[Federal Register Volume 84, Number 60 (Thursday, March 28, 2019)]
[Notices]
[Pages 11850-11852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05912]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 85399]


Securities Exchange Act of 1934

March 22, 2019.
    In the Matter of: The BOX Exchange LLC; Regarding a Suspension 
of and Order Instituting Proceedings to Determine Whether to Approve 
or Disapprove a Proposed Rule Change to Amend the Fee Schedule on 
the BOX Market LLC Options Facility to Establish BOX Connectivity 
Fees for Participants and Non-Participants Who Connect to the BOX 
Network (File No. SR-BOX-2019-04); Order Granting BOX Exchange LLC's 
Petition for Review of Division of Trading and Markets Order by 
Delegated Authority Temporarily Suspending and Instituting 
Proceedings on SR-BOX-2019-04; Affirming the Division's Order; and 
Lifting the Automatic Stay.

I. Background

    On February 13, 2019, BOX Exchange LLC (``BOX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed 
rule change (SR-BOX-2019-04) (``BOX 3'') to amend the fee schedule on 
the BOX Market LLC options facility to establish certain connectivity 
fees and reclassify its high speed vendor feed connection as a port 
fee. On February 26, 2019, the Division of Trading and Markets 
(``Division''), acting pursuant to delegated authority,\3\ issued a 
notice of the proposed rule change and order temporarily suspending the 
proposed rule change pursuant to Section 19(b)(3)(C) of the Act and 
simultaneously instituting proceedings under Section 19(b)(2)(B) of the 
Act to determine whether to approve or

[[Page 11851]]

disapprove the proposed rule change.\4\ The Commission received one 
comment letter on the proposal supporting the suspension and 
institution of proceedings.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 200.30-3(a)(12), (57) and (58).
    \4\ See Securities Exchange Act Release No. 85201, 84 FR 7146 
(March 1, 2019) (``Order Instituting Proceedings'').
    \5\ See letter from Theodore R. Lazo, Managing Director and 
Associate General Counsel, Securities Industry and Financial Markets 
Association, to Vanessa Countryman, Acting Secretary, Commission, 
dated March 12, 2019.
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    On February 26, 2019, pursuant to Rule 430 of the Commission's 
Rules of Practice,\6\ the Exchange filed a notice of intention to 
petition for review of the Order Instituting Proceedings. Pursuant to 
Rule 431(e) of the Commission's Rules of Practice,\7\ a notice of 
intention to petition for review results in an automatic stay of the 
action by delegated authority. On March 5, 2019, the Exchange filed a 
petition for review of the Order Instituting Proceedings.\8\
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    \6\ 17 CFR 201.430.
    \7\ 17 CFR 201.431(e).
    \8\ Petition for Review of Order Temporarily Suspending BOX 
Exchange LLC's Proposal to Amend the Fee Schedule on BOX Market LLC, 
dated March 5, 2019 (``Petition'').
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    The proposed fees in the proposed rule change are identical to 
those proposed in two prior BOX proposed rule changes, both of which 
were similarly suspended by delegated authority.\9\ The Forms 19b-4 for 
all three filings are substantively identical, except SR-BOX-2018-37 
(``BOX 2'') and BOX 3 identify the broad categories of the Exchange's 
costs to offer connectivity services and state that the proposed fees 
would ``offset'' the Exchange's costs.
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    \9\ See Securities Exchange Act Release Nos. 84168 (September 
17, 2018), 83 FR 47947 (September 21, 2018) (SR-BOX-2018-24) (``BOX 
1'') and 84823 (December 14, 2018), 83 FR 65381 (December 20, 2018) 
(SR-BOX-2018-37) (``BOX 2'').
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    As with the instant proposal, the Exchange challenged the 
Division's delegated authority to suspend and institute proceedings on 
BOX 1.\10\ On November 16, 2018, the Commission granted the Exchange's 
petition to review BOX 1 and discontinued the automatic stay of the 
delegated action.\11\ On February 25, 2019, the Commission issued an 
order affirming the action by delegated authority in BOX 1.\12\ The 
Order Affirming the BOX 1 OIP also re-opened the comment and rebuttal 
periods for BOX 1 to March 8, 2019 and March 15, 2019, respectively.
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    \10\ See letter from Amir C. Tayrani, Partner, Gibson, Dunn & 
Crutcher LLP, to Brent J. Fields, Secretary, Commission, dated 
September 19, 2018; Petition for Review of Order Temporarily 
Suspending BOX Exchange LLC's Proposal to Amend the Fee Schedule on 
BOX Market LLC, dated September 26, 2018. The Commission notes that 
the Exchange did not challenge the Division's action by delegated 
authority to suspend and institute proceedings on BOX 2.
    \11\ See Securities Exchange Act Release No. 84614 (November 16, 
2018), 83 FR 59432 (November 23, 2018).
    \12\ See Securities Exchange Act Release No. 85184, 84 FR 6842 
(February 28, 2019) (``Order Affirming SR-BOX-2018-24 OIP'').
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II. Discussion

