Notice2021-13783
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC Facility
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 29, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 122 (Tuesday, June 29, 2021)</title>
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[Federal Register Volume 86, Number 122 (Tuesday, June 29, 2021)]
[Notices]
[Pages 34290-34293]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-13783]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92238; File No. SR-BOX-2021-15]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule on the BOX Options Market LLC Facility
June 23, 2021.
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 June 10, 2021, 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 on
the BOX Options Market LLC (``BOX'') 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 <a href="http://boxexchange.com">http://boxexchange.com</a>.
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.
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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 II (Manual Transaction Fees)
on the BOX Fee Schedule. Specifically, the Exchange proposes to amend
QOO Order Fees for Market Makers in Section II.A of the Fee Schedule.
Currently, Floor Market Makers are charged $0.25 per contract for QOO
Orders for Penny and Non-Penny Interval Classes. The Exchange proposes
to modify the rates charged for QOO Orders to $0.35 for Market Makers
in Penny and Non-Penny Interval Classes. The proposed changes are
intended to provide consistency between the Exchange's fees for manual
transactions by Floor Market Makers and those charged by other
markets.\5\ The Exchange notes that the disparity in fees between Floor
Market Makers and other Floor Participants on the BOX Trading Floor are
similar to disparities that currently exist at other trading floors in
the industry.\6\
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\5\ See e.g., Nasdaq PHLX LLC (``Phlx'') Pricing Schedule,
available at: <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207">https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207</a> (providing $0.35 per contract rate for manual
transactions by market makers); Cboe Exchange, Inc. (``Cboe'') Fee
Schedule, available at: <a href="https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf">https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf</a> (providing $0.35 per contract rate for manual
transactions by market makers). The Exchange notes that Cboe filed
to increase the Market Maker manual transaction fee--thereby
increasing the fee disparity between Floor Market Makers and all
other Floor Participants--in October 2020. See Securities Exchange
Act Release No. 90232 (October 20, 2020), 85 FR 67782 (SR-CBOE-2020-
097).The Exchange also notes that NYSE Arca LLC (``NYSE Arca'')
recently filed a proposed change for immediate effectiveness that
increased their manual transaction fees for Market Makers to $0.35.
In their filing, NYSE Arca stated that the purpose of the change was
to better align their fees with other markets in the industry. BOX
notes that the purpose of this filing is the same--to align its fees
with other exchanges with trading floors. See SR-NYSEArca-2021-042
available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2021/SR-NYSEArca-2021-42.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2021/SR-NYSEArca-2021-42.pdf</a>.
\6\ Currently, BOX Floor Brokers are charged $0.25 per contract
for manual transactions on the BOX Trading Floor. At Phlx, Cboe, and
NYSE American, Floor Brokers are charged $0.25 per contract for
manual transactions. As discussed above, Floor Market Makers at
Phlx, Cboe, and NYSE American are charged $0.35 per contract for
manual transactions. The Exchange also notes that BOX charges
Professional Customers $0.10 for manual transactions. The Exchange
believes that the disparity between the Professional Customers and
the proposed Floor Market Maker fee is reasonable as a similar
disparity currently exists at another options exchange with a
trading floor. See Cboe Fee Schedule. At Cboe, Professional
Customers are charged $0.12 for manual transactions and Floor Market
Makers are charged $0.35 for manual transactions. Lastly, BOX notes
that Public Customers are not charged for manual transactions on the
BOX Trading Floor while Floor Market Makers are charged $0.35 for
manual transactions. This is consistent with the fee disparities
currently in place at the other exchanges with physical trading
floors.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act, in general, and Section
6(b)(4) and 6(b)(5)of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Participants and other persons using its facilities
and does not unfairly discriminate between customers, issuers, brokers
or dealers.
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\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed rule change is designed to
bring the Exchange's fees for Market Maker manual transactions into
alignment with those charged on other markets with trading floors. The
Exchange believes it is reasonable to increase certain fees, consistent
with fees offered by competing options exchanges for similar
transactions.\8\ Further, the Exchange believes that the proposed
increased charge for manual transactions for Market Makers but not for
other market participants is reasonable because the resulting disparity
would align the Exchange's fees for manual transactions with the fees
charged on other exchanges.\9\ In addition, the Exchange believes that
other pricing incentives offered by the Exchange would continue to
encourage Market Makers to conduct manual transactions on the
Exchange.\10\ The Exchange thus believes the proposed changes, even
though they are increased fees, would not discourage Market Makers from
continuing to conduct manual transactions on the Exchange and would
continue to attract volume and liquidity to the Exchange generally and
would therefore benefit all market participants (including those that
do not participate in manual transactions) through increased
opportunities to trade.
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\8\ See supra note 5.
