[Federal Register Volume 84, Number 135 (Monday, July 15, 2019)]
[Notices]
[Pages 33794-33796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14892]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86334; File No. SR-BOX-2019-23]


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 for Certain 
PIP and COPIP Transactions

July 9, 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 June 28, 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'') 
facility. While changes to the fee schedule pursuant to this proposal 
will be effective upon filing, the changes will become operative on 
July 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.
PIP and COPIP Transactions
    The Exchange first proposes to amend certain PIP and COPIP 
transaction fees for Professional Customers, Broker Dealers and Market 
Makers in Section I.B of the BOX Fee Schedule. Specifically, the 
Exchange proposes to increase Improvement Order \5\ fees for 
Professional Customers, Broker Dealers, and Market Makers in Penny 
Pilot Classes from $0.12 to $0.16 and decrease the Improvement Order 
fees for Professional Customers, Broker Dealers and Market Makers in 
Non-Penny Pilot Classes from $0.38 to $0.34.
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    \5\ An Improvement Order is a response to a PIP or COPIP 
auction.
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Liquidity Fees and Credits
    The Exchange then proposes to amend Section III.A of the BOX Fee 
Schedule, Liquidity Fees and Credits, for PIP and COPIP Transactions. 
Specifically, the Exchange proposes to increase the fees and credits 
for PIP and COPIP transactions in Non-Penny Pilot Classes and decrease 
the fees and credits for PIP and COPIP transactions in Penny Pilot 
Classes. Currently, under Section III.A, a Public Customer PIP or COPIP 
Order receives the ``removal'' credit, while the corresponding Primary 
Improvement Order and any Improvement Orders will be charged the 
``add'' fee as shown in the following table:

------------------------------------------------------------------------
                                                                 Credit
                                                     Fee for      for
                                                      adding    removing
                                                    liquidity  liquidity
------------------------------------------------------------------------
Non-Penny Pilot Classes...........................      $0.77    ($0.77)
Penny Pilot Classes...............................       0.38     (0.38)
SPY...............................................       0.45     (0.45)
------------------------------------------------------------------------

    Further, under current Section III.A., if a Non-Public Customer PIP 
or COPIP Order does not trade with its Primary Improvement Order, the 
Primary Improvement Order receives the ``removal'' credit and any 
corresponding Improvement Order responses are charged the ``add'' fee 
as shown in the following table:

------------------------------------------------------------------------
                                                                 Credit
                                                     Fee for      for
                                                      adding    removing
                                                    liquidity  liquidity
------------------------------------------------------------------------
Non-Penny Pilot Classes...........................      $0.77    ($0.77)
Penny Pilot Classes...............................       0.38     (0.38)
SPY...............................................       0.45     (0.45)
------------------------------------------------------------------------

    The Exchange now proposes to raise the fees for adding liquidity in 
PIP and COPIP transactions to $0.81 from $0.77 in Non-Penny Pilot 
Classes and decrease the fees for adding liquidity in PIP and COPIP 
transactions in Penny Pilot Classes from $0.38 to $0.34. Further, the 
Exchange proposes to increase the credit for removing liquidity in PIP 
and COPIP transactions in Non-Penny Pilot Classes to $0.81 from $0.77. 
Lastly, the Exchange proposes to decrease the credit for removing 
liquidity in PIP and COPIP transactions in Penny Pilot Classes from 
$0.38 to $0.34.
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,\6\ 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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    \6\ 15 U.S.C. 78f(b)(4) and (5).
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PIP and COPIP Transactions
    The Exchange believes that increasing the Improvement Order fees 
for Professional Customers, Broker Dealers and Market Makers in Penny 
Pilot Classes is reasonable and equitable as the proposed fees are 
lower than similar fees assessed at other options exchanges in the 
industry.\7\ The Exchange further

[[Page 33795]]

