Notice2022-10804
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 7350 To Provide for the New “Liquidity Taker Event Report-Complex Orders”
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
May 20, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 98 (Friday, May 20, 2022)</title>
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[Federal Register Volume 87, Number 98 (Friday, May 20, 2022)]
[Notices]
[Pages 31013-31019]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10804]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94920; File No. SR-BOX-2022-18]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule
7350 To Provide for the New ``Liquidity Taker Event Report--Complex
Orders''
May 16, 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 May 6, 2022, BOX Exchange LLC (``BOX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rule 7350 to provide for the new
``Liquidity Taker Event Report--Complex Orders.'' 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://boxoptions.com">http://boxoptions.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 self-regulatory organization
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 self-regulatory organization
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 currently offers the Liquidity Taker Event Report,
which is a Participant \3\ specific report and helps Participants to
better understand by how much time a particular order missed executing
against a specific order resting on the BOX Book.\4\ The current
Liquidity Taker Event Report is described under BOX Rule 7350(b).\5\
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\3\ ``Participant'' means a firm, or organization that is
registered with the Exchange pursuant to the Rule 2000 Series for
purposes of participating in trading on a facility of the Exchange.
See BOX Rule 100(a)(41).
\4\ ``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).
\5\ See Securities Exchange Act Release No. 94563 (March 31,
2022), 87 FR 19985 (April 6, 2022) (SR-BOX-2022-10) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Adopt
BOX Rule 7350, Reports and Market Data Products, to Provide for the
New ``Liquidity Taker Event Report'').
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The Exchange now proposes to amend BOX Rule 7350 to provide for the
new Liquidity Taker Event Report--Complex
[[Page 31014]]
Orders'' (the ``Complex Order Report'') which would be substantially
similar to the existing Liquidity Taker Event Report, but would include
data concerning a Participant's Complex Orders.\6\ The Exchange also
proposes to change the name of the existing Liquidity Taker Event
Report to ``Liquidity Taker Event Report--Simple Orders'' and amend BOX
Rule 7350(b) accordingly (the ``Liquidity Taker Event Report--Simple
Orders'' shall be referred to herein as the ``Simple Order Report'').
This is a competitive filing that is based on a proposals recently
submitted by Miami International Securities Exchange, LLC (``MIAX'')
and MIAX Emerald, LLC (``MIAX Emerald'') and noticed by the
Commission.\7\
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\6\ The term ``Complex Order'' means any order involving the
simultaneous purchase and/or sale of two or more different options
series in the same underlying security, for the same account, in a
ratio that is equal to or greater than one-to-three (.333) and less
than or equal to three-to-one (3.00) and for the purpose of
executing a particular investment strategy. See BOX Rule 7240(a)(7).
\7\ See Securities Exchange Act Release No. 94136 (February 2,
2022), 87 FR 7223 (February 8, 2022) (SR-EMERALD-2022-02) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Amend
Exchange Rule 531, Reports, to Provide for a New ``Liquidity Taker
Event Report--Complex Orders''). See also Securities Exchange Act
Release No. 94135 (February 2, 2022), 87 FR 7217 (February 8, 2022)
(SR-MIAX-2022-06). See also MIAX Rule 531(b) and MIAX Emerald Rule
531(b).
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The Simple Order Report includes information about incoming orders
seeking to remove resting orders from the BOX Book. The proposed
Complex Order Report would include the same information about incoming
Complex Orders that seek to remove Complex Orders resting on the
Complex Order Book.\8\ Two other differences between the proposed
Complex Order Report and the Simple Order Report are that the proposed
Complex Order Report will include the Complex BBO (``cBBO'') \9\ in
place of the BBO and Complex NBBO (``cNBBO'') \10\ in place of the
NBBO, as described further below. These are minor differences designed
to provide the BBO and NBBO that are relevant to trading Complex
Orders. Otherwise, the content and dissemination of the proposed
Complex Order Report set forth under amended BOX Rule 7350(c) will be
identical to that of the Simple Order Report under BOX Rule 7350(b).
