[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5054-5058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01393]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99401; File No. SR-BOX-2024-05]


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 Modify 
Certain Electronic Non-Auction Transaction Fees

January 19, 2024.
    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 January 12, 2024, 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

[[Page 5055]]

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 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, of the BOX Fee Schedule. Specifically, the Exchange 
proposes to establish separate fees and rebates on electronic Non-
Auction Transactions for options overlying the INVESCO QQQ Trust\SM\, 
Series 1 (``QQQ''), and iShares Russell 2000 Index Fund (``IWM'').
Non-Auction Transactions
    Currently, 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.
    The Exchange now proposes to assess separate fees for QQQ and IWM 
electronic Non-Auction Transactions. Currently, when a Public Customer 
QQQ or IWM order is a liquidity taker contra to a Professional 
Customer, Broker Dealer, or a Market Maker, the Public Customer is 
provided a $0.20 rebate. The Exchange now proposes to increase Public 
Customer taker fees on QQQ and IWM electronic Non-Auction Transactions. 
Accordingly, when a Public Customer QQQ or IWM order is a liquidity 
taker contra to a Professional Customer, Broker Dealer, or a Market 
Maker, the Public Customer will be assessed $0.10. Further, under this 
proposal, Public Customer QQQ or IWM orders that interact with a Public 
Customer QQQ or IWM order will continue to not be assessed a fee.
    Further, when a Professional Customer or Broker Dealer QQQ or IWM 
order interacts with a Public Customer QQQ or IWM order, the Exchange 
proposes to assess a $0.50 fee when making liquidity or $0.50 when 
taking liquidity. When a Professional Customer or Broker Dealer QQQ or 
IWM order interacts with a Professional Customer, Broker Dealer, or 
Market Maker QQQ or IWM order, the Exchange proposes to assess $0.15 
for making liquidity or $0.50 for taking liquidity. The Exchange notes 
that these fees are the same as fees currently assessed to QQQ and IWM 
transactions as QQQ and IWM are Penny Interval Classes.\5\
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    \5\ 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 QQQ or IWM order interacts with a Public 
Customer QQQ or IWM order, the Exchange proposes to assess $0.00 when 
making liquidity or $0.50 when taking liquidity. The Exchange notes 
that assessing Market Maker QQQ and IWM orders that interact with 
Public Customers $0.00 for making liquidity is a fee decrease from the 
current fee, which is $0.50. Lastly, when a Market Maker QQQ or IWM 
order interacts with a Professional Customer, Broker Dealer, or Market 
Maker QQQ or IWM order, the Exchange proposes to assess no fee when 
making liquidity or $0.50 when taking liquidity, which is the same as 
the currently assessed fee for QQQ and IWM orders.
    The proposed fee structure for QQQ and IWM electronic Non-Auction 
Transactions will be as follows:

------------------------------------------------------------------------
                                             SPY, QQQ, and IWM
           Account type           --------------------------------------
                                       Contra party      Maker    Taker
------------------------------------------------------------------------
Public Customer..................  Public Customer....    $0.00    $0.00
                                   Professional            0.00     0.10
                                    Customer/Broker
                                    Dealer.
                                   Market Maker.......     0.00     0.10
Professional Customer or Broker    Public Customer....     0.50     0.50
 Dealer.
                                   Professional            0.15     0.50
                                    Customer/Broker
                                    Dealer.
                                   Market Maker.......     0.15     0.50
Market Maker.....................  Public Customer....     0.00     0.50
                                   Professional            0.00     0.50
                                    Customer/Broker
                                    Dealer.
                                   Market Maker.......     0.00     0.50
------------------------------------------------------------------------

    For example, under the proposal, if a Public Customer submitted a 
QQQ order to the BOX Book (making liquidity), the Public Customer would 
not be charged a fee if the order interacted with a Market Maker's QQQ 
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 QQQ 
and IWM transactions for Public Customers in Non-Auction Transactions. 
For Tier 1, where percentage thresholds of Public

[[Page 5056]]

