[Federal Register Volume 88, Number 114 (Wednesday, June 14, 2023)]
[Notices]
[Pages 38926-38929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12663]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97673; File No. SR-BOX-2023-15]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Establish 
Separate Fees and Rebates on Non-Auction Transactions for Options 
Overlying the Standard and Poor's Depositary Receipts Trust

June 8, 2023.
    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, 2023, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 38927]]

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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    \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 
establish separate fees and rebates on Non-Auction transactions for 
options overlying the Standard and Poor's Depositary Receipts Trust 
(``SPY'') 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, 
2023. 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 https://rules.boxexchange.com/rulefilings.

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 Section IV, Non-Auction 
Transactions, of the BOX Fee Schedule. Specifically, the Exchange 
proposes to establish separate fees and rebates on Non-Auction 
transactions for options overlying the Standard and Poor's Depositary 
Receipts Trust (``SPY'').\5\
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    \5\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund 
(``ETF''), which is designed to track the performance of the S&P 500 
Index.
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Non-Auction Transactions
    Currently, in Section IV.A of the BOX Fee Schedule, fees and 
credits for Non-Auction transactions are assessed depending on three 
factors: (i) the account type of the Participant submitting the order; 
(ii) whether the Participant is a liquidity provider or liquidity 
taker; and (iii) the account type of the contra party.
    The Exchange now proposes to assess separate fees for SPY Non-
Auction transactions. Specifically, when a Public Customer SPY order 
interacts with a Public Customer or non-Public Customer SPY order, the 
Exchange will not assess a fee or credit.
    Further, when a Professional Customer or Broker Dealer SPY order 
interacts with a Public Customer SPY order, the Exchange proposes to 
assess a $0.60 fee when making liquidity or $0.50 when taking 
liquidity. When a Professional Customer or Broker Dealer SPY order 
interacts with a Professional Customer, Broker Dealer, or Market Maker 
SPY order, the Exchange proposes to assess $0.15 for making liquidity 
or $0.50 for taking liquidity. The Exchange notes that these fees are 
currently assessed to SPY transactions today as SPY is a Penny Interval 
Class.\6\
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    \6\ See BOX Informational Circular 2022-11 available at https://boxoptions.com/assets/IC-2022-11-Penny-Program-Class-Removals-1.pdf.
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    When a Market Maker SPY order interacts with a Public Customer SPY 
order, the Exchange proposes to assess no fee when making liquidity or 
$0.50 when taking liquidity. When a Market Maker SPY order interacts 
with a Professional Customer, Broker Dealer, or Market Maker SPY order, 
the Exchange proposes to assess no fee when making liquidity or $0.50 
when taking liquidity.
    The proposed fee structure for SPY Non-Auction Transactions will be 
as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                SPY
                 Account type                             Contra party           -------------------------------
                                                                                       Maker           Taker
----------------------------------------------------------------------------------------------------------------
Public Customer...............................  Public Customer.................           $0.00           $0.00
                                                Professional Customer/Broker                0.00            0.00
                                                 Dealer.
                                                Market Maker....................            0.00            0.00
Professional Customer or Broker Dealer........  Public Customer.................            0.60            0.50
                                                Professional Customer/Broker                0.15            0.50
                                                 Dealer.
                                                Market Maker....................            0.15            0.50
Market Maker..................................  Public Customer.................            0.00            0.50
                                                Professional Customer/Broker                0.00            0.50
                                                 Dealer.
                                                Market Maker....................            0.00            0.50
----------------------------------------------------------------------------------------------------------------

    For example, under the proposal, if a Public Customer submitted a 
SPY order to the BOX Book (making liquidity), the Public Customer would 
not be offered a rebate or charged a fee if the order interacted with a 
Market Maker's SPY order and the Market Maker (taking liquidity) would 
be charged $0.50.
Tiered Volume Rebate for Non-Auction Transactions
    The Exchange also proposes to amend Section IV.A.1 of the Fee 
Schedule, Tiered Volume Rebate for Non-Auction Transactions. 
Specifically, the Exchange proposes to adopt separate rebates for SPY 
transactions for Public Customers in Non-Auction Transactions. For Tier 
1, where percentage thresholds of Public Customer volume is 0.000%-
0.129%, the Exchange proposes no rebates. For Tier 2, where percentage 
thresholds of Public Customer volume is 0.130%-0.339%, the Exchange 
proposes to assess a $0.05 rebate when making liquidity or no rebate 
when taking liquidity. For Tier 3, where percentage thresholds of 
Public Customer volume is 0.340%-0.549%, the Exchange proposes