Other than the difference set forth above, the Exchange represents that
there are no other differences between Simple Orders and Complex Orders
that would necessitate any other changes to the proposed Complex Order
Report or render the effects or use of the proposed Complex Order
Report as different from the Simple Order Report.
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\8\ The term ``Complex Order Book'' means the electronic book of
Complex Orders maintained by the BOX Trading Host. See BOX Rule
7240(a)(8).
\9\ The term ``cBBO'' means the best net bid and offer price for
a Complex Order Strategy based on the BBO on the BOX Book for the
individual options components of such Strategy. See BOX Rule
7240(a)(1).
\10\ The term ``cNBBO'' means the best net bid and offer price
for a Complex Order Strategy based on the NBBO for the individual
options components of such Strategy. See BOX Rule 7240(a)(3).
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Like the Simple Order Report, the proposed Complex Order Report is
an optional product \11\ that would be made available to Participants.
Currently, the Exchange provides real-time prices and analytics in the
marketplace. The Exchange believes the additional data points from the
matching engine outlined below may help Participants gain a better
understanding about their Complex Order interactions with the Exchange.
The Exchange believes the proposed Complex Order Report will provide
Participants with an opportunity to learn more about better
opportunities to access liquidity and receive better execution rates
when trading Complex Orders. Specifically, the proposed Complex Order
Report will provide greater visibility into the missed trading
executions, which could allow Participants to optimize their trading
systems to yield better execution results when trading Complex Orders.
The proposed Complex Order Report will increase transparency and
democratize information so that all firms that subscribe to the
proposed Complex Order Report have access to the same information on an
equal basis, even for firms that do not have the appropriate resources
to generate a similar report regarding interactions with the Exchange.
Like the Simple Order Report, none of the components of the proposed
Complex Order Report include real-time market data.
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\11\ The Exchange intends to submit a separate filing with the
Commission pursuant to Section 19(b)(1) to propose fees for the
proposed Complex Order Report.
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Participants generally would use a liquidity accessing order if
there is a high probability that it will execute against an order
resting on the Complex Order Book. Like the Simple Order Report, the
proposed Complex Order Report would identify by how much time an order
that may have been marketable missed an execution. In the case of the
proposed Complex Order Report, the incoming order would be a Complex
Order submitted to trade against a resting order for a Complex
Strategy. The proposed Complex Order Report will provide greater
visibility into the missed trading executions, which could allow
Participants to optimize their models and trading systems to yield
better execution results when trading Complex Orders.
Like the Simple Order Report, the proposed Complex Order Report
will be a Participant specific report and will help Participants to
better understand by how much time a particular order, in this case a
Complex Order, missed executing against a specific resting order, thus
allowing that Participant to determine whether it wants to invest in
the necessary resources and technology to mitigate missed executions
against certain resting orders on the Exchange's Complex Order Book.
For example, Participant A submits a Complex Order that is posted to
the Complex Order Book and then, within 200 microseconds of the entry
of Participant A's Complex Order, Participant B enters a marketable
Complex Order to execute against Participant A's resting Complex Order.
Immediately thereafter, Participant C also within 200 microseconds of
the entry of Participant A's Complex Order, sends a marketable Complex
Order to execute against Participant A's resting Complex Order. Because
Participant B's Complex Order is received by the Exchange before the
Complex Order for Participant C, Participant B's Complex Order executes
against Participant A's resting Complex Order. If Participant C were to
subscribe to the proposed Complex Order Report, it would be provided
the data points necessary for that firm to calculate by how much time
they missed executing against Participant A's resting Complex Order.
Like the Simple Order Report, the Exchange proposes to provide the
proposed Complex Order Report on a T+1 basis. As further described
below, the proposed Complex Order Report will be specific and tailored
to the Participant that is subscribed to the Complex Order Report and
any data included in the Complex Order Report that relates to a
Participant other than the Participant receiving the Complex Order
Report will be anonymized.
