[Federal Register Volume 89, Number 85 (Wednesday, May 1, 2024)]
[Notices]
[Pages 35266-35269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09332]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100026; File No. SR-BOX-2024-10]


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 (``BOX'')

April 25, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 11, 2024, BOX Exchange LLC (the ``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

[[Page 35267]]

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 Terms of Substance of 
the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule on 
the BOX Options Market LLC (``BOX'') options facility. 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 VI.A, Complex Order 
Transaction Fees, of the BOX Fee Schedule, to establish a separate 
category within the fee structure for fees and rebates on Complex Order 
transactions for options overlying the Standard and Poor's Depositary 
Receipts Trust (``SPY''), the INVESCO QQQ Trust\SM\, Series 1 
(``QQQ''), and iShares Russell 2000 Index Fund (``IWM''). The Exchange 
notes that the fees for SPY, QQQ, and IWM in Section VI.A will remain 
the same as those currently assessed. The Exchange also proposes to 
amend the fees in Section VI.B to change how certain Complex Orders are 
assessed within the fee structure, specifically each leg of Public 
Customer Complex Orders in SPY, QQQ, and IWM that executes against the 
BOX Book \5\ instead of the Complex Order Book.\6\
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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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    Currently, in Section VI of the BOX Fee Schedule, fees and credits 
for Complex Order transactions in Penny Interval Classes and Non-Penny 
Interval Classes 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 proposes to assess 
separate fees for SPY, QQQ, and IWM Complex Order Transaction Fees in 
Section VI.A of the Fee Schedule. The Exchange notes that it is not 
changing the amount of the fees currently assessed for these 
transactions but is simply carving out SPY, QQQ, and IWM into a 
separate category within the fee structure.
    As proposed, the SPY, QQQ, and IWM fees will continue to be the 
same as the current fees assessed to transactions in Penny Interval 
Classes. Specifically, when a Public Customer SPY, QQQ, or IWM Complex 
Order interacts with a Public Customer, the Exchange will not assess a 
fee or offer a rebate. When a Public Customer SPY, QQQ, or IWM Complex 
Order interacts with a non-Public Customer, the Exchange will offer a 
rebate of $0.50. Further, when a Professional Customer or Broker Dealer 
SPY, QQQ, or IWM Complex Order interacts with a Public Customer Complex 
Order, the Exchange proposes to assess a $0.50 fee when making 
liquidity or a $0.50 fee when taking liquidity. When a Professional 
Customer or Broker Dealer SPY, QQQ, or IWM Complex Order interacts with 
a Professional Customer, Broker Dealer, or Market Maker Complex Order, 
the Exchange proposes to offer a rebate of $0.30 for making liquidity 
or to assess a fee of $0.50 for taking liquidity. When a Market Maker 
SPY, QQQ, or IWM Complex Order interacts with a Public Customer Complex 
Order, the Exchange proposes to assess $0.50 when making liquidity or 
$0.50 when taking liquidity. When a Market Maker SPY, QQQ, or IWM 
Complex Order interacts with a Professional Customer, Broker Dealer, or 
Market Maker Complex Order, the Exchange proposes to offer a rebate of 
$0.30 when making liquidity or to assess a fee of $0.50 when taking 
liquidity. The Exchange again notes that these fees are currently 
assessed to SPY, QQQ, and IWM transactions today as SPY, QQQ, and IWM 
are Penny Interval Classes.\7\
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    \7\ See BOX Options Notice 2024-015 available at Notice-2024-
015-Penny-Program-Class-Removals.pdf (boxexchange.com).
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    The proposed fee structure for SPY, QQQ, and IWM Complex Order 
transactions will be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                         SPY, QQQ, and IWM
                 Account type                             Contra party           -------------------------------
                                                                                       Maker           Taker
----------------------------------------------------------------------------------------------------------------
Public Customer...............................  Public Customer.................           $0.00           $0.00
                                                Professional Customer/Broker              (0.50)          (0.50)
                                                 Dealer.
                                                Market Maker....................          (0.50)          (0.50)
Professional Customer or Broker Dealer........  Public Customer.................            0.50            0.50
                                                Professional Customer/Broker              (0.30)            0.50
                                                 Dealer.
                                                Market Maker....................          (0.30)            0.50
Market Maker..................................  Public Customer.................            0.50            0.50
                                                Professional Customer/Broker              (0.30)            0.50
                                                 Dealer.
                                                Market Maker....................          (0.30)            0.50
----------------------------------------------------------------------------------------------------------------

    For example, under the proposal, if a Public Customer submitted a 
SPY order to the Complex Order Book (making liquidity), the Public 
Customer would be provided a rebate of $0.50 if the order interacted 
with a Market Maker's SPY order and the Market Maker (taking liquidity) 
would be charged $0.50.
    In addition to the above changes to Section VI.A of the Fee 
Schedule, the Exchange now proposes to amend the fees in Section VI.B 
to change how

[[Page 35268]]

certain Complex Orders are assessed within the fee structure. By way of 
background, a Participant may enter a Complex Order with the intent of 
that order executing against another Complex Order on the Complex Order 
Book, however, Complex Orders will execute against Complex Orders only 
after bids and offers at the same net price on the BOX Book for the 
individual legs have been executed.\8\ Currently, under the BOX Fee 
Schedule, 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 is subject to Section IV (Electronic Transaction Fees). The 
Exchange now proposes to assess $0.00 for Public Customer Complex 
Orders in SPY, QQQ, and IWM executed against the BOX Book. 
Specifically, the Exchange proposes to amend Section VI.B as follows:
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    \8\ See BOX Rule 7240(b)(3)(i).

