[Federal Register Volume 87, Number 115 (Wednesday, June 15, 2022)]
[Notices]
[Pages 36179-36182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12844]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95081; File No. SR-BOX-2022-20]


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

June 9, 2022.
    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 May 31, 2022, BOX Exchange LLC (``BOX'' or ``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 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.
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I. Self-Regulatory Organization's Statement of the Terms of 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'') options facility. While changes to 
the fee schedule pursuant to this proposal will be effective upon 
filing, the changes will become operative on June 1, 2022. 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 recently adopted new data products known as the 
Liquidity Taker Event Report--Simple Orders (the ``Simple Order 
Report'') and the Liquidity Taker Event Report--Complex Orders (the 
``Complex Order Report''), (collectively, the ``Reports'') which will 
be available for purchase by Exchange Participants \3\ on a voluntary 
basis. The Exchange now proposes to adopt fees for the Reports.\4\
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    \3\ The term ``Participant'' means a firm, or organization that 
is registered with the Exchange pursuant to the Rule 2000 Series for 
purposes of participating in trading on a facility of the Exchange. 
See BOX Rule 100(a)(41).
    \4\ The Exchange recently established these Reports as described 
under BOX Rule 7350(b) and (c). See Securities Exchange Act Release 
34-94563 (March 31, 2022), 87 FR 19985 (April 6, 2022) (Notice of 
Filing of Immediate Effectiveness of SR-BOX-2022-10). See Securities 
Exchange Act Release 34-94920 (May 16, 2022), 87 FR 31013 (May 20, 
2022) (Notice of Filing of Immediate Effectiveness of SR-BOX-2022-
18).
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    By way of background, the Reports are daily reports that provide a 
Participant (``Recipient Participant'') with its liquidity response 
time details for executions of an order resting on the BOX Book or 
Complex Order Book,\5\ where that Recipient Participant attempted to 
execute against such resting order \6\ within a certain timeframe. The 
purpose of the Reports is to provide Participants the necessary data in 
a standardized format on a T+1 basis to those that subscribe to the 
Simple Order Report and/or the Complex Order Report on an equal basis. 
These products are offered to Participants on a completely voluntary 
basis in that the Exchange is not required by any rule of regulation to 
make this data available and potential subscribers may purchase the 
Simple Order Report and/or the Complex Order Report only if they 
voluntarily choose to do so. It is a business decision of each 
Participant whether to subscribe to the Simple Order Report and/or the 
Complex Order Report or not.
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    \5\ The term ``BOX Book'' means the electronic book of orders on 
each single option series maintained by the BOX Trading Host. See 
BOX Rule 100(a)(10). The term ``Complex Order Book'' means the 
electronic book of Complex Orders maintained by the BOX Trading 
Host. See BOX Rule 7240(a)(8).
    \6\ Only displayed orders will be included in the Simple Order 
Report. The Exchange notes that it does not currently offer any non-
displayed order types on its options trading platform.
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    First, the Exchange proposes to rename current Section III.C of the 
BOX Fee Schedule from ``Open-Close Data Report'' to ``Reports.'' 
Further, the Exchange proposes to move current Section III.C (Open-
Close Data Report) to new Section III.C.1.\7\ The Exchange believes 
that moving current Section III.C. to new Section III.C.1 and renaming 
Section III.C ``Reports'' will improve the overall readability of the 
BOX Fee Schedule and help prevent investor confusion because the fees 
for all market data reports will reside in one place in the BOX Fee 
Schedule.
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    \7\ The Exchange notes that no changes are being made to the 
Open-Close Data Report fees. The Exchange is simply rearranging the 
Fee Schedule to account for more market data products being offered 
by BOX.
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    Next, the Exchange proposes to adopt new Section III.C.2 (Liquidity 
Taker Event Reports) in the BOX Fee Schedule. Section III.C.2 will 
provide that Participants may purchase the Simple Order Report and/or 
the Complex Order Report on a monthly or annual (12 month) basis. The 
Exchange proposes to assess a fee of $4,000 per month and a fee of 
$24,000 per year for a 12 month subscription for the Simple Order 
Report. The Exchange also proposes to assess a fee of $4,000 per