Similar to current BOX Rule 7350(b) regarding the Simple Order
Report, amended Exchange Rule 7350(c) would provide that the proposed
Complex Order Report is a daily report that provides a Participant
(``Recipient Participant'') with its liquidity response time details
for executions of an order resting on the Complex Order Book, where
that Recipient Participant submitted a Complex Order that attempted to
execute against such resting Complex Order within a certain timeframe.
[[Page 31015]]
Report Content
The content of the proposed Complex Order Report would be identical
to the Simple Order Report, but for two minor differences discussed
below. Paragraph (c)(1) of Rule 7350 would describe the content of the
proposed Complex Order Report and delineate which information would be
provided regarding the resting order,\12\ the response that
successfully executed against the resting order, and the response
submitted by the Recipient Participant that missed executing against
the resting order. It is important to note that the content of the
proposed Complex Order Report will be specific to the Recipient
Participant and the proposed Complex Order Report will not include any
information related to any Participant other than the Recipient
Participant. The Exchange will restrict all other market participants,
including the Recipient Participant, from receiving another market
participant's data.
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\12\ Like the Simple Order Report, only displayed orders will be
included in the proposed Complex Order Report. The Exchange notes
that it does not currently offer any nondisplayed order types on its
options trading platform.
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Resting Order Information. The content of the proposed Complex
Order Report set forth under amended Exchange Rule 7350(c)(1)(i) is
identical to the content of the Simple Order Report under Exchange Rule
7350(b)(1)(i). However, as noted above, the content of the proposed
Complex Order Report would be limited to incoming Complex Orders that
seek to remove liquidity from the Exchange's Complex Order Book.
Exchange Rule 7350(c)(1)(i) would provide that the following
information would be included in the proposed Complex Order Report
regarding the resting order: (A) The time the resting order was
received by the Exchange; \13\ (B) symbol; \14\ (C) order ID, which is
a unique reference number assigned to a new Complex Order at the time
of receipt; \15\ (D) whether the Recipient Participant is an Affiliate
\16\ of the Participant that entered the resting order; \17\ (E)
Whether the resting order is from a Public Customer or non- Public
Customer; \18\ (F) side (buy or sell); \19\ and (G) displayed price and
size of the resting order.\20\
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\13\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(A).
\14\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(B).
\15\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(C).
\16\ The term ``Affiliate'' means, with respect to any Person,
any other Person controlling, controlled by or under common control
with, such Person. As used in this definition, the term ``control''
means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise with respect to such Person. A Person is presumed to
control any other Person, if that Person: (i) Is a director, general
partner, or officer exercising executive responsibility (or having
similar status or performing similar functions); (ii) directly or
indirectly has the right to vote 25 percent or more of a class of
voting security or has the power to sell or direct the sale of 25
percent or more of a class of voting securities of the Person; or
(iii) in the case of a partnership, has contributed, or has the
right to receive upon dissolution, 25 percent or more of the capital
of the partnership. See BOX Rule 100(a)(1).
\17\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(D). The Report will simply
indicate whether the Recipient Participant is an Affiliate of the
Participant that entered the resting order and not include any other
information that may indicate the identity of the Participant that
entered the resting order.
\18\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(E).
\19\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(F).
\20\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(i)(G). The Exchange notes that
the displayed price and size are also disseminated via the
Exchange's proprietary data feeds.
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Execution Information. Proposed Exchange Rule 7350(c)(1)(ii) would
provide that the following information would be included in the
proposed Complex Order Report regarding the execution of the resting
order: (A) Complex BBO (``cBBO''), as defined in Rule 7240(a)(1), at
the time of the execution; \21\ (B) the Complex NBBO (``cNBBO''), as
defined in Rule 7240(a)(3), at the time of execution; \22\ (C) the time
the first response that executes against the resting order was received
by the Exchange and the size of the execution and type of the response;
\23\ (D) the time difference between the time the resting order was
received by the Exchange and the time the first response that executes
against the resting order was received by the Exchange; \24\ and (E)
whether the response was entered by the Recipient Participant.\25\ If
the resting order executes against multiple contra-side responses, only
the cBBO and cNBBO at the time of the execution against the first
response will be included.
