[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5538-5540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02893]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85133; File No. SR-BOX-2019-03]
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 (``BOX'') Facility To Modify Its
Strategy QOO Order Fee Cap and Rebate
February 14, 2019.
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 February 1, 2019, BOX 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
amend the Fee Schedule [sic] 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
[[Page 5539]]
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 the Fee Schedule for trading on BOX
to amend Section II.D (Strategy QOO Order Fee Cap and Rebate).
Currently, the Exchange caps fees and offers rebates on all reversal,
conversion, jelly roll, and box spread strategies on the BOX Trading
Floor. The Exchange is now proposing to cap fees and offer a Floor
Broker rebate for short stock interest strategy transactions.
A short stock interest strategy is 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. The Exchange
proposes to include this definition in a footnote in the BOX Fee
Schedule along with the other definitions of the strategies in Section
II.D.
The Exchange proposes to offer a strategy cap for short stock
interest strategies. Today, Floor Participant transactions are capped
at $1,000 for all reversal, conversion, jelly roll, and box spread
strategies executed on the same trading day.\5\ The Exchange proposes
to include short stock interest strategies in the daily Strategy QOO
Order Fee Cap and Rebate. As such, Floor Participant transactions will
also be capped at $1,000 for all short stock interest strategies
executed on the same trading day. Further, the Exchange proposes to
include short stock interest strategies in the Floor Broker Strategy
QOO Rebate. As proposed, on each trading day, Floor Brokers are
eligible to receive a $500 rebate for presenting certain Strategy QOO
Orders on the Trading Floor. The rebate will be applied once the $1,000
fee cap for all short stock interest, reversal, conversion, jelly roll,
and box spread strategies is met.
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\5\ Reversal, conversion, jelly roll and box spread transactions
are not included in the monthly fee cap for Broker Dealers.
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The Exchange notes that the fee cap discussed herein exists at
another options exchange in the industry.\6\
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\6\ See Cboe Exchange Inc. (``Cboe'') Fee Schedule Footnote 13.
At Cboe, market-maker, Clearing Trading Permit Holder, JBO
participant, broker-dealer and non-Trading Permit Holder market-
maker transaction fees are capped at $1,000 for all short stock
interest strategies. Unlike Cboe, BOX does not have a monthly fee
cap because the Exchange previously removed it for being unnecessary
due to the fact that if Participants are capped at $1,000 per day,
they would never reach the previous $25,000 monthly fee cap. See SR-
BOX-2018-11.
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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,\7\ 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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\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that including short stock interest
strategies in Section II.D of the BOX Fee Schedule is reasonable, as
another exchange offers fee caps for short stock interest strategies,
namely Cboe.\8\ Moreover, the Exchange believes the proposed fees are
reasonable in comparison because BOX's fee cap for short stock interest
strategies is identical to Cboe's fee cap. Further, the Exchange
believes that including short stock interest strategies in the Strategy
QOO Order rebate is appropriate as Floor Brokers are eligible to
receive a $500 rebate for presenting all other strategies to the BOX
Trading Floor.
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\8\ See supra note 6.
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The Exchange believes that the proposed fee cap for short stock
interest strategies is equitable and not unfairly discriminatory
because it provides incentives for all Participants to submit these
types of strategy orders to the BOX Trading Floor, which brings
increased liquidity and order flow to the floor for the benefit of all
market participants. Further, the Exchange believes that including
short stock interest strategies in the Strategy QOO Order rebate is
equitable and not unfairly discriminatory as the rebate is available to
all Floor Brokers who submit such orders to the BOX Trading Floor.
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 because the proposed change
applies uniformly to all Participants that incur transaction fees for
short stock interest strategies. Further, another options exchange
today offer caps on short stock interest strategies; therefore, the
Exchange believes that the proposal is consistent with robust
competition and does not provide any unnecessary burden on competition.
Further, because Floor Participants pay Floor Brokers to execute trades
on the Exchange floor, the Exchange believes that offering fee caps on
short stock interest strategies to Participants executing floor
transactions and not electronic executions does not create an
unnecessary burden on competition because the fee cap defrays brokerage
costs associated with executing short stock interest strategy
transactions, similar to other strategies today.
The Exchange operates in a highly competitive market in which
market participants can easily and readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or rebates to be inadequate. Accordingly, the fee cap and
Floor Broker rebate for short stock interest strategies proposed by the
Exchange, as described in the proposal, are influenced by these robust
market forces and therefore must remain competitive with fee caps at
other venues and therefore must continue to be reasonable and equitably
allocated to those Participants that opt to direct orders to the
Exchange rather than competing venues.
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 \9\ and Rule 19b-4(f)(2)
thereunder,\10\ because it establishes or changes a due, or fee.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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
[[Page 5540]]
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-2019-03 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-2019-03. 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-2019-03, and should be submitted on
or before March 14, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02893 Filed 2-20-19; 8:45 am]
BILLING CODE 8011-01-P