[Federal Register Volume 84, Number 28 (Monday, February 11, 2019)]
[Notices]
[Pages 3265-3267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01728]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85052; File No. SR-BOX-2019-01]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Clarify That
Multi-Leg Qualified Open Outcry Orders Are Permitted on the BOX Trading
Floor
February 5, 2019.
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 January 30, 2019, BOX 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 change
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 make multi-leg QOO Orders available on the
BOX Trading Floor. 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://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
In August 2017, the Securities and Exchange Commission (``SEC'' or
``Commission'') approved the Exchange's proposal to adopt rules for an
open outcry trading floor.\3\ Among the approved rules was BOX Rule
7600(a)(4) which stated that ``QOO Orders may be multi-leg orders up to
four (4) legs, including Complex Orders as defined in Rule 7240(a)(5)
and tied to hedge orders as defined in IM-7600-2.'' \4\ The Exchange
notes that while this
[[Page 3266]]
rule currently allows for multi-leg QOO Orders that do not meet the
definition of a Complex Order \5\ to trade on the BOX Trading Floor,
such multi-leg QOO Orders are not currently traded. Due to technology
enhancements, the Exchange now proposes to make these multi-leg QOO
Orders available on the BOX Trading Floor.\6\ As such, the Exchange
proposes to add rule text that states that the priority rules for
Complex Orders contained in Rule 7240(b)(2) and (3) do not apply to
multi-leg QOO orders that are not Complex Orders (``multi-leg QOO
Orders''). Multi-leg QOO Orders must involve the simultaneous purchase
and/or sale of two or more different options series in the same
underlying security, for the same account, and for the purpose of
executing a particular investment strategy.\7\ Each component series of
a multi-leg QOO order must be executed at a price that is equal to or
better than the NBBO for that series subject to the exceptions of Rule
15010(b). Each component series of a multi-leg QOO order (1) may not
trade through any equal or better priced Public Customer bids or offers
on the BOX book for that series or any non-Public Customer bids or
offers on the BOX book for that series that are ranked ahead of or
equal to better priced Public Customer bids or offers, and (2) may not
trade through any non-Public Customer bids or offers for that series on
the BOX book that are priced better than the proposed execution
price.\8\
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\3\ See Securities Exchange Act Release No. 81292 (August 2,
2017), 82 FR 37144 (August 8, 2017) (Order Approving a Proposed Rule
Change, as Modified by Amendment Nos. 1 and 2, To Adopt Rules for an
Open-Outcry Trading Floor).
\4\ The Exchange notes it recently amended this rule to provide
the ability for the Exchange to determine the applicable number of
legs for a Complex QOO Order. See Securities Exchange Act Release
No. 84340 (October 2, 2018), 83 FR 50718 (October 9, 2018) (Notice
of Filing and Immediate Effectiveness SR-BOX-2018-30). In this
filing, the Exchange stated that only orders that meet the
definition of a Complex Order are allowed to trade on the BOX
Trading Floor. The Exchange now proposes, due to technology
enhancements, to make such multi-leg QOO Orders that do not meet the
definition of a Complex Order available on the BOX Trading Floor.
Upon approval, multi-leg QOO orders that are entered into the system
will be accepted and executed pursuant to Rule 7600(c). The Exchange
notes that Complex Order priority provisions do not apply to multi-
leg QOO Orders. Multi-leg QOO Orders are treated like single-leg QOO
Orders with respect to execution and priority.
\5\ The term ``Complex Order'' means any order involving the
simultaneous purchase and/or sale of two or more different options
series in the same underlying security, for the same account, in a
ratio that is equal to or greater than one-to-three (.333) and less
than or equal to three-to-one (3.00) and for the purpose of
executing a particular investment strategy. See BOX Rule 7240(a)(7).
\6\ The Exchange notes that NYSE Arca Inc. (``NYSE Arca'')
currently allows multi-leg orders to trade on their trading floor.
While NYSE Arca does not specifically provide in their rulebook that
multi-leg orders (that do not meet the definition of a Complex
Order) may trade on the trading floor, NYSE Arca distributed a
regulatory bulletin which detailed the rules of priority and order
protection in open outcry including multi-leg orders on the trading
floor. Specifically, the bulletin states, ``OTP Holders are reminded
that orders involving multiple legs that do not meet the definition
of a Complex Order, as defined in Rule 6.62(e) . . . do not have
priority over equal priced priority interest in the Consolidated
Book.'' See NYSE Arca Options RB-16-04. Given this language, the
Exchange believes that multi-leg orders that do not meet the
definition of a Complex Order are currently permitted on the NYSE
Arca trading floor. As such, the Exchange does not believe the
proposed clarification is novel; especially since current BOX rules
already allow for such orders to be traded on the Trading Floor. The
purpose of this filing is to advise market participants that multi-
leg QOO Orders will now be allowed to trade on the Trading Floor due
to recent technological enhancements.
\7\ The Exchange notes multi-leg QOO Orders are the same as
Complex QOO Orders except for the ratio restrictions.
\8\ The Exchange notes that similar functionality exists at NYSE
Arca with respect to execution and priority for single leg orders on
their trading floor. See NYSE Arca Rule 6.47-O(a)(3).
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The Exchange notes that the system will enforce the execution and
priority provisions in the proposed change. As such, multi-leg QOO
Orders will not be allowed to take advantage of the Complex Order
priority provisions in BOX Rule 7240(b)(2) and (3).
The Exchange anticipates this enhanced functionality to be
available in the first quarter of 2019. The Exchange will distribute an
Informational Circular at least two weeks before the implementation
date.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\9\ in general, and Section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
promote just and equitable principles of trade, 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. The Exchange believes that the proposed change discussed
herein protects investors and the public interest as it will reduce any
potential confusion regarding multi-leg QOO Orders on the BOX Trading
Floor. Further, the Exchange notes that similar functionality exists on
another options exchange with a trading floor.\11\ Also, the Exchange
believes the proposed change promotes just and equitable principles of
trade and removes impediments to and perfects the mechanism of a free
and open market and a national system because it mirrors the current
functionality for single leg orders on the Trading Floor. Lastly, the
Exchange believes the proposed change is consistent with the Act
because it is simply advising Participants of the technological
enhancement. Further, the functionality is available to all Floor
Participants.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ See supra note 6.
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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. The Exchange believes that
proposed clarification will promote competition by making the enhanced
functionality available to market participants. The Exchange notes that
similar functionality already exists on another trading floor.\12\ As
such, 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.
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\12\ Id.
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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 foregoing 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\
thereunder.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
The Exchange has satisfied this requirement.
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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
[[Page 3267]]
Send an email to [email protected]. Please include
File Number SR-BOX-2019-01 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-2019-01. 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 the 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-2019-01 and should be submitted on
or before March 4, 2019.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01728 Filed 2-8-19; 8:45 am]
BILLING CODE 8011-01-P