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\21\ Similar information is included in the Simple Order Report.
Exchange Rule 7350(b)(1)(ii)(A) would similarly provide that if the
resting order executes against multiple contra-side responses, only
the cBBO at the time of the execution against the first response
will be included. The Exchange is proposing to include this
information to provide context to the Participants regarding what
BOX's market looked like at the time the order was submitted.
\22\ Similar information is included in the Simple Order Report.
See Exchange Rule 7350(b)(1)(ii)(B). Exchange Rule 7350(b)(1)(ii)(B)
would similarly provide that if the resting order executes against
multiple contra-side responses, only the cNBBO at the time of the
execution against the first response will be included. The Exchange
is proposing to include this information to provide context to the
Participants regarding what the away market looked like at the time
the order was submitted.
\23\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(ii)(C). The Exchange notes that
the type of the response provides whether the response was received
from a Public Customer or non-Public Customer.
\24\ The time difference would be provided in nanoseconds. This
information is also included in the Simple Order Report. See
Exchange Rule 7350(b)(1)(ii)(D).
\25\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(ii)(E).
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The content of the proposed Complex Order Report set forth under
amended Exchange Rule 7350(c)(1)(ii) is identical to the content of the
Simple Order Report under Exchange Rule 7350(b)(1)(ii) with two minor
differences. The Simple Order Report includes the BBO, which is the
Exchange's best bid or offer, and the NBBO, which is the best bid or
offer of away exchanges. In their place, the proposed Complex Order
Report would include the Complex BBO and Complex NBBO. The Exchange is
providing the Complex BBO and Complex NBBO because both are relevant
and tailored to a Participant that is entering a Complex Order to
remove liquidity as part of a Complex Strategy and, therefore, more
germane to the purpose of the Complex Order Report.
Recipient Participant's Response Information. The content of the
proposed Complex Order Report set forth under proposed Rule
7350(c)(1)(iii) is identical to the content of the Simple Order Report
under Rule 7350(b)(1)(iii). Proposed Rule 7350(c)(1)(iii) would provide
that the following information would be included in the Complex Order
Report regarding Complex Order(s) sent by the Recipient Participant:
(A) Recipient Participant ID; \26\ (B) the time difference between the
time the first response that executes against the resting order was
received by the Exchange and the time of each Complex Order sent by the
Recipient Participant, regardless of whether it executed or not; \27\
(C) Time difference between the time the resting order was received by
the Exchange and the time the response submitted by the Recipient
Participant was received by the Exchange; \28\ (D) size and type of
each Complex Order submitted by the Recipient Participant; \29\ and (E)
response ID, which is a unique reference
[[Page 31016]]
number attached to the response by the Recipient Participant.\30\
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\26\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(iii)(A).
\27\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(iii)(B).
\28\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(iii)(C).
\29\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(b)(1)(iii)(D).
\30\ This information is also included in the Simple Order
Report. See Exchange Rule 7350(a)(1)(iii)(E).
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Timeframe for Data Included in Report
The timeframe for data to be included the proposed Complex Order
Report set forth under proposed Exchange Rule 7350(c)(2) is identical
to the timeframe for data included in the Simple Order Report under
Exchange Rule 7350(b)(2). Paragraph (c)(2) of Exchange Rule 7350 would
provide that the Complex Order Report would include the data set forth
under Exchange Rule 7350(c)(1) described above for executions and
contra-side responses that occurred within 200 microseconds of the time
the resting order was received by the Exchange. The Exchange believes
200 microseconds is the appropriate timeframe because it understands
most Participants that would be interested in subscribing to the
proposed Complex Order Report would submit their incoming liquidity
removing Complex Orders within 200 microseconds of the time a contra-
side Complex Order is posted to the Complex Order Book.