\9\ See supra note 6.
\10\ See BOX Fee Schedule Section II.A (Strategy QOO Order Fee
Cap and Rebate). While the fee cap on Strategy transactions is
available to all Participants, the Exchange notes that Floor Market
Makers have a time and place advantage by virtue of their presence
on the Trading Floor to participate in such transactions and
therefore benefit from the fee cap.
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Further, the Exchange believes the proposed rule change is
reasonable and equitable as the proposal is based on the type of
business transacted on the Exchange, and Market Makers can opt to
participate in manual transactions or not. Finally, to the extent the
proposed fees continue to encourage Market Makers to participate in
manual transactions on the Exchange, the Exchange believes the proposed
changes would continue to improve the Exchange's overall
competitiveness and strengthen its market quality for all market
participants. In the backdrop of the competitive environment in which
the Exchange operates, the proposed rule change is a reasonable attempt
by the Exchange to maintain its market share relative to its
competitors.
Further, the Exchange believes the proposed change is equitable and
not unfairly discriminatory as the proposed modifications would apply
to all Floor Market Makers who execute manual transactions on an equal
and non-discriminatory basis. The Exchange also believes that
increasing fees for manual transactions by Market Makers, but not for
other market participants, is not unfairly discriminatory given that
the proposed rates (and resulting disparities) are a competitive
response to rates charged on options exchanges for manual transactions
by Market Makers and because these Participants may avail themselves of
other incentives offered by the Exchange. Further, the Exchange
believes the proposed change is reasonable, equitable, and not unfairly
discriminatory because it is consistent with the manner in which other
options exchanges with trading floors currently assess fees for Market
Maker manual transactions. As discussed above, the Exchange notes that
the disparity in fees between the Floor Market Makers and other Floor
Participants on the BOX Trading Floor are similar to disparities that
currently exist at other trading floors in the industry.\11\
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\11\ See supra note 6.
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The Exchange notes that it operates in a highly competitive market.
The Commission has repeatedly expressed its preference for competition
over regulatory intervention in determining prices, products, and
services in the securities markets. 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.'' \12\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly available information, and excluding
index-based
[[Page 34292]]
options, no single exchange has more than 16% of the market share of
executed volume of multiply-listed equity and ETF options trades.\13\
Therefore, currently no exchange possesses significant pricing power in
the execution of multiply-listed equity & ETF options order flow. More
specifically, in April 2021, the Exchange had less than 6% market share
of executed volume of multiply-listed equity and ETF options
trades.\14\
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\13\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-OpenInterest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-OpenInterest/Monthly-Weekly-Volume-Statistics</a>.
\14\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. Stated otherwise, changes
to exchange transaction fees and rebates can have a direct effect on
the ability of an exchange to compete for order flow. As such, the
Exchange believes that the proposed change is reasonable, equitable,
and not unfairly discriminatory as discussed above.
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. Instead, as discussed above,
the Exchange believes that the proposed changes would be consistent
with fees for similar transactions at other markets. As a result, the
Exchange believes that the proposed changes further the Commission's
goal in adopting Regulation NMS of fostering integrated competition
among orders, which promotes ``more efficient pricing of individual
stocks for all types of orders, large and small.'' \15\
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\15\ See Reg NMS Adopting Release, supra note 12, at 37499.
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The Exchange does not believe that the proposed change will impose
any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Particularly,
the proposed change will apply uniformly to all Market Makers on the
BOX Trading Floor. That is, all Market Makers transacting orders on the
BOX Trading Floor will be assessed the proposed fees. The Exchange
believes that the proposed increased fees for manual transactions by
Market Makers, but not for other market participants, would not impose
any burden on intermarket competition that is not necessary or
appropriate because the proposed fees (and resulting disparities) are
consistent with fees charged for manual transactions by Market Makers
on other exchanges and because these Participants may avail themselves
to other incentives offered by the Exchange.\16\ Further, the Exchange
does not believe the proposed rule change will impose any burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because, as noted above,
competing options exchanges with trading floors have similar fees for
identical transactions on their respective trading floors.\17\
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\16\ See supra notes 5, 6, and 10.
\17\ See supra note 5.
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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 \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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6e1c1b020b430d0103030b001a1d2e1d0b0d40090118"><span class="__cf_email__" data-cfemail="1e6c6b727b337d7173737b706a6d5e6d7b7d30797168">[email protected]</span></a>. Please include
File Number SR-BOX-2021-15 on the subject line.
Paper Comments
<bullet> 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-2021-15. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2021-15, and should be submitted on
or before July 20, 2021.
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\20\ 17 CFR 200.30-3(a)(12).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13783 Filed 6-28-21; 8:45 am]
BILLING CODE 8011-01-P
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