believes that decreasing Improvement Order fees for Professional 
Customers, Broker Dealers and Market Makers in Non-Penny Pilot Classes 
is reasonable and equitable as the proposed fees are lower than similar 
fees assessed at other options exchanges in the industry.\8\ Further, 
the Exchange believes that the proposed changes are reasonable as they 
will incentivize Participants to send Non-Penny Pilot issues to the 
Exchange which in turn will result in increased liquidity in these 
issues on the Exchange. As such, the Exchange believes that the 
increased order flow in Non-Penny Pilot issues will benefit all market 
participants as the new order flow will result in increased opportunity 
to trade in these names on BOX. Further, the Exchange notes that 
submitting an order is entirely voluntary and Participants can 
determine which type of order they wish to submit, if any, to the 
Exchange. As such, the Exchange believes that proposed changes 
discussed herein are reasonable and consistent with the Act.
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    \7\ See Nasdaq Phlx LLC (``Phlx'') Pricing Schedule, where 
Market Maker or Specialist Responders to the PIXL are charged $0.25 
for Penny Pilot Classes and where all other non-Customer Responders 
are charged $0.48 for Penny Pilot Classes. See also Miami 
International Securities Exchange LLC (``MIAX'') Fee Schedule, where 
all responders are charged $0.50 for Penny Pilot Classes.
    \8\ At Phlx, Market Maker responders to the PIXL are charged 
$0.40 for Non-Penny Pilot Classes and all other non-Customer 
responders are charged $0.70 for Non-Penny Pilot Classes. At MIAX, 
all responders are charged $0.99 for Non-Penny Pilot Classes.
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    Further, the Exchange believes that the proposed fees are not 
unfairly discriminatory as they apply to all Professional Customers, 
Broker Dealers and Market Makers submitting Improvement Orders to the 
PIP and COPIP auction mechanisms. Further, the Exchange believes it is 
equitable and not unfairly discriminatory to charge Public Customers 
less than Non-Public Customers for their Improvement Orders. The 
practice of incentivizing Public Customer order flow is common in the 
options market. While Penny Pilot Classes are typically more actively 
traded, the Exchange believes that the proposed Improvement Order fees 
for Non-Penny Pilot Classes will incentivize order flow in Non-Penny 
Pilot issues on the Exchange, ultimately benefitting all Participants 
trading on BOX.\9\
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    \9\ The Exchange continues to believe that despite the slight 
increase in fees for Improvement Orders in Penny Pilot Classes, the 
proposed fees will continue to incentivize Improvement Order flow in 
Penny Pilot issues as the Exchange's Improvement Order fees are 
substantially lower than other exchanges in the industry. See supra 
note 7.
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Liquidity Fees and Credits
    The Exchange believes that the changes to the PIP and COPIP 
transaction liquidity fees and credits are equitable and not unfairly 
discriminatory in that they apply to all categories of participants and 
across all account types. The Exchange notes that liquidity fees and 
credits on BOX are meant to offset one another in any particular 
transaction. The liquidity fees and credits do not directly result in 
revenue to BOX, but simply allow BOX to provide incentives to 
Participants to attract order flow. As such, the Exchange believes that 
the proposed changes to the liquidity fees and credits for PIP and 
COPIP transactions are reasonable, equitable and not unfairly 
discriminatory.

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. The Exchange believes that the 
proposed changes in PIP and COPIP transaction fees incentivizes 
Participants to direct order flow to Non-Penny Pilot Classes which will 
promote competition in these issues on the Exchange. Further, the 
Exchange does not believe that the proposed changes will burden 
competition by creating a disparity between the fees an Initiating 
Participant in the PIP or COPIP auction pays and the fees a competitive 
responder pays that would result in certain Participants being unable 
to compete with initiators. In fact, the Exchange believes that these 
changes will not impair these Participants from adding liquidity and 
competing in the auction mechanisms and will help promote competition 
by providing incentives for market participants to submit PIP or COPIP 
order flow to BOX and thus, create a greater opportunity for customers 
to receive additional price improvement.
    The Exchange believes the proposed changes to the liquidity fees 
and credits for PIP and COPIP transactions will not impose a burden on 
competition. Rather, BOX believes that the changes will result in 
Participants being charged and credited appropriately for their PIP and 
COPIP transactions and is designed to enhance competition in auction 
transactions on BOX by increasing order flow in Non-Penny Pilot Issues. 
The Exchange believes that the increased order flow in Non-Penny Pilot 
issues will result in more responses to the Exchange's PIP and COPIP 
auction mechanisms which, in turn, will result in increased opportunity 
for price improvement and thus will benefit Participants on the 
Exchange.
    The Exchange does not believe that the propose change will impose 
an undue burden on intra-market competition as all Participants are 
subject to the proposed changes discussed herein. Further, the Exchange 
does not believe the proposal will impose an undue burden on 
intermarket competition, as the proposed changes will allow BOX to 
compete with other exchanges in the industry. As discussed above, 
submitting an order is entirely voluntary and Participants can 
determine which type of order they wish to submit, if any, to the 
Exchange.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing exchanges. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and credits to 
remain competitive with other exchanges. For the reasons discussed 
above, the Exchange believes that the proposed rule change reflects 
this competitive environment.

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 \10\ and Rule 19b-4(f)(2) 
thereunder,\11\ because it establishes or changes a due, or fee.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 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:

[[Page 33796]]

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-2019-23 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-2019-23. 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-2019-23, and should be submitted on 
or before August 5, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2019-14892 Filed 7-12-19; 8:45 am]
 BILLING CODE 8011-01-P