[Federal Register Volume 88, Number 221 (Friday, November 17, 2023)]
[Notices]
[Pages 80353-80356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25379]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98906; File No. SR-BOX-2023-25]


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 Amend 
Sections IV.A (Non-Auction Transactions) and IV.A.1 (Tiered Volume 
Rebate for Non-Auction Transactions)

November 13, 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 November 1, 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 Section IV.A (Non-
Auction Transactions) and Section IV.A.1 (Tiered Volume Rebate for Non-
Auction Transactions) of the Fee Schedule on the BOX Options Market LLC 
(``BOX'') options facility. The text of the proposed rule change is 
available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's internet 
website at 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.A (Non-Auction 
Transactions) and Section IV.A.1 (Tiered Volume Rebate for Non-Auction 
Transactions) of the BOX Fee Schedule. First, the Exchange proposes to 
increase Public Customer taker fees on transactions for options 
overlying the Standard and Poor's Depositary Receipts Trust (``SPY'') 
in Section IV.A.\5\ Next, the Exchange proposes to reduce Tier 4 
rebates and establish a new Tier 5 in the Tiered Volume Rebate for Non-
Auction Transactions for Percentage National Customer Volume in 
Multiply-Listed Options Classes.
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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
    In Section IV.A of the BOX Fee Schedule, fees and credits for 
Electronic 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. Currently, when 
a Public Customer SPY order is a liquidity taker contra to a 
Professional Customer, Broker Dealer, or a Market Maker, the Public 
Customer is assessed no fee. The Exchange now proposes to increase 
Public Customer taker fees on SPY Non-Auction Transactions. 
Accordingly, when a Public Customer SPY order is a liquidity taker 
contra to a Professional Customer, Broker Dealer, or a Market Maker, 
the Public Customer will be assessed a fee of $0.10.
Tiered Volume Rebate for Non-Auction Transactions
    The Exchange also proposes to amend Section IV.A.1 of the Fee 
Schedule. Specifically, the Exchange proposes to add a Tier and to 
adjust the Percentage Thresholds of National Customer Volume in 
Multiply-Listed Options Classes. Currently, Public Customers

[[Page 80354]]

receive a per contract rebate for electronic Non-Auction Transactions 
according to the Tier achieved by the Public Customer as provided in 
the Percentage Thresholds of National Customer Volume in Multiply-
Listed Options Classes table in Section IV.A.1 of the BOX Fee 
Schedule.\6\ Percentage thresholds are calculated on a monthly basis by 
totaling the Public Customer's executed Auction and Non-Auction 
transaction volume on BOX, relative to the total national customer 
volume in multiply-listed options classes.
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    \6\ The Exchange notes that Public Customers do not initiate 
transactions on BOX directly. BOX Participants initiate Electronic 
Non-Auction Transactions on the behalf of Public Customers and are 
assessed fees or provided rebates by the Exchange.
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    The Exchange notes that Non-Auction Transactions where a Public 
Customer order interacts with another Public Customer order are exempt 
from a per contract rebate. However, these transactions still count 
toward the Public Customer's monthly volume on BOX. The current 
thresholds and rebates are as follows:

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                     Percentage                     Per contract rebate
                   thresholds of   -----------------------------------------------------------------------------
                 national customer   Penny interval classes      Non-penny interval                SPY
      Tier           volume in     --------------------------          classes         -------------------------
                  multiply-listed                            --------------------------
                  options classes      Maker        Taker                                  Maker        Taker
                     (monthly)                                   Maker        Taker
----------------------------------------------------------------------------------------------------------------
1..............  0.000-0.249......        $0.00        $0.00        $0.00        $0.00        $0.00        $0.00
2..............  0.250-0.499......       (0.05)       (0.15)       (0.15)       (0.27)       (0.05)         0.00
3..............  0.500-0.749......       (0.10)       (0.20)       (0.30)       (0.32)       (0.10)         0.00
4..............  0.750 and Above..       (0.27)       (0.27)       (0.60)       (0.40)       (0.27)         0.00
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    The Exchange proposes to modify Tier 4 from 0.750% and Above to 
0.750%-0.999% and to establish Tier 5 which will be 1.000% and Above. 
The Exchange also proposes to reduce Tier 4 rebates to $0.20 and $0.22 
for Maker and Taker respectively in Penny Interval Classes, $0.45 and 
$0.35 for Maker and Taker respectively in Non-Penny Interval Classes, 
and $0.20 and $0.00 for Maker and Taker respectively in SPY. Finally, 
the Exchange proposes to establish Tier 5 rebates of $0.27 and $0.27 
for Maker and Taker respectively in Penny Interval Classes, $0.60 and 
$0.40 for Maker and Taker respectively in Non-Penny Interval Classes, 
and $0.27 and $0.11 for Maker and Taker respectively in SPY. The 
proposed rebate structure is as follows:

