[Federal Register Volume 85, Number 166 (Wednesday, August 26, 2020)]
[Notices]
[Pages 52654-52656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18679]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89622; File No. SR-BOX-2020-34]
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 Facility To Amend the Liquidity
Fees and Credits for SPY PIP and COPIP Transactions
August 20, 2020.
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 August 12, 2020, BOX Exchange LLC (``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 on
the BOX Options Market LLC (``BOX'') facility. 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 III., Liquidity Fees and Credits. Specifically, the
Exchange proposes to amend the liquidity fees and credits for SPY PIP
and COPIP transactions. Currently, a Public Customer SPY PIP or COPIP
Order receives a $0.45 ``removal'' credit while the corresponding
Primary Improvement Order and any Improvement Order are charged a $0.45
``add'' fee. Further, under the current BOX Fee Schedule, when Non-
Public Customer SPY PIP or COPIP orders do not trade with its Primary
Improvement Order, the Primary Improvement Order receives a $0.45
``removal'' credit and any corresponding Improvement Order responses
are charged a $0.45 ``add'' fee.
The Exchange now proposes to no longer assess liquidity fees and
credits for SPY PIP and COPIP transactions as described above, and
instead proposes to establish that SPY PIP and COPIP Order submitted to
the PIP and COPIP mechanisms that do not trade with their Primary
Improvement Order shall receive a ``removal'' credit of $0.45, while
Improvement Orders to the SPY PIP and COPIP Orders executed in these
mechanisms shall be charged the ``add'' fee of $0.45. The Exchange
notes that a similar fee and credit structure is in place for liquidity
fees and credits for Facilitation and Solicitation transactions on
BOX.\5\
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\5\ See BOX Fee Schedule Section III.B. Agency Orders submitted
to the Facilitation and Solicitation mechanisms that do not trade
with their contra order shall receive the ``removal'' credit.
Responses to Facilitation and Solicitation Orders executed in these
mechanisms shall be charged the ``add'' fee.
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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,\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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The Exchange believes the proposed change to establish new SPY PIP
and COPIP liquidity fees and credits is reasonable, equitable, and not
unfairly discriminatory because pricing by symbol is a common practice
on many U.S. options exchanges as a means to incentivize order flow to
be sent to an exchange for execution in the most actively traded
options classes.\7\
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\7\ The Exchange is proposing that SPY PIP and COPIP Order
submitted to the PIP and COPIP mechanisms that do not trade with
their Primary Improvement Order shall receive a ``removal'' credit
of $0.45, while responses to the SPY PIP and COPIP Orders executed
in these mechanisms shall be charged the ``add'' fee of $0.45.
Further, the Exchange notes that SPY Primary Improvement Orders will
no longer be assessed the $0.45 ``add'' fee. The Exchange believes
that the proposed changes will result in increased SPY order flow to
BOX's PIP and COPIP auction mechanisms.
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The Exchange believes that the proposed changes to Section III of
the BOX Fee Schedule are reasonable, equitable and not unfairly
discriminatory. In particular, the Exchange believes the proposed
change
[[Page 52655]]
is reasonable as a similar ``removal'' credit and ``add'' fee structure
is in place for liquidity fees and credits for Facilitation and
Solicitation transactions.\8\ The Exchange believes that mirroring the
structure in place for liquidity fees and credits for Facilitation and
Solicitation transactions is reasonable as the Exchange believes that
the proposed change will incentivize Participants to submit SPY order
flow through the PIP and COPIP auction mechanisms thereby benefitting
all market participants through promoting market depth, facilitating
tighter spreads and enhancing price discovery. Further, the Exchange
believes that the proposed change is equitable and not unfairly
discriminatory as the change applies to all Participants, regardless of
account type.
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\8\ See supra note 5.
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Under this proposal, Public Customer SPY PIP and COPIP Primary
Improvement Orders will no longer be assessed the $0.45 ``add'' fee;
however, responses to the SPY PIP and COPIP Orders will continue to be
charged the $0.45 ``add'' fee. The Exchange believes it is reasonable,
equitable and not unfairly discriminatory to charge higher exchange
fees for responders in the PIP and COPIP mechanisms than for initiators
of these orders and the contra orders. The Exchange believes it is
reasonable when compared to a similar practice for Facilitation and
Solicitation fees at a competing venue.\9\ For example, at Nasdaq ISE
the fee for both the initiating and contra order for PIM Orders is
$0.10 for Select Symbols for all account types except Priority
Customers who are charged no fees. Responses to these orders are
charged $0.50 for Select Symbols regardless of account type. The
Exchange notes that a differential of fees between initiators and
responders currently exists in the Facilitation and Solicitation
auction mechanisms on BOX. Further, the Exchange continues to believe
that the proposed differential is reasonable because responders to PIP
and COPIP Orders are willing to pay a higher fee for liquidity
discovery. Responders to PIP and COPIP Orders are given the opportunity
to interact with customer order flow which, in turn, allows for the
opportunity for increased executions on the Exchange thus benefitting
all market participants. The Exchange also believes it is reasonable
and appropriate to charge initiators of PIP and COPIP Orders less than
responders because initiators bring liquidity to the Exchange which, in
turn, results in increased opportunity for more executions on BOX. As
such, the Exchange believes the differential is reasonable and
appropriate.