Customer volume is 0.000%--0.249%, the Exchange proposes no rebates. 
For Tier 2, where percentage thresholds of Public Customer volume is 
0.250%--0.499%, the Exchange proposes to offer a $0.05 rebate when 
making liquidity or no rebate when taking liquidity. For Tier 3, where 
percentage thresholds of Public Customer volume is 0.500%--0.749%, the 
Exchange proposes a $0.10 rebate when making liquidity or no rebate 
when taking liquidity. For Tier 4, where percentage thresholds of 
Public Customer volume is 0.750%--0.999%, the Exchange proposes a $0.20 
rebate when making liquidity or no rebate for taking liquidity. In Tier 
5, where percentage thresholds of Public Customer volume is 1.000% and 
above, the Exchange proposes a $0.27 rebate when making liquidity or 
$0.11 rebate when taking liquidity. The proposed rebate structure will 
be as follows:

------------------------------------------------------------------------
                         Percentage             Per contract rebate
                        thresholds of    -------------------------------
                      national customer          SPY, QQQ, and IWM
       Tier          volume in multiply- -------------------------------
                       listed options
                     classes  (monthly)        Maker           Taker
------------------------------------------------------------------------
1.................  0.000%-0.249%.......           $0.00           $0.00
2.................  0.250%-0.499%.......          (0.05)            0.00
3.................  0.500%-0.749%.......          (0.10)            0.00
4.................  0.750%-0.999%.......          (0.20)            0.00
5.................  1.000% and Above....          (0.27)          (0.11)
------------------------------------------------------------------------

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,\6\ 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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    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to adopt separate fees for QQQ and IWM 
electronic 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 notes that the proposed fees are 
identical to the fees currently assessed for SPY transactions on BOX. 
The Exchange also notes that other exchanges assess separate fees and 
credits for QQQ and IWM transactions.\7\ Further, QQQ and IWM are two 
of the most actively traded options and therefore the Exchange believes 
that separate fees are appropriate to more effectively attract order 
flow to BOX.
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    \7\ See Cboe C2 Exchange, Inc. Fee Schedule and MIAX PEARL, LLC 
Fee Schedule and Nasdaq BX, Inc. Fee Schedule.
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Non-Auction Transactions
    The Exchange believes the proposed electronic Non-Auction 
Transaction fees for Public Customer QQQ and IWM transactions are 
reasonable. Under the proposal, Public Customers will never pay a fee 
for their QQQ or IWM Non-Auction Transactions when making liquidity 
against Public Customer or Non-Public Customer QQQ or IWM orders. The 
Exchange notes that Public Customers are not currently assessed a fee 
for their QQQ or IWM Non-Auction Transactions when making liquidity 
against Public Customer or Non-Public Customer QQQ or IWM orders. 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. The Exchange 
believes that assessing no fee will attract Public Customer order flow, 
which provides increased opportunities to interact with Public Customer 
order flow to the benefit of all Participants. Accordingly, the 
Exchange believes that charging no fee for Public Customers when making 
liquidity for their QQQ and IWM transactions is appropriate and not 
unfairly discriminatory.
    Under the proposal, Public Customer taker fees for QQQ and IWM 
electronic Non-Auction Transactions when taking liquidity against 
Professional Customers, Broker Dealers, or Market Makers will be $0.10, 
which is a fee increase from what is currently assessed. The Exchange 
believes the proposed electronic Non-Auction transaction fees for 
Public Customer QQQ and IWM transactions are reasonable as the proposed 
fees are lower than similar transaction fees assessed at other 
exchanges.\8\ The Exchange further believes that the proposed QQQ and 
IWM 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. The Exchange believes that 
Public Customers may be willing to pay a fee of $0.10 to access such 
competitive markets.
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    \8\ See e.g., Cboe C2 Exchange, Inc. Fee Schedule (``Transaction 
Fees'' applicable to QQQ and IWM for Public Customer Remove rates of 
$0.37); MIAX PEARL, LLC Fee Schedule (``Transaction Rebates/Fees'' 
for Priority Customer QQQ and IWM Taker in Tier 1 of $0.48).
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    The Exchange believes further that charging a fee of $0.10 to 
Public Customers for QQQ and IWM electronic Non-Auction Transactions is 
equitable and not unfairly discriminatory. The Exchange notes that 
Professional Customer, Broker Dealer, and Market Maker taker fees for 
QQQ and IWM electronic Non-Auction Transactions when taking liquidity 
against any contra party are $0.50 while Public Customers will be 
assessed $0.10 when taking liquidity against Professional Customers, 
Broker Dealers, and Market Makers. The Exchange again notes that 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. The Exchange 
believes that assessing lower fees for Public Customers compared to 
other account types will attract Public Customer order flow, which 
provides increased opportunities to interact with Public Customer order 
flow to the benefit of all Participants. Accordingly, the Exchange 
believes that charging a lower fee for Public Customers for their QQQ 
and IWM transactions compared to other account types on BOX is 
appropriate and not unfairly discriminatory.
    The Exchange believes that charging Professional Customers and 
Broker Dealers higher fees than Public Customers for QQQ and IWM 
electronic Non-Auction Transactions is equitable and not unfairly 
discriminatory.

