Notice2021-25126
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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Published
November 18, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 220 (Thursday, November 18, 2021)</title>
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[Federal Register Volume 86, Number 220 (Thursday, November 18, 2021)]
[Notices]
[Pages 64554-64556]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25126]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93562; File No. SR-BOX-2021-26]
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
November 12, 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 October 28, 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'') options facility. While changes to
the fee schedule pursuant to this proposal will be effective upon
filing, the changes will become operative on November 1, 2021. 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.
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.A. (QOO Order Fees) and
Section II.C. (QOO Order Rebate) of the BOX Fee Schedule. Specifically,
the Exchange proposes to amend Section II.A. (QOO Order Fees) to remove
the QOO Order fee cap of $75,000 per month per Broker Dealer and
Section II.C. (QOO Order Rebate) to remove the QOO Order rebate cap of
$30,000 per month per Broker Dealer.
Currently, QOO Order fees for Broker Dealers on BOX are capped at
$75,000 per month per Broker Dealer. The Exchange proposes to eliminate
this monthly QOO Order fee cap for Broker Dealers. The fee cap was
intended to incentivize Broker Dealers to submit floor transactions on
the Exchange by capping manual transaction fees. The Exchange no longer
believes such fee cap is necessary because, as discussed herein, the
fee cap was initially established to incentivize Broker Dealers to
bring increased liquidity and order flow to the new BOX Trading Floor,
however the BOX Trading Floor is now well established and does not need
this incentive to encourage order flow to the Trading Floor.
The Exchange also applies a QOO Order rebate cap of $30,000 per
month per Broker Dealer. Currently, Floor Brokers are eligible to
receive a $0.075 per contract rebate for all Broker Dealer and Market
Maker QOO Orders presented on the BOX Trading Floor.\5\ The rebate is
not applied to Public Customer executions, executions subject to the
Strategy QOO Order Fee Cap, or Broker Dealer executions where the
Broker Dealer is facilitating a Public Customer. The Exchange proposes
to remove the monthly rebate cap for Broker Dealer executions.\6\ The
Exchange notes that it is not making any other changes to the QOO Order
fees or the QOO Order Rebate. The QOO Order fees and QOO Order rebate
will be assessed and applied in the same manner as they are today.
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\5\ Floor Brokers are also eligible to receive a $0.05 per
contract rebate for all Professional Customer QOO Orders presented
on the BOX Trading Floor.
\6\ The Exchange notes that BOX has removed the QOO Order rebate
cap in the past. See Securities Exchange Act Release No. 87704
(December 10, 2019), 84 FR 68499 (December 16, 2019) (SR-BOX-2019-
35).
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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 elimination of the QOO
Order fee cap of $75,000 per month per Broker Dealer and the QOO Order
rebate cap of $30,000 per month per Broker Dealer is reasonable,
equitable, and not unfairly discriminatory. As discussed above, the
Exchange established the QOO Order fee cap and rebate cap in an effort
to incentivize market participants to send order flow to the BOX
Trading Floor. The Exchange believes such incentive is no longer
necessary because the Exchange has a well-established trading floor and
no longer needs this incentive to encourage increased order flow to the
BOX Trading Floor.
[[Page 64555]]
QOO Order Fee Cap
The Exchange established the QOO Order fee cap of $75,000 per month
per Broker Dealer in 2017 when the Exchange introduced fees for Manual
Transactions after the approval of the BOX Trading Floor.\8\ The
Exchange established the QOO Order fee cap for Broker Dealers to
incentivize Broker Dealers to bring increased liquidity and order flow
to the new BOX Trading Floor.
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\8\ See Securities Exchange Act Release No. 81292 (August 2,
2017), 82 FR 37144 (August 8, 2017) (SR-BOX-2016-48). See also
Securities Exchange Act Release No. 81504 (August 30, 2017), 82 FR
42195 (September 6, 2017) (SR-BOX-2017-28).
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The Exchange believes that removing the $75,000 monthly cap on QOO
Order Fees for Broker Dealers is reasonable and appropriate because, as
discussed above, these fee caps were introduced to provide incentives
for Broker Dealers to bring increased liquidity and order flow to the
BOX Trading Floor. The Exchange no longer believes such incentive is
necessary. As such, the Exchange believes the removal of the QOO Order
fee cap is reasonable.
The Exchange believes the removal of the QOO Order fee cap is not
unfairly discriminatory because Public Customer, Market Maker, and
Professional Customer order fees are not subject to the fee cap.
Additionally, the QOO Order Fees will continue to be applied in the
same manner as they are today. Further, the Exchange believes that the
removal of the monthly QOO Order fee cap for Broker Dealer executions
is equitable and not unfairly discriminatory because the proposal
applies to all similarly situated market participants.
QOO Order Rebate Cap
BOX established the QOO Order Rebate program and the monthly rebate
cap in August 2017. As discussed in BOX's 2017 proposal to establish
the QOO Order Rebate program and rebate cap, the rebate was created to
incentivize order flow to the BOX Trading Floor. Unlike competing
exchanges, the Exchange does not offer a front-end order entry on the
BOX Trading Floor. With this, Participants have two possible means of
bringing orders to the Exchange's Trading Floor for possible execution:
(1) They can invest in the technology, systems and personnel to
participate on the Trading Floor and deliver the order to the Exchange
matching engines for validation and execution; or (2) they can utilize
the services of another Participant acting as a Floor Broker. The QOO
Order Rebate program was established to attract order flow by rewarding
Floor Brokers with rebates for directing qualifying orders to the BOX
Trading Floor.
