[Federal Register Volume 85, Number 169 (Monday, August 31, 2020)]
[Notices]
[Pages 53883-53885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19052]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89664; File No. SR-BOX-2020-35]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 
7160 (Transfer of Positions)

August 25, 2020.
    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 August 18, 2020, BOX Exchange LLC (the ``Exchange'') filed with 
the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 7160 (Transfer of 
Positions). 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://boxoptions.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 self-regulatory organization 
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 self-regulatory organization 
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 recently filed a proposed change to establish new Rule 
7160 to provide a process by which Participants may transfer option 
positions in limited circumstances off the BOX Trading Floor.\5\ 
Currently, Rule 7160 permits market participants to move positions from 
one account to another without first exposure of the transaction on the 
Exchange, provided certain exceptions are met. Specifically, the 
exception in Rule 7160(a)(2) provides that off the Exchange transfers 
of positions are permissible if from one account to another account 
where no change in ownership is involved (i.e., accounts of the same 
Person),\6\ provided the accounts are not in separate aggregation units 
or otherwise subject to information barrier or account segregation 
requirements. These transfers are subject to, among other things, the 
requirement to submit prior written notice of the transfers to the

[[Page 53884]]

Exchange pursuant to paragraph (d) and the restriction on effecting 
these transfers repeatedly or routinely.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 88810 (May 5, 2020), 
85 FR 27782 (May 11, 2020)(SR-BOX-2020-09). The Exchange notes that 
the proposed change was similar to Cboe Rule 6.7.
    \6\ ``Person'' is defined as ``an individual, partnership 
(general or limited), joint stock company, corporation, limited 
liability company, trust or unincorporated organization, or any 
governmental entity or agency or political subdivision thereof.'' 
This definition is identical to Cboe Rule 1.1.
---------------------------------------------------------------------------

    The Exchange now proposes to amend Rule 7160 to be in line with a 
recent proposal submitted by Cboe.\7\ The proposed rule change excepts 
off-floor position transfers effected pursuant to Rule 7160(a)(2) from 
the prior written notice requirement in paragraph (d) and from 
repeated, recurring use restriction in paragraph (g). Off-floor 
position transfers pursuant to Rule 7160(a)(2) do not involve a change 
in ownership. In other words, such transfers may only occur between the 
same individual or legal entity. These types of transfer are merely 
transfers of positions from one account to another, both of which 
accounts are attributable to the same individual or legal entity, and 
thus the transferred option positions will continue to be attributable 
to the same Person. A market participant effecting an off Exchange 
position transfer pursuant to Rule 7160(a)(2) is analogous to an 
individual transferring funds from a checking account to a savings 
account, or from an account at one bank to an account at another bank--
the money still belongs to the same person, who is just holding it in a 
different account for personal financial reasons.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 89389 (July 23, 
2020), 85 FR 45709 (July 29, 2020)(SR-CBOE-2020-067).
---------------------------------------------------------------------------

    Because there is no change in ownership of positions transferred 
pursuant to Rule 7160(a)(2), the Exchange believes it is appropriate to 
permit them to occur as routinely and repeatedly as a market 
participant would like. These transfers will continue to be subject to 
the prohibition on netting set forth in Rule 7160(b), and thus may not 
result in the closing of any positions. While the off-floor position 
transfers permitted by Rule 7160 were intended to accommodate non-
routine and non-recurring transfers, the Exchange believes permitting 
routine, recurring off-floor position transfers that do not result in a 
change in ownership or reduction in open interest is consistent with 
the purpose of not being used to circumvent the normal auction purpose. 
Additionally, given that these transfers may occur on a regular basis 
in accordance with a market participants' business needs and 
procedures, the Exchange believes prior written notice would be onerous 
and would not serve any purpose given the lack of change in ownership 
and in open interest. The Exchange believes this will provide market 
participants with additional flexibility to structure their option 
position accounts as they believe is appropriate and move their 
positions between accounts as they deem necessary and appropriate for 
their business and trading needs, including for risk management 
purposes.
    The proposed rule change also corrects an erroneous cross-reference 
in Rule 7160(d)(1), as the method for determining the transfer price is 
in paragraph (c) rather than paragraph (e) of Rule 7160.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\8\ in general, and Section 6(b)(5) of the Act,\9\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. Additionally, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \10\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest because it will provide market 
participants with a more efficient process to transfer open positions 
between their accounts in accordance with their own business and 
trading needs, including to respond to then-current market conditions. 
Because these transfers would not result in a change in ownership or 
reduction in open interest, the Exchange believes the proposed rule 
change remains consistent with the purpose of Rule 7160, which was to 
prohibit the use of off-floor transfer procedure in circumvention of 
the normal auction process, as the normal auction process involves the 
opening and closing of positions through a transaction among multiple 
market participants. Market participants may maintain different 
accounts for a variety of reasons, such as the structure of their 
businesses, the manner in which they trade, their risk management 
procedures, and for capital purposes. Given that these transfers may 
occur on a regular basis in accordance with a market participants' 
business needs and procedures, the Exchange believes prior written 
notice would be onerous and would not serve any purpose given the lack 
of change in ownership and in open interest. Therefore, the proposed 
rule change will benefit investors by permitting market participants to 
manage their open positions in their accounts in a manner consistent 
with their businesses.
    The Exchange recognizes the numerous benefits of executing options 
transactions on an exchange, including price transparency, potential 
price improvement, and a clearing guarantee. However, the Exchange 
believes it is appropriate to permit position transfers among accounts 
of the same individual or legal entity where there is no impact on open 
interest to occur off the exchange, as these benefits are inapplicable 
to those transfers. These transfers have a narrow scope and are 
intended to permit market participants to achieve their own business 
needs. These transfers are not intended to be a competitive trading 
tool. There is no need for price discovery or improvement, as the 
transfer merely moves positions to different accounts for the same 
Person and does not open or close any positions. These transfers will 
result in no change in ownership. The transactions that resulted in 
open positions to be transferred pursuant to Rule 7160(a)(2) were 
already guaranteed by a clearing member of The Options Clearing 
Corporation (``OCC''), and the positions may not be closed pursuant to 
the transfer and will continue to be subject to OCC rules, as they will 
continue to be held in an account with an OCC clearing member.

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. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
response to a filing submitted by Cboe.\11\ The proposed rule change is 
not intended to address competitive issues. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the

[[Page 53885]]

proposed rule change will apply to all market participants in the same 
manner. All market participants will be able to effect off-floor 
position transfers pursuant to Rule 7160(a)(2) on a recurring or 
routine basis without providing the Exchange with notice of such 
transfers. The Exchange does not believe the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it 
relates solely to the notice required for off-floor transfers that may 
occur today, and the frequency with which those transfers may occur. 
These transfers will continue to not result in a change in ownership or 
netting, and thus will have no impact on outstanding options positions.
---------------------------------------------------------------------------

    \11\ See supra note 5.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to so that it may 
adopt the proposed position transfer rules as soon as possible which, 
according to the Exchange, would benefit investors and the general 
public because it will provide Participants with the ability to request 
a transfer, for limited, non-recurring types of transfers, without the 
need for exposing those orders on the Exchange. The proposed rule 
change does not present any unique or novel regulatory issues and is 
substantively identical to provisions in Cboe Rule 6.7. Accordingly, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\16\
---------------------------------------------------------------------------

    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change 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-2020-35 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-2020-35. 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 the 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-2020-35 and should be submitted on 
or before September 21, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-19052 Filed 8-28-20; 8:45 am]
BILLING CODE 8011-01-P