[[Page 36180]]

month and a fee of $24,000 per year for a 12 month subscription for the 
Complex Order Report. Participants may cancel their subscription at any 
time. The Exchange proposes further to specify that for mid-month 
subscriptions, new subscribers to the Simple Order Report and/or the 
Complex Order Report will be charged for the full calendar month for 
which they subscribe and will be provided Simple Order Report and/or 
Complex Order Report data for each trading day of the calendar month 
prior to the day on which they subscribed. Additionally, the Exchange 
proposes to offer a 12 month subscription discount whereby Participants 
will be charged a discounted fee of $40,000 per year when they purchase 
12 month subscriptions to both the Simple Order Report and the Complex 
Order Report. Participants with an existing 12 month subscription to 
either the Simple Order Report or the Complex Order Report, but not 
both, may add a subscription to the Simple Order Report or Complex 
Order Report during their current 12 month subscription. In such case, 
the fee for the added Report will be pro-rated for the remainder of the 
Participant's current 12 month subscription based on the amount of the 
12 month subscription discount. Participants would then receive the 12 
month subscription discount for subscribing to both Reports on the 
renewal date of their original subscription if desired.
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,\8\ 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. The Exchange also believes that its proposal to adopt fees 
for the Simple Order Report and the Complex Order Report is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \10\ in particular, in that it 
is an equitable allocation of dues, fees and other charges among its 
Participants and other recipients of Exchange data.
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    \8\ 15 U.S.C. 78f(b)(4) and (5).
    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. The Exchange believes that the Simple Order 
Report and the Complex Order Report further broaden the availability of 
U.S. option market data to investors consistent with the principles of 
Regulation NMS. The Simple Order Report and the Complex Order Report 
also promote increased transparency through the dissemination of the 
Simple Order Report and the Complex Order Report. Particularly, the 
Simple Order Report and the Complex Order Report will benefit investors 
by facilitating their prompt access to the value-added information that 
is included in the Simple Order Report and the Complex Order Report. 
The Simple Order Report and Complex Order Report will allow 
Participants to access information regarding their trading activity 
that they may utilize to evaluate their own trading behavior and order 
interactions.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
Based on publicly available information, no single options exchange has 
more than 15% of the market share and currently the Exchange represents 
only approximately 5.68% of the market share.\11\ The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Particularly, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \12\ Making similar data products available to 
market participants fosters competition in the marketplace, and 
constrains the ability of exchanges to charge supracompetitive fees. In 
the event that a market participant views one exchange's data product 
as more attractive than the competition, that market participant can, 
and often does, switch between similar products. The proposed fees are 
a result of the competitive environment of the U.S. options industry as 
the Exchange seeks to adopt fees to attract purchasers of the recently 
established Simple Order Report and Complex Order Report.
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    \11\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (March 18, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are similar to fees assessed by another exchange that 
provides similar data products.\13\ The Exchange notes that if market 
participants viewed the proposed fees discussed herein as excessively 
high, then the proposed fees would simply serve to reduce demand for 
the Exchange's data product, which as noted, is entirely optional. 
Other options exchanges are also free to introduce their own comparable 
data products with lower prices to better compete with the Exchange's 
offering. As such, the Exchange believes that the proposed fees are 
reasonable and set at a level to compete with other options exchanges 
that may choose to offer similar reports. Moreover, if a market 
participant views another exchange's potential report as more 
attractive, then such market participant can merely choose not to 
purchase the Exchange's Simple Order Report and Complex Order Report 
and instead purchase another exchange's similar data product, which may 
offer similar data points, albeit based on that other market's trading 
activity.
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    \13\ See Securities Exchange Act Release 34-94384 (March 9, 
2022), 87 FR 14598 (March 15, 2022) (SR-MIAX-2022-11). See also 
Miami International Securities Exchange, LLC (``MIAX'') Fee 
Schedule, Section 7, Reports. The Exchange notes that the proposed 
fees are identical to the fees assessed at MIAX. See also Securities 
Exchange Act Release 34-94386 (March 9, 2022), 87 FR 14603 (March 
15, 2022) (SR-Emerald-2022-08).
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    The Exchange also believes providing an annual subscription for an 
overall lower fee than a monthly subscription is equitable and 
reasonable because it would enable the Exchange to gauge long-term 
interest in the Simple Order Report and the Complex Order Report. A 
lower annual subscription fee would also incentivize Participants to 
subscribe to the Simple Order Report and the Complex Order Report on a 
long-term basis, thereby improving the efficiency by which the Exchange 
may deliver the Simple Order Report and Complex Order Report by doing 
so on a regular basis over a prolonged and set period of time. The 
Exchange notes that other exchanges provide annual subscriptions for 
reports concerning their data product offerings.\14\
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    \14\ See MIAX Fee Schedule, Section 7, Reports. The Exchange 
also notes that Cboe Exchange, Inc. assesses a $24,000 annual fee 
for an intra-day subscription to Open-Close Data. See https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf .