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\9\ See Nasdaq ISE LLC (``Nasdaq ISE'') Pricing Schedule Section
3. (Regular Order Fees and Rebates).
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Currently, if a non-Public Customer PIP or COPIP Order does not
trade with its Primary Improvement Order, the Primary Improvement Order
receives the $0.45 ``removal'' credit and any corresponding Improvement
Order responses are charged the $0.45 ``add'' fee. Now, under this
proposal, all SPY PIP and COPIP Orders submitted to the PIP and COPIP
mechanisms that do not trade with their Primary Improvement Order shall
receive a ``removal'' credit of $0.45. Improvements Orders submitted to
the SPY PIP and COPIP Orders executed in these mechanisms will continue
to be charged the ``add'' fee of $0.45. The Exchange believes this is
reasonable and competitive when compared to similar fees and credits
for SPY transactions at a competing venue.\10\ Further, as discussed
herein, the Exchange believes the proposed change will incentivize
Participants to submit SPY order flow through the PIP and COPIP auction
mechanisms thus increasing liquidity on the Exchange and increasing the
opportunity for executions thus benefitting all market participants.
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\10\ See Phlx Pricing Schedule, Section 3, Part A. The Exchange
notes that Phlx offers rebates ranging from $0.12 to $0.32 to Lead
Market Makers and Market Makers for adding liquidity in SPY.
Further, Phlx assesses a $0.48 fee for Market Makers, Broker Dealers
and Professionals and a $0.42 fee for Public Customers for removing
liquidity in SPY.
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The Exchange believes that the proposed changes to Section III are
equitable and not unfairly discriminatory in that the fees and credits
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 allows
BOX to provide incentives to Participants to attract order flow. The
Exchange believes it is equitable and not unfairly discriminatory to
charge lower exchange fees for initiators in the PIP and COPIP
mechanisms than for responders because initiators bring liquidity to
the Exchange which, in turn, allows responders to interact with
customer orders thus increasing the opportunity for more executions on
BOX. The Exchange believes that structuring the proposed fees and
credits will incentivize initiators to bring order flow to the Exchange
thus benefitting all market participants. Further, the Exchange
believes it is equitable and not unfairly discriminatory to charge
higher exchange fees for responders in the PIP and COPIP mechanisms
than for initiators because, as discussed herein, responders to PIP and
COPIP Orders are willing to pay a higher fee for liquidity discovery
and, in turn, are given the opportunity to interact with customer order
flow on BOX.
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 described
above, the Exchange believes that the proposed rule change reflects
this competitive environment.
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 does not believe
that the proposed liquidity fees and credits will burden competition by
creating such a disparity between the fees an initiating Participant in
the PIP and 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
PIP and COPIP auction transactions and will help promote competition by
providing incentives for market participants to submit customer order
flow to BOX and thus, create a greater opportunity for customers to
receive additional price improvement.
Further, the Exchange believes that the proposed liquidity fees and
credits for SPY PIP and COPIP transactions will not impose a burden on
competition. Rather, BOX believes that the changes will result in
Participants being charged or credited appropriately for their PIP and
COPIP transactions and is designed to enhance competition in auction
transactions on BOX. Submitting an order is entirely voluntary and
Participants can determine which type of order they wish to submit, if
any, to the Exchange. The Exchange also believes that the proposed
change will not impose an undue burden on intermarket competition as
the proposed change will allow BOX to better compete for SPY order
flow. Further, as stated above the fees and credits
[[Page 52656]]
proposed are in line with the facilitation and solicitation fees and
credits currently on BOX.
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 \11\ and Rule 19b-4(f)(2)
thereunder,\12\ because it establishes or changes a due, or fee.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 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 rule-comments@sec.gov. Please include
File Number SR-BOX-2020-34 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-2020-34. 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-2020-34, and should be submitted on
or before September 16, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18679 Filed 8-25-20; 8:45 am]
BILLING CODE 8011-01-P