Scope of Data Included in the Report
The scope of data to be included [sic] the proposed Complex Order
Report set forth under proposed Exchange Rule 7350(c)(3) is identical
to the scope of data included in the Simple Order Report under Exchange
Rule 7350(b)(3). Paragraph (c)(3) of Exchange Rule 7350 would provide
that the Complex Order Report will only include trading data related to
the Recipient Participant and, subject to the proposed paragraph (4) of
Exchange Rule 7350(c) described below, will not include any other
Participant's trading data other than that listed in paragraphs (1)(i)
and (ii) of Exchange Rule 7350(c), described above. Like the Simple
Order Report, the proposed Complex Order Report will not include
information related to any Participant other than the Recipient
Participant.
Historical Data
Proposed paragraph (c)(4) of Exchange Rule 7350 would specify that
the Complex Order Report will contain historical data from the prior
trading day and will be available after the end of the trading day,
generally on a T+1 basis. This is identical to the timeframe for when
the Simple Order Report is made available.\31\
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\31\ See Exchange Rule 7350(b)(4).
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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,\32\ in general, and Section
6(b)(5) of the Act.\33\ Specifically, the Exchange believes the
proposed rule change is consistent with the Section 6(b)(5) \34\
requirements that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. This proposal is in keeping
with those principles in that it promotes increased transparency
through the dissemination of the optional Complex Order Report to those
interested in subscribing to receive the data. Additionally, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \35\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The proposed Report is similar to reports
previously adopted by MIAX and MIAX Emerald.\36\
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\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
\34\ 15 U.S.C. 78f(b)(5).
\35\ Id.
\36\ See supra note 7.
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But for three differences, the description of the proposed Complex
Order Report under Exchange Rule 7350(c) is identical to that of the
Simple Order Report under Exchange Rule 7350(b). The first difference
concerns the content of the proposed Complex Order Report, which would
be limited to incoming Complex Orders that seek to remove liquidity
from the Exchange's Complex Order Book. The Simple Order Report
includes information about incoming orders seeking to remove liquidity
from the BOX Book. This difference is immaterial because both reports
include basically the same information and seek to serve the same
purpose, to provide the Recipient Participant with the same type of
data necessary for them to evaluate their own trading behavior and
order interactions on the Exchange; however, the Simple Order Report
contains data relevant to the BOX Book while the proposed Complex Order
Report contains data relevant to the Complex Order Book.
The other two differences are that the Simple Order Report includes
the BBO, which is the Exchange's best bid or offer, and the NBBO, which
is the best bid or offer of away exchanges. In their place, the
proposed Complex Order Report would include the cBBO and cNBBO. The
Exchange is providing the cBBO and cNBBO because both are relevant and
tailored to a Participant that is entering a Complex Order to remove
liquidity as part of a Complex Strategy and, therefore, more germane to
the purpose of the Complex Order Report. The Exchange believes these
differences are appropriate because providing the cBBO in place of the
BBO and the cNBBO in place of the NBBO are more germane to the purpose
of the proposed Complex Order Report.
Like the Simple Order Report, the Exchange believes the proposed
Complex Order Report will serve to promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system, and, in general
protect investors and the public interest by providing Participants
access to information regarding their trading activity that they may
utilize to evaluate their own Complex Order trading behavior and order
interactions. Also, like the Simple Order Report, the proposed Complex
Order Report is designed for Participants that are interested in
gaining insight into latency in connection with Complex Orders that
failed to execute against an order resting on the Exchange's Complex
Order Book by providing those Participants data to analyze by how much
time their Complex Order may have missed an execution against a contra-
side order resting on the Complex Order Book. The Exchange believes
that providing this optional latency data to interested Participants is
consistent with facilitating transactions in securities, removing
impediments to and perfecting the mechanism of a free and open market
and a national market system, and, in general, protecting investors and
the public interest because it provides greater visibility into the
latency of Participants' incoming orders that they may use to optimize
their models and trading systems in an effort to yield better execution
results by calculating by how much time their order may have missed an
execution. This would, in turn, benefit other market participants who
may experience better executions on the Exchange because those that use
the proposed Complex Order Report may re-calibrate their trading models
and then increase their trading on the Exchange and volume of liquidity
removing orders. This could lead to an increase in
[[Page 31017]]
incoming liquidity removing orders resulting in higher execution rates
for Participants who primarily place resting orders on the Complex
Order Book. The proposed Complex Order Report may benefit other market
participants who would receive greater fill rates, thereby facilitating
transactions in securities and perfecting the mechanism of the national
market system.
