meet minimum quote size requirements, and to 
contribute to the maintenance of a fair and orderly market in their 
appointed classes, which the Exchange believes will ensure continued 
liquidity on the Exchange. BOX believes that its proposed rule change 
is consistent with the Act in that providing flexibility does not 
detract from the overall market making obligations of Preferred Market 
Makers. The proposed rule change better supports a Preferred Market 
Maker's continuous obligation to engage in dealings for its own 
account. Accordingly, any benefits of the proposed rule change to 
provide flexibility to Preferred Market Makers are offset by the 
continued responsibilities to provide significant liquidity to the 
market to the benefit of 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. As discussed above, the 
proposed change simply aligns the rules of the Exchange with those of 
other options exchanges.\11\ Additionally, the proposed change is only 
amending how the quoting obligations are calculated; not the quoting 
obligations themselves.
---------------------------------------------------------------------------

    \11\ See supra note 7.
---------------------------------------------------------------------------

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    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 change 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-2017-35 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-2017-35. 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. 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-2017-35 and should be 
submitted on or before December 15, 2017.


[[Page 55894]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25357 Filed 11-22-17; 8:45 am]
BILLING CODE 8011-01-P