[Federal Register Volume 88, Number 143 (Thursday, July 27, 2023)]
[Notices]
[Pages 48498-48501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-15861]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97959; File No. SR-BOX-2023-19]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule for Trading on the BOX Options Market LLC Facility To Change 
How Certain Complex Orders Are Assessed Within the Fee Structure

July 21, 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 July 18, 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. 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 for 
trading on the BOX Options Market LLC (``BOX'') options facility to 
change how certain Complex Orders are assessed within the fee 
structure, specifically each leg of a Complex Orders that executes 
against the BOX Book \5\ instead of the Complex Order Book.\6\ 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.
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    \5\ The term ``Central Order Book'' or ``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).
    \6\ The term ``Complex Order Book'' means the electronic book of 
Complex Orders maintained by the BOX Trading Host. See BOX Rule 
7240(a)(8).
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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 change how certain Complex Orders are assessed within the fee 
structure, specifically each leg of a Complex Orders that executes 
against the BOX Book \7\ instead of the Complex Order Book.\8\
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    \7\ The term ``Central Order Book'' or ``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).
    \8\ The term ``Complex Order Book'' means the electronic book of 
Complex Orders maintained by the BOX Trading Host. See BOX Rule 
7240(a)(8).
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    While a Participant may enter a Complex Order with the intent of 
that Order executing against another Complex Order on the Complex Order 
Book, the BOX Trading System allows single legs within the Complex 
Order to execute against orders on the BOX Book.\9\ Currently, each leg 
of a Complex Order executed against the BOX Book is treated as a 
Complex Order for purposes of the Fee Schedule and subject to the fees 
detailed in Section VI (Complex Order Transaction Fees). The Exchange 
now proposes to amend Section VI.B (Orders on BOX Book Executed Against 
Complex Orders) of the BOX Fee Schedule to include language stating 
that each leg of a Complex Order executed against the BOX Book will be 
treated as a standard order for purposes of the Fee Schedule and now be 
subject to Section IV (Electronic Transaction Fees). Specifically, the 
Exchange proposes to amend Section VI.B as follows:
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    \9\ See BOX Rule 7240.

    Each order on the BOX Book executed against a Complex Order and 
each leg of a Complex Order executed against the BOX Book will be 
treated as a standard order for purposes of the Fee Schedule and 
subject to Section IV.A (Electronic Transaction Fees for Non-Auction 
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Transactions).

    The Exchange believes the proposed change is reasonable because the 
Exchange's fee structures for electronic non-auction transactions and 
Complex Orders are designed to independently attract liquidity and to 
reward Participants for their order flow. Specifically, when a Complex 
Order interacts with the BOX Book, the orders in the BOX Book are 
assessed electronic transaction fees for non-auction transactions.\10\ 
In contrast, the legs of the Complex Order involved in the same 
transaction are assessed fees from a different section of the BOX Fee 
Schedule, which may be confusing to Participants.\11\ As such, the 
Exchange proposes to assess each leg of a Complex Order that trades 
against the BOX Book the electronic transaction fees for non-auction 
transactions detailed in Section IV.A of the BOX Fee Schedule. The 
Exchange believes that assessing each leg of a Complex Order according 
to the fee structure applicable to electronic non-auction transactions 
(which may increase or decrease fees or result in BOX providing no 
rebate or a smaller rebate), is reasonable because such orders may 
benefit from the liquidity on the BOX Book in addition to the liquidity 
on the Complex Order Book. The Exchange believes further that the 
proposed changes are reasonable because they add clarity to the Fee 
Schedule by expressly providing which fees will be assessed to the legs 
of a Complex Order when the legs of a Complex Order interact with the 
BOX Book.
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    \10\ See BOX Fee Schedule Section VI.B.
    \11\ Although this is not specified expressly in the Fee 
Schedule, the legs of Complex Orders trading against the BOX Book 
are currently assessed Complex Order transaction fees in BOX Fee 
Schedule Section VI.A.
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    The Exchange notes that Complex Orders from Public Customers are 
assessed no fee or provided a rebate of $0.50 depending on the contra 
party and whether the order is making or taking liquidity in Penny 
Interval Classes and are assessed no fee or provided a rebate