The Exchange believes that removing the rebate cap is reasonable
and appropriate as it will continue to allow Floor Brokers to price
their services at a level that would enable them to attract increased
QOO order flow from market participants who might otherwise utilize the
front-end order entry mechanism offered by the Exchange's competitors,
instead of incurring the cost in time and resources to install and
develop their own internal systems to deliver QOO orders directly to
the Exchange system. As such, the Exchange believes it is beneficial
from a competitive standpoint to continue to offer the rebate to the
executing Floor Broker on a QOO order without capping the dollar amount
allowed for the rebate. Further, the Exchange believes removing the
rebate cap will encourage Floor Brokers to bring additional QOO order
flow to the Exchange because Floor Brokers will be further incentivized
by the removal of the QOO Order rebate cap for these specific QOO
orders. Lastly, the Exchange believes the proposed change is reasonable
and appropriate, as the Exchange is allowing eligible Floor Brokers
greater opportunities to price their services related to the execution
of qualifying QOO transactions more competitively.
In addition, the Exchange believes that removing the QOO Order
rebate cap is reasonable as a competing exchange with a similar rebate
program offered to Floor Brokers currently has a rebate cap twelve
times higher than the QOO Order rebate cap on BOX.\9\
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\9\ See NYSE Arca Options Fees and Charges, Qualified Contingent
Cross (``QCC'') Transactions Fees and Credits, Footnote 13 (stating
the ``maximum Floor Broker credit paid shall not exceed $375,000 per
month per Floor Broker firm.''). Similar to the Floor Broker Credit
for Executed QCC Transactions on NYSE Arca, the QOO Order Rebate on
BOX is applied to both sides of the paired order and is directed to
the Floor Broker, and not to the Participant who is assessed the QOO
Order fee. Finally, similar to the BOX QOO Rebate, the NYSE Arca QCC
credit is only applied when the Floor Broker executes the QCC Order
manually on the NYSE Arca trading floor.
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The Exchange believes that the removal of the monthly rebate cap is
equitable and not unfairly discriminatory because the proposal allows
all similarly situated Floor Brokers to benefit from the removal of the
QOO Order rebate cap. Furthermore, the Exchange believes that all
market participants would benefit from additional trading opportunities
generated from increased order flow due to the removal of the QOO Order
rebate cap.
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 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 to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, the Exchange believes that the degree to which fee changes in
this market may impose any burden on competition is limited. For the
reasons discussed above, the Exchange believes that the proposed
changes do not impose an undue burden on competition. The Exchange does
not believe that removing the monthly fee cap of $75,000 per Broker
Dealer and the monthly rebate cap of $30,000 per month per Broker
Dealer will burden competition because the Exchange capped the Manual
Transaction Fees for QOO Orders and introduced the QOO Order monthly
rebate cap in an effort to incentivize market participants, but such
incentives are no longer necessary because the Exchange has a well-
established trading floor and no longer needs these incentives to
encourage increased order flow to the BOX Trading Floor.
With respect to the QOO Order rebate cap, one of the Exchange's
competitors offers a QCC credit cap that is twelve times higher than
the Exchange's QOO Order rebate cap.\10\ In addition, as mentioned
above, the Floor Broker Credit for QCC Transactions on NYSE Arca is
similar to the QOO Order Rebate on BOX in that it is applied to both
sides of the paired order and is directed to the Floor Broker and not
to the Participant who is assessed the QOO Order fee. Moreover, similar
to the BOX QOO Rebate, the NYSE Arca QCC credit is only applied when
the Floor Broker executes the QCC Order manually on the NYSE Arca
trading floor.
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\10\ Id. See also NASDQ PHLX (``Phlx'') Pricing Schedule,
Section 4 (stating the ``maximum QCC Rebate to be paid in a given
month will not exceed $550,000.''). The Exchange notes Phlx's QCC
Rebate cap is over eighteen times higher than the current QOO Order
rebate cap on BOX.
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[[Page 64556]]
Further, the Exchange does not believe that removing the QOO Order
rebate cap will impose an undue burden on intra-market competition
because all Floor Brokers will remain eligible to transact QOO Orders
and receive the same rebate. Further, the Exchange believes that the
removal of the rebate cap will promote competition by allowing Floor
Brokers to competitively price their services and for the Exchange to
remain competitive with other exchanges. As noted above, the Exchange
previously removed the monthly rebate cap in 2019.
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
<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#82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4"><span class="__cf_email__" data-cfemail="790b0c151c541a1614141c170d0a390a1c1a571e160f">[email protected]</span></a>. Please include
File Number SR-BOX-2021-26 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-2021-26. 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-2021-26, and should be submitted on
or before December 9, 2021.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25126 Filed 11-17-21; 8:45 am]
BILLING CODE 8011-01-P
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