[[Page 38928]]

a $0.10 rebate when making liquidity or no rebate when taking 
liquidity. For Tier 4, where percentage thresholds of Public Customer 
volume is 0.550% and above, the Exchange proposes a $0.27 rebate when 
making liquidity or no rebate for taking liquidity. The proposed rebate 
structure will be as follows:

------------------------------------------------------------------------
                           Percentage           Per contract rebate
                          thresholds of  -------------------------------
                            national                    SPY
                         customer volume -------------------------------
         Tier             in multiply-
                         listed options
                             classes           Maker           Taker
                            (monthly)
------------------------------------------------------------------------
1.....................  0.000%-0.129%...           $0.00           $0.00
2.....................  0.130%-0.339%...          (0.05)            0.00
3.....................  0.340%-0.549%...          (0.10)            0.00
4.....................  0.550% and Above          (0.27)            0.00
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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,\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's proposal to adopt separate fees for SPY Non-Auction 
Transactions 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. The 
Exchange believes that eliminating maker fees for Market Makers when 
trading against Public Customers will incentivize Market Makers to 
provide tighter spreads in SPY which may lead to increased order flow 
to BOX and result in increased liquidity on the Exchange, benefitting 
all market participants. The Exchange also proposes to eliminate Public 
Customer rebates for transactions when the Market Maker is a maker and 
the Public Customer is a taker because BOX will no longer receive fees 
when the Market Maker is a maker and the Public Customer is a taker. 
The Exchange notes that other exchanges assess separate fees and 
credits for SPY transactions,\8\ and that it currently assesses 
separate fees and rebates for SPY transactions for PIP and COPIP 
Transactions on BOX.\9\ The Exchange also notes that SPY has the most 
actively traded options \10\ and therefore the Exchange believes that 
separate fees are appropriate to more effectively attract order flow to 
BOX.
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    \8\ See Nasdaq Phlx LLC (``Phlx'') Fee Schedule, Section 3 
(Rebates and Fees for Adding and Removing Liquidity in SPY). The 
Exchange notes that while PHLX differentiates SPY from other symbols 
for fee purposes, the structure and amount of the fees are different 
than the proposal discussed herein.
    \9\ See BOX Fee Schedule, Section IV.B (PIP and COPIP 
Transactions).
    \10\ See https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options (providing a daily list of the most 
active options by type).
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Non-Auction Transactions
    The Exchange believes the proposed Non-Auction Transaction fees for 
Public Customer SPY transactions are reasonable. Under the proposal, 
Public Customers will never pay a fee for their SPY Non-Auction 
Transactions and may be eligible for a rebate depending on their 
monthly volume for all transactions executed on BOX under Section 
IV.A.1. The Exchange believes that charging no fee to Public Customers 
for SPY Non-Auction Transactions is equitable and not unfairly 
discriminatory. The securities markets generally, and BOX in 
particular, have historically aimed to improve markets for investors 
and develop various features within the market structure for Public 
Customer benefit. Accordingly, the Exchange believes that charging no 
fee for Public Customers for their SPY transactions is appropriate and 
not unfairly discriminatory. The Exchange notes that where the Public 
Customer is a taker against Professional Customer/Broker Dealer or 
Market Maker, the Public Customer will no longer receive a rebate. The 
Exchange believes that any disincentive created by removing this rebate 
will be more than offset by Market Makers providing tighter spreads in 
response to the elimination of maker fees for Market Makers trading 
against Public Customers. Tighter spreads may attract a higher level of 
Public Customer order flow to the BOX Book and create liquidity, which 
will ultimately benefit all Participants trading on BOX.
    The Exchange believes that charging Professional Customers and 
Broker Dealers higher fees than Public Customers for SPY Non-Auction 
Transactions is equitable and not unfairly discriminatory. Professional 
Customers, while Public Customers by virtue of not being Broker 
Dealers, generally engage in trading activity more similar to Broker 
Dealer proprietary trading accounts (submitting more than 390 standard 
orders per day on average). The Exchange believes that the higher level 
of trading activity from these Participants will draw a greater amount 
of BOX system resources than that of non-professional, Public 
Customers. Because this higher level of trading activity will result in 
greater ongoing operational costs, the Exchange aims to recover its 
costs by assessing Professional Customers and Broker Dealers higher 
fees for transactions. The Exchange notes that the proposed SPY 
transaction fees for Professional Customers and Broker Dealers is 
identical to what their SPY transactions are assessed today.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to assess no maker fee for BOX Market Makers trading 
against Public Customers and to eliminate rebates when the Public 
Customer is a taker against a Professional Customer, Broker Dealer, or 
Market Maker for SPY Non-Auction Transactions because, when being 
charged no fee for their transactions, Market Makers may tighten their 
spreads in SPY and therefore will increase market quality in SPY 
options. Specifically, Market Makers can provide higher volumes of 
liquidity and lowering certain fees will help attract a higher level of 
Market Maker order flow to the BOX Book and create liquidity, which the 
Exchange believes will make Public Customer taker rebates unnecessary 
to attract order flow. As such, the Exchange believes it is appropriate 
that Market Makers be charged lower transaction fees than Professional 
Customers and Broker Dealers for SPY Non-Auction Transactions and that 
Public Customers not receive rebates when the Public Customer is a 
taker against a