[[Page 48499]]

of $0.90 depending on the contra party and whether the order is making 
or taking liquidity in Non-Penny Interval Classes. Electronic 
transaction fees in non-auction transactions for Public Customers are 
currently assessed no fee or provided a rebate of $0.20 depending on 
the contra party and whether the order is making or taking liquidity in 
Penny Interval Classes, are assessed no fee or provided a rebate of 
$0.50 depending on the contra party and whether the order is making or 
taking liquidity in Non-Penny Interval Classes, and are assessed no fee 
or rebate for transactions in SPY. Complex Order SPY transactions are 
assessed the fee or provided the rebate for Penny Interval Classes as 
SPY is a Penny Interval Class. Therefore, the proposal will result in 
no fee assessment or BOX providing a smaller rebate for the legs of 
Public Customer Complex Orders that trade against the BOX Book.
    Similarly, Complex Orders from Professional Customers and Broker 
Dealers are currently provided a rebate of $0.30 or assessed a fee of 
$0.50 depending on the contra party and whether the order is making or 
taking liquidity in Penny Interval Classes and are provided a rebate of 
$0.30 or assessed a fee between $0.98 and $1.00 depending on the contra 
party and whether the order is making or taking liquidity in Non-Penny 
Interval Classes. Electronic transaction fees in non-auction 
transactions for Professional Customers and Broker Dealers are 
currently assessed a fee between $0.15 and $0.60 depending on the 
contra party and whether the order is making or taking liquidity in 
Penny Interval Classes, are assessed a fee between $0.15 and $0.95 
depending on the contra party and whether the order is making or taking 
liquidity in Non-Penny Interval Classes, and are assessed a fee between 
$0.15 and $0.60 depending on the contra party and whether the order is 
making or taking liquidity for transactions in SPY. Complex Order SPY 
transactions are assessed the fee or provided the rebate for Penny 
Interval Classes as SPY is a Penny Interval Class. Therefore, the 
proposal may increase or decrease fees or result in BOX providing no 
rebate for the legs of Professional Customer and Broker Dealer Complex 
Orders that trade against the BOX Book depending on the contra party 
and whether the class traded is a Penny Interval Class, a Non-Penny 
Interval class, or SPY.
    Lastly, Complex Orders from Market Makers are currently provided a 
rebate of $0.30 or assessed a fee of $0.50 depending on the contra 
party and whether the order is making or taking liquidity in Penny 
Interval Classes and are provided a rebate of $0.30 or a fee between 
$0.98 and $1.00 depending on the contra party and whether the order is 
making or taking liquidity in Non-Penny Interval classes. Electronic 
transaction fees in non-auction transactions for Market Makers are 
currently assessed a fee between $0.00 and $0.50 depending on the 
contra party and whether the order is making or taking liquidity in 
Penny Interval Classes, are assessed a fee between $0.00 and $0.95 
depending on the contra party and whether the order is making or taking 
liquidity in Non-Penny Interval Classes, and are assessed a fee between 
$0.00 and $0.50 depending on the contra party and whether the order is 
making or taking liquidity for transactions in SPY. Complex Order SPY 
transactions are assessed the fee or provided the rebate for Penny 
Interval Classes as SPY is a Penny Interval Class. Therefore, the 
proposal may increase or decrease fees or result in BOX providing no 