The Exchange believes this proposal promotes just and equitable
principles of trade because it would provide latency information in a
systematized way and standardized format to any Participant that
chooses to subscribe to the proposed Complex Order Report. As a result,
the proposal would also remove impediments to and perfect the mechanism
of a free and open market and a national market system by making
latency information for liquidity-seeking orders available in a more
equalized manner. The proposal further promotes just and equitable
principles of trade by increasing transparency, particularly for
Recipient Participants that may not have the expertise to generate the
same information on their own. The proposed Complex Order Report may
better enable Recipient Participants to increase the fill rates for
their liquidity-seeking Complex Orders. At the same time, as is also
discussed above, the Complex Order Report promotes just and equitable
principles of trade and protects investors and the public interest
because it is designed to prevent a Recipient Participant from learning
other Participants' sensitive trading information. The Complex Order
Report would not be a real-time market data product, as it would
provide only historical trading data for the previous trading day,
generally on a T+1 basis. In addition, the data in the Complex Order
Report regarding incoming orders that failed to execute would be
specific to the Recipient Participant's Complex Orders, and other
information in the proposed Complex Order Report regarding resting
orders and executions would be anonymized if it relates to a
Participant other than the Recipient Participant.
The Complex Order Report generally contains three buckets of
information. The first two buckets include information about the
resting order and the execution of the resting order. Some of this
information is available from other public sources or derivable from
other public sources, such as OPRA and the Exchange's proprietary data
feed, or is similar to information included in a report offered by
another exchange. For example, OPRA provides bids, offers, and
consolidated last sale and quotation information for options trading on
all national securities exchanges, including the Exchange. In addition,
the Exchange offers the High-Speed Vendor Feed (``HSVF'') which
broadcasts BOX's real-time trading and statistical information
(comprised of trades, quotes, market depth, complex order strategies,
bulletins, summaries, auctions, and other statistics).\37\
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\37\ See current BOX Rule 7130(a)(2). The Exchange notes that
the cBBO and cNBBO are provided in BOX's HSVF. BOX makes the HSVF
available to all market participants pursuant to current Rule
7130(a)(2).
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The first bucket of information contained in the Complex Order
Report for the resting order includes the time the resting order was
received by the Exchange, the symbol, unique reference number assigned
at the time of receipt, side (buy or sell), and the displayed price and
size of the resting order. Further, the symbol, whether the resting
order is from a Public Customer or non-Public Customer, side (buy or
sell), and displayed price and size are also available either via OPRA
or the Exchange's HSVF.\38\ The first bucket of information also
indicates whether the Recipient Participant is an Affiliate of the
Participant that entered the resting order. This data field will not
indicate the identity of the Participant that entered the resting order
and would simply allow the Recipient Participant to better understand
the scenarios in which it may execute against the orders of its
Affiliates.\39\
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\38\ The Exchange also notes that the proposed information in
the first bucket is identical to the information provided in the
Simple Order Report. See BOX Rule 7350(b)(1)(i).
\39\ The Exchange surveils to monitor for aberrant behavior
related to internalized trades and identify potential wash sales.
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The second bucket of information contained in the proposed Complex
Order Report regards the execution of the resting order and includes
the cBBO and cNBBO at the time of execution. These data points are also
available via the Exchange's HSVF. The second bucket of information
will also indicate whether the response was entered by the Recipient
Participant. This data point is simply provided as a convenience. If
not entered by the Recipient Participant, this data point will be left
blank so as not to include any identifying information about other
Participant activity. The second bucket of information also includes
the size, time and type of first response that executes against the
resting order; as well as the time difference between the time the
resting order and first response that executes against the resting
order are received by the Exchange. These data points would assist the
Recipient Participant in analyzing by how much time their order may
have missed an execution against a contra-side order resting on the
Complex Order Book.