[[Page 5057]]

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 again notes that 
Professional Customers and Broker Dealers are currently assessed the 
same fees for their QQQ and IWM transactions as QQQ and IWM are Penny 
Interval Classes.\9\
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    \9\ See BOX Fee Schedule, Section IV.A.
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    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to assess no maker fee for BOX Market Makers trading 
against a Public Customer, Professional Customer, Broker Dealer, or 
Market Maker for QQQ and IWM electronic Non-Auction Transactions. The 
Exchange notes that under this proposal Market Makers making liquidity 
against a Public Customer for QQQ and IWM electronic Non-Auction 
Transactions will not be assessed a fee, which is a fee decrease from 
what is currently assessed. As a result of this change, Market Makers 
may tighten their spreads in QQQ and IWM and therefore will increase 
market quality in QQQ and IWM 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. As such, the Exchange believes it is appropriate that 
Market Makers be charged lower transaction fees than Professional 
Customers and Broker Dealers for QQQ and IWM electronic Non-Auction 
Transactions.
Tiered Volume Rebate for Non-Auction Transactions
    The Exchange believes that the proposed Public Customer QQQ and IWM 
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 QQQ and IWM 
transactions are meant to incentivize Public Customers to post orders 
on BOX to obtain the benefit of the rebate, which will in turn benefit 
all market participants by increasing liquidity on BOX. The Exchange 
notes that the proposed QQQ and IWM rebates are identical to the 
rebates that are currently assessed to SPY transactions today.

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 change will not impose a burden on intramarket competition as 
BOX believes that the changes will result in the Participants being 
charged appropriately for their QQQ and IWM transactions. Specifically, 
the change to eliminate Market Maker maker fees when contra to Public 
Customers is designed to incentivize order flow to BOX by incentivizing 
Market Makers to provide tighter spreads thus improving market quality 
to the benefit of all BOX Participants. Additionally, the Exchange 
believes that eliminating Public Customer credits when taking liquidity 
contra to a Professional Customer, Broker Dealer, or Market Maker and 
instead assessing a fee will not disincentivize the sending of such 
orders 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. The Exchange 
notes further that 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 will 
not impose a burden on intermarket competition as another exchange 
currently assesses separate fees for QQQ and IWM transactions.\10\
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    \10\ See supra note 7.
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    The Exchange believes the addition of QQQ and IWM to the rebate 
structure for Public Customer electronic 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 QQQ and IWM 
transactions. Further, the Exchange believes that this proposal will 
enhance competition between exchanges because it is designed to allow 
BOX 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 credits 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 \11\ and Rule 19b-4(f)(2) 
thereunder,\12\ because it establishes or changes a due, or fee.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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-2024-05 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-2024-05. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your

[[Page 5058]]

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-2024-05 and should be submitted on or before February 15, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01393 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-P