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[[Page 36181]]

    Another exchange also offers a further 12 month discount for 
subscribers of both the Simple Order Report and the Complex Order 
Report which the Exchange proposes to adopt as well. The Exchange is 
proposing to apply this discount for any period during which a 
Participant subscribes to both reports and then renews if desired at 
the discounted rate on the anniversary date of the first subscription. 
For example, assume ``Participant A'' previously subscribed to the 
Simple Order Report on September 1, 2021 and paid $24,000 for a 12 
month subscription to the Simple Order Report. Participant A's current 
subscription expires on August 31, 2022 for the Simple Order Report. 
Before Participant A's subscription to the Simple Order Report expires, 
Participant A decides to subscribe to the Complex Order Report, 
beginning March 1, 2022. Rather than being immediately charged $40,000 
for the 12 month subscription discount for subscribing to both Reports 
(Participant A already paid $24,000 upfront for the Simple Order Report 
12 month subscription), Participant A would only be charged an 
additional $8,000 to add the Complex Order Report for the remaining 
months of Participant A's current 12 month subscription to the Simple 
Order Report. On September 1, 2022, assuming Participant A decided to 
keep both Reports, Participant A would then be charged the 12 month 
discounted rate of $40,000 for both Reports for the next year. The 
Exchange proposes to determine the pro-rated fee described above as 
follows: on the date that Participant A wanted to begin subscribing to 
the Complex Order Report (March 1, 2022), there were six months 
remaining on Participant A's existing 12 month subscription to the 
Simple Order Report (March, April, May, June, July and August). The 
added cost would be calculated as (6 months remaining/12 months total) 
* ($40,000 discounted annual subscription for both Reports--$24,000 for 
annual subscription to each Report individually) = $8,000 for remaining 
6 months. Beginning September 1, 2022 (the original renewal date for 
the Simple Order Report), Participant A would then be charged the 
discounted 12 month subscription rate of $40,000, assuming Participant 
A renews their subscriptions to both the Simple Order Report and the 
Complex Order Report.
    The Exchange also believes the proposed fees are reasonable as they 
would support the introduction of new market data products to 
Participants that are interested in gaining insight into latency in 
connection with orders that failed to execute against an order resting 
on the Exchange's Book and Complex Order Book. The Simple Order Report 
and the Complex Order Report accomplish this by providing those 
Participants data to analyze by how much time their order may have 
missed an execution against a contra-side order resting on the Book or 
the Complex Order Book. Participants may use this data to optimize 
their models and trading patterns in an effort to yield better 
execution results by calculating by how much time their order may have 
missed an execution.
    Selling market data, such as the Simple Order Report and Complex 
Order Report, is also a means by which exchanges compete to attract 
business. To the extent that the Exchange is successful in attracting 
subscribers for the Simple Order Report and Complex Order Report, it 
may earn trading revenues and further enhance the value of its data 
products. If the market deems the proposed fees to be unfair or 
inequitable, firms can diminish or discontinue their use of the data 
and/or avail themselves of similar products offered by other 
exchanges.\15\ The Exchange therefore believes that the proposed fees 
for the Simple Order Report and Complex Order Report reflect the 
competitive environment and would be properly assessed on Participant 
users. The Exchange also believes the proposed fees are equitable and 
not unfairly discriminatory as the fees would apply equally to all 
users who choose to purchase such data. It is a business decision of 
each Participant that chooses to purchase the Simple Order Report and/
or the Complex Order Report. The Exchange's proposed fees would not 
differentiate between subscribers that purchase the Simple Order Report 
and the Complex Order Report and are set at a modest level that would 
allow any interested Participant to purchase such data based on their 
business needs.
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    \15\ See supra note 13.
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    The Exchange reiterates that the decision as to whether or not to 
purchase the Simple Order Report and/or the Complex Order Report is 
entirely optional for all potential subscribers. Indeed, no market 
participant is required to purchase the Simple Order Report or the 
Complex Order Report, and the Exchange is not required to make the 
Simple Order Report or the Complex Order Report available to all 
investors. It is entirely a business decision of each Participant to 
subscribe to the Simple Order Report and/or the Complex Order Report. 
The Exchange will offer the Simple Order Report and the Complex Order 
Report as a convenience to Participants to provide them with additional 
information regarding trading activity on the Exchange on a delayed 
basis after the close of regular trading hours. A Participant that 
chooses to subscribe to the Simple Order Report and/or the Complex 
Order Report may discontinue receiving the Simple Order Report and/or 
the Complex Order Report at any time if that Participant determines 
that the information contained in the Simple Order Report and/or the 
Complex Order Report is no longer useful.
    Lastly, the Exchange is also proposing to rename current Section 
III.C of the BOX Fee Schedule from ``Open-Close Data Report'' to 
``Reports,'' and to move current Section III.C (Open-Close Data Report) 
to new Section III.C.1.\16\ The Exchange believes that moving current 
Section III.C. to new Section III.C.1 and renaming Section III.C 
``Reports'' is reasonable as it will improve the overall readability of 
the BOX Fee Schedule and help prevent investor confusion because the 
fees for all market data reports will reside in one place in the BOX 
Fee Schedule.
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    \16\ The Exchange notes that no changes are being made to the 
Open-Close Data Report fees. The Exchange is simply rearranging the 
Fee Schedule to account for more market data products being offered 
by BOX.
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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 will make the 
Simple Order Report and the Complex Order Report available in order to 
keep pace with changes in the industry and evolving customer needs and 
demands, and believes the data products will contribute to robust 
competition among national securities exchanges. As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable data product 
with lower prices to better compete with the Exchange's offerings. The 
Exchange operates in a highly competitive environment, and its ability 
to price the Simple Order Report and the Complex Order Report is 
constrained by competition among exchanges who choose to adopt a 
similar product. The