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                     Percentage                     Per contract rebate
                   thresholds of   -----------------------------------------------------------------------------
                 national customer   Penny interval classes      Non-penny interval                SPY
      Tier           volume in     --------------------------          classes         -------------------------
                  multiply-listed                            --------------------------
                  options classes      Maker        Taker                                  Maker        Taker
                     (monthly)                                   Maker        Taker
----------------------------------------------------------------------------------------------------------------
1..............  0.000-0.249......        $0.00        $0.00        $0.00        $0.00        $0.00        $0.00
2..............  0.250-0.499......       (0.05)       (0.15)       (0.15)       (0.27)       (0.05)         0.00
3..............  0.500-0.749......       (0.10)       (0.20)       (0.30)       (0.32)       (0.10)         0.00
4..............  0.750-0.999......       (0.20)       (0.22)       (0.45)       (0.35)       (0.20)         0.00
5..............  1.000 and Above..       (0.27)       (0.27)       (0.60)       (0.40)       (0.27)       (0.11)
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    The Exchange notes that the proposed SPY taker fees are lower than 
comparable taker fees at several other exchanges.\7\ The Exchange notes 
further that other exchanges employ similar incentive programs; and the 
Exchange believes that the proposed changes are reasonable and 
competitive when compared to incentive structures at other 
exchanges.\8\
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    \7\ See e.g., Nasdaq PHLX LLC, Options 7, Section 3 Part A. 
(``Simple Order'' Customer fee for removing SPY liquidity of $0.41); 
Cboe C2 Exchange, Inc. Fee Schedule (``Transaction Fees'' applicable 
to SPY for Public Customer Remove rates of $0.37); MIAX PEARL, LLC 
Fee Schedule (``Transaction Rebates/Fees'' for Priority Customer SPY 
Taker in Tier 1 of $0.46).
    \8\ See Nasdaq PHLX LLC (``Nasdaq PHLX'') Options 7, Section 2 
(Customer Rebate Program) and Cboe Exchange, Inc. (``CBOE'') Fee 
Schedule (Volume Incentive Program). The Exchange notes that these 
programs use different tier structures, volume calculations, and 
rebate amounts, however, their rebate programs operate similarly to 
BOX's in that they are driven by volume and designed to incentivize 
Public Customer order flow.
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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,\9\ 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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    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange notes that it operates in a highly competitive 
environment. Indeed, there are currently 17 registered options 
exchanges that trade options. Based on publicly available information, 
no single options exchange has more than 21% of the market share and 
currently the Exchange represents only approximately 7% of the market 
share.\10\ 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.'' \11\ As stated 
above, the Exchange operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive or 
incentives to be insufficient. The proposed fee changes reflect a 
competitive pricing structure designed to incentivize Public Customer 
electronic non-auction order flow to BOX.
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    \10\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (September 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \11\ 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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[[Page 80355]]