The third bucket of information is about the Recipient
Participant's response(s) and the time their response(s) is received by
the Exchange. This includes the time difference between the time the
first response that executes against the resting order was received by
the Exchange and the time of each response sent by the Recipient
Participant, regardless of whether it executed or not. Also included is
the time difference between the time the resting order was received by
the Exchange and the time the response submitted by the Recipient
Participant was received by the Exchange. As stated above, these data
points would assist the Recipient Participant in analyzing by how much
time their order may have missed an execution against a contra-side
order resting on the Complex Order Book. This bucket would also include
the size and type of each response submitted by the Recipient
Participant, the Recipient Participant identifier, and a response
reference number which is selected by the Recipient Participant. Each
of these data points are unique to the Recipient Participant and should
already be known by Recipient Participant even if not included in the
proposed Report.\40\
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\40\ The Exchange notes that the proposed information in the
third bucket is identical to the information provided in the Simple
Order Report. See BOX Rule 7350(b)(1)(iii).
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[[Page 31018]]
The Exchange notes one additional data point included in the third
bucket of information that is not included in the information provided
in MIAX Emerald's Complex Order Liquidity Taker Event Report.
Specifically, the Exchange proposes to include the time difference
between the time the resting order was received by the Exchange and the
time the response submitted by the Recipient Participant was received
by the Exchange.\41\ As discussed herein, the Exchange believes that
providing this information is reasonable and appropriate as this data
point is being derived from information already provided in the Complex
Order Report that is identical to information already provided in the
MIAX Emerald Complex Order Liquidity Taker Event Report. Specifically,
Participants can take the sum of the time difference between the time
the resting order was received by the Exchange and the time the first
response that executes against the resting order was received by the
Exchange \42\ and the time difference between the first response that
executes against the resting order was received by the Exchange and the
time of each response sent by the Recipient Participant, regardless of
whether it executed or not.\43\ By summing these values, the
Participant could derive the time difference between the time the
resting order was received by the Exchange and the time the response
submitted by the Recipient Participant was received by the Exchange,
regardless of whether it executed or not. This time difference would be
provided in nanoseconds. Further, the Exchange believes providing this
additional information in the proposed Complex Order Report is
reasonable and appropriate as it will provide greater visibility into
the missed trading execution, which will allow Participants to optimize
their trading systems to yield better execution results.
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\41\ See Proposed Rule 7350(c)(1)(iii)(C).
\42\ See proposed Rule 7350(c)(1)(ii)(D).
\43\ See proposed Rule 7350(b)(1)(iii)(B).
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The Exchange proposes to provide the Complex Order Report on a
voluntary basis and no Participant will be required to subscribe to the
Complex Order Report. The Exchange notes that there is no rule or
regulation that requires the Exchange to produce, or that a Participant
elect to receive, the Complex Order Report. It is entirely a business
decision of each Participant to subscribe to the Complex Order Report.
The Exchange proposes to offer the Complex Order Report as a
convenience to Participants to provide them with additional information
regarding trading activity on the Exchange on a delayed basis after the
close of regular trading hours. A Participant that chooses to subscribe
to the Complex Order Report may discontinue receiving the Complex Order
Report at any time if that Participant determines that the information
contained in the Complex Order Report is no longer useful.
In summary, the proposed Complex Order Report will help to protect
a free and open market by providing additional data (offered on an
optional basis) to the marketplace and by providing investors with
greater opportunities to understand by how much time a particular order
missed executing against a specific order resting on the Complex Order
Book. This, in turn, could allow Participants to optimize their models
and trading systems to yield better execution results when trading
Complex Orders. Additionally, the proposal would not permit unfair
discrimination because the proposed Complex Order Report will be
available to all Exchange 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.