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Exchange must consider this in its pricing discipline in order to 
competitively offer market data products. For example, proposing fees 
that are excessively higher than fees for potentially similar data 
products would simply serve to reduce demand for the Exchange's data 
products, which as discussed, market participants are under no 
obligation to utilize. In this competitive environment, potential 
purchasers are free to choose which, if any, similar product to 
purchase to satisfy their need for market information. As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
    The Exchange does not believe the proposed rule change would cause 
any unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed fees apply uniformly to any purchaser in 
that the Exchange does not differentiate between subscribers that 
purchase the Simple Order Report and/or the Complex Order Report. The 
proposed fees are set at a modest level that would allow any interested 
Participant to purchase such data based on their business needs.
    The Exchange also believes providing a 12 month discounted fee for 
subscribers of both the Simple Order Report and the Complex Order 
Report is equitable and reasonable because it would enable the Exchange 
to gauge long-term interest in both Reports. The Exchange believes that 
a lower annual combined subscription fee may incentivize Participants 
to subscribe to both Reports on a long-term basis, thereby allowing the 
Exchange to better gauge demand for both Reports over a longer period 
of time. Doing so will enable the Exchange to better predict the future 
demand for both Reports. This will allow the Exchange to better prepare 
and adjust resources for the production and delivery of both Reports to 
Participants, improving the efficiency by which the Exchange may 
deliver both Reports over a prolonged and set period of time. The 
Exchange also believes that it is reasonable, equitable and not 
unfairly discriminatory to offer a 12 month discounted fee for 
Participants that subscribe to both Reports because all Participants 
may subscribe to both Reports and receive the discounted rate.
    Lastly, the Exchange does not believe that the proposed change to 
rename current Section III.C of the BOX Fee Schedule from ``Open-Close 
Data Report'' to ``Reports,'' and to move current Section III.C (Open-
Close Data Report) to new Section III.C.1 will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. This proposed clarifying change has no competitive purpose 
and is only intended to improve the overall readability of the BOX Fee 
Schedule and help prevent investor confusion by including the fees for 
all market data reports in one place in the BOX Fee Schedule.

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 \17\ and Rule 19b-4(f)(2) 
thereunder,\18\ because it establishes or changes a due, or fee.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-2022-20 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-2022-20. 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-2022-20, and should be submitted on 
or before July 6, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12844 Filed 6-14-22; 8:45 am]
BILLING CODE 8011-01-P