    Pursuant to Rule 431 of the Commission Rules of Practice,\13\ the 
Exchange's Petition is granted. The Commission is not providing for a 
time period during which any party to the action or other person may 
file a written statement in support of or in opposition to the Order 
Instituting Proceedings.\14\ The Commission believes that the issues 
raised by the Exchange's Petition were presented during the course of 
the Commission's review of the Exchange's petition to review the 
delegated action in BOX 1 temporarily suspending and instituting 
proceedings, in which two statements were received and considered by 
the Commission in its order affirming the delegated action.\15\ The 
Commission therefore does not believe the Petition presents any new 
issues that would benefit from an additional period for written 
statement and believes that no time period for the filing of statements 
is necessary for this review.
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    \13\ 17 CFR 201.431.
    \14\ 17 CFR 201.100(c).
    \15\ See Order Affirming SR-BOX-2018-24 OIP, supra note 12. See 
also letters to Brent J. Fields, Secretary, Commission, from Lisa J. 
Fall, President, BOX, dated December 7, 2018 and Amir C. Tayrani, 
Gibson, Dunn & Crutcher LLP, dated December 10, 2018.
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    The Commission's Rules of Practice set forth procedures for the 
review of actions made pursuant to delegated authority. Rule 431(a) 
provides that the Commission may affirm, reverse, modify, set aside, or 
remand for further proceedings, in whole or in part, any action made 
pursuant to authority delegated in 17 CFR 200.30-1 through 200.30-
18.\16\ For the reasons discussed below, the Commission affirms the 
temporary suspension of the proposed rule change and the institution of 
proceedings.
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    \16\ See 17 CFR 201.431(a).
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    Instituting proceedings and keeping in place the temporary 
suspension provides a process for the Commission to further consider 
whether the proposed rule change is consistent with the statutory 
requirements applicable to a national securities exchange under the 
Act. In particular, this approach will allow the Commission to consider 
whether the proposed rule change satisfies the standards under the Act 
and the rules thereunder requiring, among other things, that (i) an 
exchange's rules provide for the equitable allocation of reasonable 
fees among members, issuers, and other persons using its facilities; 
(ii) do not permit unfair discrimination between customers, issuers, 
brokers, or dealers; and (iii) do not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\17\ Accordingly, the Order Instituting Proceedings properly 
concluded that it was appropriate in the public interest, for the 
protection of investors, and otherwise in furtherance of the purposes 
of the Act to temporarily suspend the proposed rule change and to 
institute proceedings to determine whether the proposed rule change 
should be approved or disapproved in view of the significant legal and 
policy issues raised by the proposal.\18\
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    \17\ See Order Instituting Proceedings, supra note 4, at 7150.
    \18\ See id.
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    Further, suspending the filing and instituting proceedings 
constitutes an interim step in the Commission's consideration of the 
substantive issues raised by the filing, and does not constitute a 
final disposition of the proposed rule change. As reflected in the 
Order Instituting Proceedings, the Commission has not reached any 
conclusions with respect to the issues involved.\19\ To the contrary, 
the Commission sought additional comment with respect to the concerns 
raised by the filing,\20\ and noted that the institution of proceedings 
provides the Commission the opportunity to more fully assess the issues 
raised.
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    \19\ See id.
    \20\ See id.
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    As noted above, during the proceedings the Commission will consider 
whether the proposal satisfies the standards under the Act and the 
rules thereunder requiring, among other things, that an exchange's 
rules provide for the equitable allocation of reasonable fees among 
members, issuers, and other persons using its facilities; not permit 
unfair discrimination between customers, issuers, brokers or dealers; 
and do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
    Further, the Commission finds that it is in the public interest to 
lift the stay during the pendency of the Commission's review. The 
Commission believes the continued suspension of the proposed rule 
change while the Commission conducts proceedings to consider the 
Exchange's proposal will allow the Commission to further

[[Page 11852]]

consider the proposed fees' consistency with the Exchange Act without 
the risk of allowing a fee that is potentially inconsistent with the 
Exchange Act to remain in effect. The Commission also does not believe 
that lifting the stay precludes meaningful review of the Order 
Instituting Proceedings.
    For the reasons stated above, it is hereby:
    Ordered that the Exchange's petition for review of the Division's 
action, by delegated authority, temporarily suspending the proposed 
rule change and simultaneously instituting proceedings to determine 
whether to approve or disapprove the proposed rule change be granted; 
and
    It is further ordered that the Division's Order Instituting 
Proceedings by delegated authority is hereby affirmed; and
    It is further ordered that the automatic stay of delegated action 
pursuant to Commission Rule of Practice 431(e) \21\ is hereby 
discontinued.
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    \21\ 17 CFR 201.431(e).
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    The order temporarily suspending such proposed rule change and 
instituting proceedings to determine whether to approve or disapprove 
such proposed rule change shall remain in effect.

    By the Commission.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05912 Filed 3-27-19; 8:45 am]
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