Notice2022-05839
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
Primary source
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
March 21, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 54 (Monday, March 21, 2022)</title>
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[Federal Register Volume 87, Number 54 (Monday, March 21, 2022)]
[Notices]
[Pages 16039-16040]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-05839]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94416; File No. SR-BOX-2022-09]
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
March 15, 2022.
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 March 1, 2022, 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 to
amend Section II.D (Strategy QOO Order Fee Cap and Rebate) 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 <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.D (Strategy QOO Order Fee
Cap and Rebate) of the BOX Fee Schedule. Specifically, the Exchange
proposes to decrease the daily fee cap for short stock interest, long
stock interest, merger, reversal, conversion, jelly roll, and box
spread strategies \5\ executed on the same trading day from $1,000 to
$500. Lastly, the Exchange notes that the daily fee cap for dividend
strategies \6\ will continue to be $1,000 per day per customer. As
such, the Exchange proposes to add clarifying language to the Fee
Schedule that states that for dividend strategies, the rebate of $500
per customer will apply once the $1,000 fee cap is met.\7\
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\5\ A ``short stock interest strategy'' is defined as a
transaction done to achieve a short stock interest arbitrage
involving the purchase, sale, and exercise of in-the-money options
of the same class. A ``long stock interest strategy'' is defined as
a transaction done to achieve long stock involving the purchase,
sale, and exercise of in-the-money options of the same class. A
``merger strategy'' is defined as transactions done to achieve a
merger arbitrage involving the purchase, sale and exercise of
options of the same class and expiration date, each executed prior
to the date on which shareholders of record are required to elect
their respective form of consideration, i.e., cash or stock. A
``reversal strategy'' is established by combining a short security
position with a short put and a long call position that shares the
same strike and expiration. A ``conversion strategy'' is established
by combining a long position in the underlying security with a long
put and a short call position that shares the same strike and
expiration. A ``jelly roll strategy'' is created by entering into
two separate positions simultaneously. One position involves buying
a put and selling a call with the same strike price and expiration.
The second position involves selling a put and buying a call, with
the same strike price, but with a different expiration from the
first position. A ``box spread strategy'' is a strategy that
synthesizes long and short stock positions to create a profit.
Specifically, a long call and short put at one strike is combined
with a short call and long put at a different strike to create
synthetic long and synthetic short stock positions, respectively.
\6\ A ``dividend strategy'' is defined as a transaction done to
achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed the
first business day prior to the date on which the underlying stock
goes ex-dividend.
\7\ The Exchange notes that the daily fee cap for dividend
strategies is similar to a fee cap at another options exchange in
the industry. See Nasdaq Phlx LLC (``Phlx'') Fee Schedule. On Phlx,
Lead Marker Makers, Market Makers, Professionals, Firms and Broker-
Dealers receive a fee cap of $1,100 for dividend strategies executed
on the same trading day in the same options class when such members
are trading in their own proprietary account or on an agency basis.
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The intent of the above change is to increase order flow in certain
strategy QOO Orders on the BOX Trading Floor, which will benefit all
market participants. The Exchange notes that these changes will apply
equally to all Participants, regardless of Participant type or size of
the Participant. The Exchange notes that similar fee caps exist at
other options exchanges for these order types.\8\
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\8\ See NYSE American LLC (``NYSE American'') Options Fee
Schedule Section I.J. At NYSE American, there is a $1,000 cap on
transaction fees for options Strategy Executions involving reversals
and conversions, box spreads, short stock interest spreads, merger
spreads, and jelly rolls; however, the cap is reduced to $200 on
transactions fees for qualifying strategies traded on the same
trading day for those ATP Holders that trade at least 25,000 monthly
billable contract sides in qualifying Strategy Executions. See also
Nasdaq Phlx LLC (``Phlx'') Pricing Schedule, Options 7, Section 4.
Phlx offers merger, short stock interest and box spread strategy
cap, which is applicable to Lead Market Makers, Market Makers,
Professionals, Firms and Broker-Dealers, of $1,000 (daily) if more
than one class of options, and $700 (daily) if only in a single
class of options. Further, Phlx offers a daily strategy cap for
reversal and conversion and jelly roll strategies on the same
trading day of $200 (daily).
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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's proposal to decrease the daily fee cap for short
stock interest, long stock interest, merger, reversal, conversion,
jelly roll, and box spread strategies is reasonable as the Exchange
believes it will incentivize Participants to execute a greater number
of these strategy types on the BOX Trading Floor for the opportunity to
qualify for the lower daily strategy cap. Strategy fee caps limit fees
for Participants executing these strategy types.
Further, the Exchange's proposal to decrease the daily fee cap for
short stock interest, long stock interest, merger, reversal,
conversion, jelly roll, and box spread strategies is equitable and not
unfairly discriminatory because all account types may qualify for the
strategy cap provided those strategies are executed on the same trading
day.
As discussed above, the Exchange believes the proposed change will
incentivize order flow in certain QOO Strategy Orders, and the Exchange
believes that the decreased fee cap will
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result in increased participation in these types of orders on the BOX
Trading Floor. As such, the Exchange believes that increased
participation on the Trading Floor will result in increased liquidity
on the BOX Floor which will benefit 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 does not believe
that the proposed change burdens competition and will instead help
promote competition by continuing to provide incentives for market
participants to submit strategy orders to the BOX Trading Floor.
Further, the Exchange does not believe that the proposed change will
impose an undue burden on intra-market competition because all Floor
Participants are subject to the proposed change, regardless of account
type.
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 \10\ and Rule 19b-4(f)(2)
thereunder,\11\ because it establishes or changes a due, or fee.
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 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#1a686f767f37797577777f746e695a697f79347d756c"><span class="__cf_email__" data-cfemail="750700191058161a1818101b0106350610165b121a03">[email protected]</span></a>. Please include
File Number SR-BOX-2022-09 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-2022-09. 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-2022-09, and should be submitted on
or before April 11, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05839 Filed 3-18-22; 8:45 am]
BILLING CODE 8011-01-P
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