Non-Auction Transactions
    The Exchange believes the proposed electronic Non-Auction 
transaction taker fees for Public Customer SPY transactions are 
reasonable as the proposed taker fees are lower than similar 
transaction fees assessed at other exchanges.\12\ The Exchange further 
believes that the proposed SPY taker fee for electronic Non-Auction 
Public Customer transactions will not disincentivize Public Customer 
order flow because BOX's electronic Non-Auction Transactions fee 
structure is designed to attract competitive quotes and orders, which 
results in liquid markets that Public Customers may find attractive. 
Specifically, the Exchange assesses no fees for Public Customers that 
make liquidity in SPY and, no fees for Market Makers that make 
liquidity in SPY, which incentivizes competitive quotes and resting 
orders. The Exchange believes that Public Customers may be willing to 
pay a nominal taker fee of $0.10 to access such competitive markets. 
The Exchange notes that other exchanges assess fees between $0.37 and 
$0.46 for customer transactions taking liquidity in SPY.\13\
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    \12\ See supra note 7.
    \13\ See supra note 7.
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    The Exchange believes that assessing Public Customers a taker fee 
of $0.10 for SPY electronic Non-Auction Transactions is equitable and 
not unfairly discriminatory. The Exchange notes that Professional 
Customer, Broker Dealer, and Market Maker taker fees for SPY electronic 
Non-Auction Transactions are $0.50. 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 a lower taker fee for Public Customers for their SPY 
transactions compared to other account types on BOX is appropriate and 
not unfairly discriminatory.
Tiered Volume Rebate for Non-Auction Transactions
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to adjust certain percentage thresholds in the volume-
based thresholds for Public Customers in electronic Non-Auction 
Transactions. The volume-based thresholds and applicable rebates are 
designed to continue to incentivize Public Customers to direct order 
flow to BOX to obtain the benefit of the rebate, which may in turn 
benefit all market participants by increasing liquidity on BOX. The 
Exchange proposes to amend Tier 4, which was 0.750% and Above, to 
0.750%-0.999%, and to add Tier 5 with a threshold of 1.000% and Above. 
This fee structure is designed to incentivize Public Customers to send 
their order flow to BOX, which may result in increased trading 
opportunities and executions on BOX.\14\ Further, the Exchange notes 
that the proposed amendment to the percentage thresholds in the volume-
based thresholds for Public Customers in electronic Non-Auction 
Transactions is not designed to benefit one firm in particular, but, as 
discussed herein, is designed to further incentivize order flow to BOX. 
While the Exchange proposes to decrease Tier 4 rebates, the Exchange 
believes that Public Customers will still benefit from the opportunity 
to obtain a rebate for their executions on BOX. The Exchange notes that 
other exchanges employ similar incentive programs; and the Exchange 
believes that the proposed changes are reasonable and competitive when 
compared to incentive structures at other exchanges.\15\
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    \14\ The Exchange notes that BOX Participants collect rebates on 
behalf of Public Customers and have independent fee arrangements 
with such Public Customers.
    \15\ See supra note 8.
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    The Exchange believes that the proposed changes to the thresholds 
in Tiers 4 and 5 are equitable and not unfairly discriminatory as they 
are available to all Public Customers, and Public Customers may choose 
whether or not to take advantage of the percentage thresholds and their 
applicable rebates. 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 providing a 
rebate structure for Public Customers is appropriate and not unfairly 
discriminatory. Based on its review of competitor exchanges, the 
Exchange believes that lowering Tier 4 rebates, and adding more 
difficult to obtain Tier 5 rebates, will not disincentivize Public 
Customer order flow. Rather, the Exchange believes that the proposed 
rebates will continue to help attract a high level of Public Customer 
order flow to the BOX, which will ultimately benefit all Participants 
trading on BOX.
    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow and discontinue or reduce use of certain categories of 
products in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated differently, 
changes to exchange transaction fees can have a direct effect on the 
ability of an exchange to compete for order flow. The Exchange believes 
the proposed changes are a reasonable attempt to effectively compete 
for electronic Non-Auction Public Customer orders. The Exchange 
believes that the proposed change may incentivize Public Customer order 
flow and, in turn, may make BOX a more competitive venue for order 
execution to the benefit of all Participants. Finally, the Exchange 
believes the proposed changes are consistent with the Act because, to 
the extent the modifications permit the Exchange to continue to attract 
greater volume and liquidity, the proposed changes would improve BOX's 
overall competitiveness and strengthen market quality for all market 
participants.

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 Public Customer SPY 
taker fees in the electronic Non-Auction Transactions fee structure 
will not impose a burden on intramarket competition as BOX believes 
that the changes will result in Public Customers being charged 
appropriately for their SPY taker transactions. The proposed change 
would apply to all similarly situated market participants and, 
accordingly, the proposed change would not impose a disparate burden on 
competition among Participants on BOX. The proposed change is designed 
to assess Public Customers a nominal taker fee for Electronic SPY Non-
Auction Transactions. The Exchange notes that Public Customer taker 
fees remain lower than Professional Customer, Broker Dealer, and Market 
Maker taker fees because BOX has historically aimed to improve markets 
for investors and develop various features within the market structure 
for Public Customer benefit.
    The Exchange believes further the proposed changes to Public 
Customer SPY taker fees in the Electronic Non-Auction Transactions fee 
structure will not impose a burden on intermarket competition. The 
Exchange notes that the Non-Auction Transaction fee structure as a 
whole, including the proposed change, is designed to be competitive 
with other options

[[Page 80356]]

exchanges and to attract order flow. The Exchange believes the 
electronic Non-Auction Transactions fee structure, including the 
proposed change, will remain competitive with other options exchanges 
and will continue to assess lower Public Customer taker fees than 
several other exchanges.\16\
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    \16\ See supra note 7.
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    The Exchange believes the proposed changes to Tier 4 and the 
addition of Tier 5 in Section IV.A.1 will not impose a burden on 
competition among various BOX Participants. The Exchange believes that 
the proposed changes will result in Public Customers being rebated 
appropriately for their transactions. The Exchange believes further 
that the proposed rebates will continue to attract Public Customer 
order flow to the BOX, which will ultimately benefit all Participants 
trading on BOX.
    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. 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 or rebate changes in 
this market may impose any burden on competition is extremely limited. 
The Exchange notes that other exchanges provide programs to incentivize 
customer order flow and that the proposed changes to the volume 
thresholds remain competitive when compared to incentive structures at 
other exchanges.\17\ For the reasons described above, the Exchange 
believes that the proposed rule change will encourage intermarket 
competition.
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    \17\ See supra note 8.
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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 \18\ and Rule 19b-4(f)(2) 
thereunder,\19\ because it establishes or changes a due, or fee.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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-2023-25 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-2023-25. 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-2023-25 and should be 
submitted on or before December 8, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25379 Filed 11-16-23; 8:45 am]
BILLING CODE 8011-01-P