[Federal Register Volume 84, Number 78 (Tuesday, April 23, 2019)]
[Notices]
[Pages 16911-16913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08106]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85678; File No. SR-BOX-2019-11]


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

April 17, 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 April 4, 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

[[Page 16912]]

the Fee Schedule [sic] on the BOX Options 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 May 
1, 2019. 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://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 short stock 
interest, 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 dividend strategy transactions.
    A dividend strategy is defined as a transaction done to achieve a 
dividend arbitrage involving the purchase, sale and exercise of in-the-
money options of the same class, executed the first business day prior 
to the date on which the underlying stock goes ex-dividend. The 
Exchange proposes to include this definition in a footnote in the BOX 
Fee Schedule in Section II.D.
    The Exchange now proposes to offer a strategy cap for dividend 
strategies. Today, Floor Participant transactions are capped at $1,000 
for all short stock interest, reversal, conversion, jelly roll, and box 
spread strategies executed on the same trading day.\5\ The Exchange 
proposes to include dividend 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 dividend strategies executed on the same 
trading day in the same options class. The Exchange notes that the 
proposed fee cap is similar to a fee cap at another options exchange in 
the industry.\6\
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    \5\ Short stock interest, reversal, conversion, jelly roll and 
box spread transactions are not included in the monthly fee cap for 
Broker Dealers. The Exchange notes that dividend strategies will not 
be included in the monthly fee cap for Broker Dealers.
    \6\ See Nasdaq Phlx LLC (``Phlx'') Fee Schedule. On Phlx, 
Specialist, Market Makers, Professionals, Firms and Broker-Dealers 
receive a fee cap of $1,500 for a [sic] dividend, merger and short 
stock interest strategies executed on the same trading day in the 
same options class when such members are trading in their own 
proprietary account.
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    Further, the Exchange proposes to include dividend 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 is met for dividend strategies executed 
on the same trading day in the same options class.
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 dividend strategies in Section 
II.D of the BOX Fee Schedule is reasonable, as another exchange offers 
fee caps for dividend strategies.\8\ On Phlx, Specialist, Market 
Makers, Professionals, Firms and Broker-Dealers receive a fee cap of 
$1,500 for a [sic] dividend, merger and short stock interest strategies 
executed on the same trading day in the same options class when such 
members are trading in their own proprietary account. The Exchange also 
notes that the Phlx fee cap is broader in that it applies to dividend, 
merger and short stock interest strategies collectively. As discussed 
herein, the Exchange proposes a separate cap for dividend strategies. 
The Exchange believes this difference is appropriate as dividend 
strategies must execute in the same options class where the other 
strategies in the BOX Fee Schedule are not subject to the same 
requirement. As such, the Exchange believes it is reasonable and 
appropriate to separate dividend strategies from the other strategies 
in the BOX Fee Schedule. Further, the Exchange believes that including 
dividend 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. The Exchange notes that it is not 
including the Phlx requirement that the Participant be trading in 
their own proprietary account as this is not the BOX strategy fee 
cap model and is not a requirement for the other strategies on the 
BOX Fee Schedule.
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    The Exchange believes the proposed fee cap for dividend 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 dividend 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 
dividend strategies. Further, another options exchange today offers a 
cap on dividend 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 dividend 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 dividend 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 dividend strategies proposed by the Exchange, 
as described in the proposal, are influenced by these robust market 
forces

[[Page 16913]]

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 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-2019-11 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-2019-11. 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-2019-11, and should be submitted on 
or before May 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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-08106 Filed 4-22-19; 8:45 am]
 BILLING CODE 8011-01-P