[[Page 38929]]

Professional Customer, Broker Dealer, or Market Maker.
Tiered Volume Rebate for Non-Auction Transactions
    The Exchange believes that the proposed Public Customer SPY rebates 
in the Tiered Volume Rebate for Non-Auction Transactions structure are 
reasonable, equitable, and not unfairly discriminatory. The proposed 
volume thresholds and applicable rebates for SPY are meant to 
incentivize Public Customers to post orders on the Exchange to obtain 
the benefit of the rebate, which will in turn benefit all market 
participants by increasing liquidity on the Exchange. The Exchange 
notes that the proposed SPY maker rebates are identical to the rebates 
that are currently assessed to SPY transactions today. The Exchange 
believes that offering no rebate for SPY taker transactions is 
reasonable and appropriate because assessing no maker fee for Market 
Makers may result in tighter spreads in SPY, thus eliminating the need 
for additional volume-based incentives for Public Customers to take 
liquidity on BOX.

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 the proposed changes to the fees in the Non-
Auction Transactions fee structure will not impose a burden on 
intramarket competition as BOX believes that the changes will result in 
the Participants being charged appropriately for their SPY transactions 
and are designed to incentivize order flow to BOX by incentivizing 
Market Makers to provide tighter spreads. Submitting an order is 
entirely voluntary and Participants can determine which type of order 
they wish to submit, if any, to BOX. Further, the Exchange believes the 
proposed changes in the Non-Auction Transaction fee structure will not 
impose a burden on intermarket competition as another exchange 
currently assesses separate fees for SPY transactions.\11\
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    \11\ See supra note 8.
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    The Exchange believes the proposed changes to the rebate structure 
for Public Customer Non-Auction Transactions will not impose a burden 
on competition among various Exchange Participants. The Exchange 
believes that the proposed changes will result in Public Customers 
being rebated appropriately for their SPY transactions. Further, the 
Exchange believes that this proposal will enhance competition between 
exchanges because it is designed to allow the Exchange to better 
compete with other exchanges for this order flow.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and rebates to remain 
competitive with other exchanges. For the reasons described 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 \12\ and Rule 19b-4(f)(2) 
thereunder,\13\ because it establishes or changes a due, or fee.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BOX-2023-15 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-2023-15. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BOX-2023-15 and should be 
submitted on or before July 5, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12663 Filed 6-13-23; 8:45 am]
BILLING CODE 8011-01-P