    ``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 
Transactions), except that each leg of a Public Customer Complex 
Order in SPY, QQQ, and IWM executed against the BOX Book will be 
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assessed $0.00.''

    For example, if a SPY, QQQ, or IWM Public Customer Complex Order 
interacts with the BOX Book, the legs are currently assessed $0.10 for 
taking liquidity against Professional Customers, Broker Dealers, and 
Market Makers.\9\ The proposed change would effectively decrease the 
fee assessed in this case from $0.10 to $0.00.
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    \9\ See BOX Fee Schedule, Section IV.A (Non-Auction 
Transactions).
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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,\10\ 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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    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to establish a separate category within the 
fee structure for SPY, QQQ, and IWM Complex Order 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 it 
currently assesses separate fees and rebates for SPY, QQQ, and IWM Non-
Auction Transactions.\11\ The Exchange also notes that SPY, QQQ, and 
IWM are among the most actively traded options \12\ and therefore the 
Exchange believes that creating a separate category within the fee 
structure for these classes is appropriate to more effectively attract 
order flow to BOX. The Exchange again notes that it is not changing the 
amount of the fees currently assessed for SPY, QQQ, and IWM Complex 
Order Transaction Fees in Section VI.A of the Fee Schedule, but is 
simply carving out SPY, QQQ, and IWM into a separate category within 
the fee structure. As proposed, the SPY, QQQ, and IWM fees will 
continue to be the same as the current fees assessed to transactions in 
Penny Interval Classes.
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    \11\ See BOX Fee Schedule, Section IV.A (Non-Auction 
Transactions).
    \12\ 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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    Additionally, the Exchange believes the proposed change to amend 
the fees in Section VI.B to change how each leg of a Public Customer 
Complex Order in SPY, QQQ, and IWM that executes against the BOX Book 
is assessed within the fee structure is reasonable because it is 
designed to incentivize Public Customer Complex 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\ Currently, in the case of a Public 
Customer Complex Order interacting with the BOX Book, the legs are 
assessed $0.00 for making liquidity against all account types, $0.00 
for taking liquidity against another Public Customer, and $0.10 for 
taking liquidity against Professional Customers, Broker Dealers, and 
Market Makers. The proposed change would effectively decrease the fee 
assessed in the latter case from $0.10 to $0.00. Further, the Exchange 
believes it is equitable and not unfairly discriminatory that Public 
Customers be charged lower fees than Professional Customers, Broker 
Dealers, and Market Makers on BOX. The Exchange believes it promotes 
the best interests of investors to have lower transaction costs for 
Public Customers and will attract Public Customer order flow. The 
Exchange believes further that increased opportunities to interact with 
Public Customer order flow benefits all market participants. As such, 
the industry in general and the Exchange in particular have 
historically created fee structures to benefit Public Customers because 
increased Public Customer order flow benefits all market participants.
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    \13\ See BOX Fee Schedule Section VI.B.
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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.\14\ The result of this structure is that a Participant 
does not know the fee it will be charged when submitting certain 
orders. Specifically, Participants who submit a Complex Order to BOX 
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 higher(lower) than their expectations. The Exchange notes that under 
the proposal, SPY, QQQ, and IWM Public Customer Complex Orders will not 
be assessed a fee regardless of whether the Complex Order executes in 
the Complex Order Book or 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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    \14\ See BOX Fee Schedule Sections IV.A (Electronic Non-Auction 
Transactions) and VI.A (Complex Order Transaction Fees).
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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 intermarket 
competition. The Exchange believes its proposal to decrease fees for 
SPY, QQQ, and IWM Public Customer Complex Orders that execute against 
the BOX Book will allow BOX to compete 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

[[Page 35269]]

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 believes that the proposed changes do not impose an 
undue burden on intra-market competition because the proposal will not 
place any category of market participant at a competitive disadvantage. 
Specifically, the Exchange believes that assessing no fees to the legs 
of SPY, IWM, or QQQ Public Customer Complex Orders that trade against 
the BOX Book does not impose an undue burden on intra-market 
competition because the proposed change is designed to attract Public 
Customer order flow which increases the number of executions on BOX, 
thus benefiting all market participants. The Exchange believes further 
that separating SPY, IWM, and QQQ Complex Order transaction fees from 
Penny Interval Classes does not impose an undue burden on competition 
because the proposal changes the structure of the Fee Schedule but does 
not change the fees assessed or rebates offered.

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 \15\ and Rule 19b-4(f)(2) 
thereunder,\16\ because it establishes or changes a due, or fee.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 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-2024-10 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-2024-10. 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-2024-10 and should be 
submitted on or before May 22, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-09332 Filed 4-30-24; 8:45 am]
BILLING CODE 8011-01-P