rebate for the legs of Market Maker Complex Orders that trade against 
the BOX Book depending on the contra party and whether the class traded 
is a Penny Interval Class, a Non-Penny Interval Class, or SPY.
    The Exchange believes that the proposed change discussed above will 
allow both sides of a transaction executed on BOX to be assessed 
consistently and will add clarity by expressly providing how fees will 
be assessed for each leg of a Complex Order executed against the BOX 
Book.
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,\12\ 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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    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed change is reasonable because the 
Exchange's fee structures for both electronic non-auction transactions 
and Complex Orders are designed to independently attract liquidity and 
to reward Participants for their order flow. Specifically, when a 
Complex Order interacts with the BOX Book, the orders in the BOX Book 
are assessed electronic transaction fees for non-auction 
transactions.\13\ In contrast, the legs of the Complex Order involved 
in the same transaction are assessed fees from a different section of 
the BOX Fee Schedule, which may be confusing to Participants.\14\ As 
such, the Exchange proposes to assess each leg of a Complex Order 
traded against the BOX Book the electronic transaction fees for non-
auction transactions in Section IV.A of the BOX Fee Schedule. The 
Exchange believes it is reasonable to assess the same fees for the legs 
of Complex Orders as single-leg orders because the legs of Complex 
Orders executed against the BOX Book are executed as if they were 
single-leg orders.\15\ The Exchange believes that the proposed change 
will allow both sides of a transaction executed on BOX to be assessed 
consistently, and will add clarity by expressly providing how fees will 
be assessed for each leg of a Complex Order executed against the BOX 
Book.
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    \13\ See BOX Fee Schedule Section VI.B.
    \14\ Although this is not specified expressly in the Fee 
Schedule, the legs of Complex Orders trading against the BOX Book 
are currently assessed Complex Order transaction fees in BOX Fee 
Schedule Section VI.A.
    \15\ The Exchange notes that Complex Orders will be 
automatically executed against bids and offers on the BOX Book for 
the individual legs of the Complex Order to the extent that the 
Complex Order can be executed in full or in a permissible ratio by 
such bids and offers. See BOX Rule 7240(b)(3)(ii).
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    Further, the Exchange believes that to the extent the legs of 
Complex Orders are assessed lower or higher fees or provided a smaller 
rebate or no rebate, this proposal is reasonable because such orders 
may benefit from the liquidity on the BOX Book in addition to the 
liquidity on the Complex Order Book. The Exchange notes that Complex 
Orders may receive executions for each leg of a Complex Order against 
the BOX Book when the Complex Order would not otherwise have received 
an execution in the Complex Order Book. The Exchange notes further that 
another exchange assesses fees similarly to the proposal.\16\ The 
Exchange believes that, although some transactions will be assessed 
lower or higher fees or provided a smaller rebate or no rebate under 
the proposal, the Complex Order fee structure is still designed to 
attract order flow and will allow BOX to remain a competitive venue for 
Complex Order flow. The Exchange