Inter-Market Competition
The proposed Complex Order Report will allow the Exchange to
provide a new option for Participants to receive historical latency
related data. The proposed Complex Order Report will also further
enhance inter-market competition between exchanges by allowing the
Exchange to expand its product offerings. The latency information that
would be provided in the proposed Complex Order Report would enhance
competition between exchanges that offer complex order functionality
because it would allow Recipient Participants to recalibrate their
models and trading strategies to improve their overall trading
experience on the Exchange. This may improve the Exchange's overall
trading environment resulting in increased liquidity and order flow on
the Exchange. In response, other exchanges may similarly seek ways to
provide latency related data in an effort to improve their own market
quality. The Exchange notes that the rule change is being proposed as a
competitive response to filings submitted by MIAX and MIAX Emerald that
were recently noticed by the Commission.\44\
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\44\ See supra note 7.
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Intra-Market Competition
The Exchange does not believe the proposed Complex Order Report
will have an inappropriate burden on intra-market competition between
Recipient Participants and other Participants who choose not to receive
the Complex Order Report. As discussed above, the first two buckets of
information included in the Complex Order Report contain information
about the resting order and the execution of the resting order, both of
which are generally available to Participants that choose not to
receive the Complex Order Report from other sources, such as by
deriving these data points from OPRA or obtaining them from the
Exchange's HSVF. The third bucket of information is about the Recipient
Participant's response and the time their response is received by the
Exchange, information which the Recipient Participant would be able to
obtain without receiving the Complex Order Report. Additionally, some
Participants may already be able to derive a substantial amount of the
same data that is provided by some of the components based on their own
executions and algorithms.
In sum, if the proposed Complex Order Report is unattractive to
Participants, Participants will opt not to receive it. Additionally,
the proposal would not permit unfair discrimination because the
proposed Report will be available to all Exchange Participants.
Accordingly, the Exchange does not believe that the proposed change
will impair the ability of Participants or competing order execution
venues to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section
[[Page 31019]]
19(b)(3)(A)(iii) of the Act \45\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\46\
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\45\ 15 U.S.C. 78s(b)(3)(A)(iii).
\46\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \47\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\48\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay. The Exchange states
that waiver of the 30-day operative delay would benefit investors by
enabling the Exchange to make latency information for liquidity-seeking
Complex Orders available to Exchange Participants in a more equalized
and timely manner, allow the Exchange to compete with other exchanges
that currently offer substantially similar reports for complex
orders,\49\ and provide the Exchange with an opportunity to attract
additional order flow from Participants that find value in the proposed
report. The Commission finds that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest. As
discussed above, the Exchange states that the proposed reports could
provide Participants that subscribe to the reports with increased
visibility into missed executions against orders resting on the
Exchange's Complex Order Book, thereby allowing Participants to
determine whether to invest in the resources and technology needed to
mitigate missed executions. The Exchange notes that all firms that
choose to subscribe to the proposed reports, which are optional, will
have access to the same information on an equal basis, including firms
that lack the resources to generate similar reports regarding
interactions with the Exchange. In addition, the proposal does not
raise new or novel regulatory issues because other options exchanges
currently offer substantially similar reports for complex orders.\50\
For these reasons, the Commission designates the proposal operative
upon filing.\51\
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\47\ 17 CFR 240.19b-4(f)(6).
\48\ 17 CFR 240.19b-4(f)(6)(iii).
\49\ See supra note 7.
\50\ See supra note 7.
\51\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of 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#1361667f763e707c7e7e767d6760536076703d747c65"><span class="__cf_email__" data-cfemail="f785829b92da94989a9a92998384b7849294d9909881">[email protected]</span></a>. Please include
File Number SR-BOX-2022-18 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-2022-18. 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 the 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-2022-18, and should be submitted on
or before June 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
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\52\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10804 Filed 5-19-22; 8:45 am]
BILLING CODE 8011-01-P
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