[[Page 48500]]

believes further that the proposed changes are reasonable because they 
add clarity to the Fee Schedule by expressly providing which fees will 
be assessed to the legs of a Complex Order when the legs of a Complex 
Order interact with the BOX Book.
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    \16\ See Cboe EDGX Exchange, Inc. (``Cboe EDGX'') Options Fee 
Schedule (providing that standard fee codes are applicable to 
Complex Orders that leg into the Simple Book). The Simple Book on 
Cboe EDGX is the regular electronic book of orders. There is an 
exception for fee code ZD which corresponds to: ``Complex order legs 
into Simple Book, Customer'' and a fee of ``FREE.'' The Exchange 
notes that, although such Customer Complex Orders are free, the 
standard Cboe EDGX rates would provide a credit. The Exchange 
believes that the Cboe EDGX fee structure for Complex Orders that 
leg into the Simple Book uses different rates but is similar in 
operation to the proposal.
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    The Exchange notes another mechanism in the BOX Fee Schedule where 
both sides of a transaction are assessed fees, in a consistent manner, 
from the same section of the Fee Schedule. In Section IV.B of the BOX 
Fee Schedule for PIP and COPIP transactions, each PIP Order or COPIP 
Order that executes against an Unrelated Order on the BOX Book shall be 
treated as a non-auction transaction.\17\ Specifically, both sides of 
the same transaction where one is an Unrelated Order entered into the 
BOX market during a PIP and the other is a PIP Order, are assessed fees 
from the same section of the BOX Fee Schedule--Section IV.A (Electronic 
Transaction Fees for Non-Auction Transactions). The Exchange believes 
that this structure provides clarity to the Fee Schedule and reduces 
Participant confusion about how these executions are treated.
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    \17\ For the PIP, an Unrelated Order is a non-Improvement Order 
entered into the BOX market during a PIP. For the COPIP, an 
Unrelated Order is a non-Improvement Order entered on BOX during a 
COPIP or BOX Book Interest during a COPIP.
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    The Exchange notes that the BOX Fee Schedule, including Section VI 
(Complex Order Transaction Fees), assesses fees and credits according 
to the account type of the Participant originating the order and the 
contra party.\18\ The result of this structure is that a Participant 
does not know the fee it will be charged when submitting certain 
orders. The Exchange believes that this uncertainty is reasonable 
because each section of the BOX Fee Schedule is designed to 
independently attract order flow and to compete with exchanges that 
have similar fee structures.\19\ Similarly, the proposed change 
contains some uncertainty about which fees will be assessed because 
Participants may not know ahead of time whether their Complex Order 
will interact with the Complex Order Book or the BOX Book. As a result, 
Participants must recognize when submitting a Complex Order to BOX that 
they could be assessed a range of fees or rebates and must expect the 
highest applicable fee or lowest applicable rebate such that fees 
(rebates) may be lower (higher) than their expectations. The Exchange 
notes that under the proposal, Public Customer Complex Orders will not 
pay a fee regardless of whether the Complex Order executes in the 
Complex Order Book or the BOX Book, however, such orders will receive a 
smaller rebate or no rebate if the legs of the Complex Order execute 
against the BOX Book. Further, the Exchange believes the proposed 
changes are equitable and not unfairly discriminatory as the proposed 
fee structure will apply uniformly to all Participants.
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    \18\ See BOX Fee Schedule Sections IV.A (Electronic Non-Auction 
Transactions) and VI.A (Complex Order Transaction Fees).
    \19\ See Nasdaq ISE, LLC (``Nasdaq ISE'') Options 7 Section 4 
(Complex Order Fees and Rebates) and MIAX Emerald, LLC Options 
Exchange Fee Schedule (Transaction Fees). The Exchange notes that 
Nasdaq ISE assesses fees based on market participant, whether the 
market participant is trading against a Priority Customer, maker/
taker, and whether the symbol is a Select or non-Select Symbol, 
whereas BOX varies fees based on account type, contra party, maker/
taker, and whether the class is a Penny Interval Class or a Non-
Penny Interval Class.
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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 proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal, to the extent it 
increases or decreases fees or provides smaller rebates or no rebates, 
remains competitive with other options markets. The Exchange notes that 
it operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees and rebates to remain competitive with 
other exchanges. Because competitors are free to modify their own fees 
and rebates in response, and because market participants may readily 
adjust their order routing practices, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited. The Exchange notes that another 
exchange has a similar fee structure.\20\
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    \20\ See supra note 16.
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    The proposed changes do not impose an undue burden on intra-market 
competition because the Exchange does not believe that the proposal 
will place any category of market participant at a competitive 
disadvantage. Specifically, the Exchange believes that applying Section 
IV.A (Electronic Transaction Fees for Non-Auction Transactions) to the 
legs of Public Customer Complex Orders that trade against the BOX Book 
does not impose an undue burden on intra-market competition because the 
fee structure contained in Section IV.A is designed to attract Public 
Customer order flow which increases the number of executions on the 
Exchange, thus benefiting all market participants. The Exchange notes 
that, as discussed above, although the Public Customer rebates in 
Section IV.A are smaller than Public Customer rebates in Section VI 
(Complex Order Transaction Fees), Public Customers benefit from the 
additional liquidity available on the BOX Book.
    Lastly, the Exchange believes that the proposed changes will 
provide all Participants with consistency and clarity regarding how 
Complex Order fees are assessed on BOX. The Exchange notes that all 
Participants sending a Complex Order to BOX that interacts with the BOX 
Book will be subject to fees and rebates already in place on the 
Exchange.

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 \21\ and Rule 19b-4(f)(2) 
thereunder,\22\ because it establishes or changes a due, or fee.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 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.

[[Page 48501]]

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-2023-19 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-2023-19. 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-2023-19 and should be 
submitted on or before August 17, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-15861 Filed 7-26-23; 8:45 am]
BILLING CODE 8011-01-P