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Notice2022-14883

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 12140 (Imposition of Fines for Minor Rule Violations), To Expand the List of Violations Eligible for Disposition Under the Exchange's Minor Rule Violation Plan and To Update the Fine Schedule Applicable to Minor Violations of Certain Rules

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Published

July 13, 2022

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 87 Issue 133 (Wednesday, July 13, 2022)</title>
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[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Notices]
[Pages 41798-41813]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-14883]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95217; File No. SR-BOX-2022-08]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule
12140 (Imposition of Fines for Minor Rule Violations), To Expand the
List of Violations Eligible for Disposition Under the Exchange's Minor
Rule Violation Plan and To Update the Fine Schedule Applicable to Minor
Violations of Certain Rules

July 7, 2022.

I. Introduction

On March 31, 2022, BOX Exchange LLC (``Exchange'' or ``BOX'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to
amend Rule 12140 (Imposition of Fines for Minor Rule Violations), to
expand the list of violations eligible for disposition under the
Exchange's Minor Rule Violation Plan (``MRVP'') and update the fine
schedule applicable to minor rule violations related to certain rule
violations. The proposed rule change was published for comment in the
Federal Register on April 21, 2022.\4\ On June 3, 2022, the Commission
extended

[[Page 41799]]

the time period within which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to approve or disapprove the proposed rule change.\5\
On June 10, 2022, the Exchange filed Amendment No. 1 to the proposed
rule change, which replaced and superseded the proposed rule change in
its entirety.\6\ The Commission received one comment on the proposed
rule change.\7\ The Commission is publishing this notice to solicit
comments on Amendment No. 1 from interested persons and is approving
the proposed rule change, as modified by Amendment No. 1, on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 94729 (April 15,
2022), 87 FR 23893.
\5\ See Securities Exchange Act Release No. 95037, 87 FR 35273
(June 9, 2022) (extending the time period to July 20, 2022).
\6\ In Amendment No. 1, the Exchange revised the proposed rule
change to: (1) provide additional detail and clarification regarding
the Exchange's usage of the terms ``violation'' and ``offense''
within Rule 12140; and (2) clarify the application of fines under
Rule 12140(d)(6). Amendment No. 1 to the proposed rule change is
available at: <a href="https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm">https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm</a>.
\7\ The Commission has received one comment on the proposal
which does not relate to the substance of the proposed rule change.
The comment letter is available at <a href="https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm">https://www.sec.gov/comments/sr-box-2022-08/srbox202208.htm</a>.
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II. The Exchange's Description of the Proposed Rule Change, as Modified
by Amendment No. 1

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 purpose of the proposed rule change is to amend Rule 12140
(Imposition of Fines for Minor Rule Violations), which governs the
Exchange's MRVP, in connection with certain minor rule violations,
applicable fines, as well as other clarifying and non-substantive
changes to improve the consistency of the Exchange's MRVP with the
MRVPs at other options exchanges. Specifically, the proposed rule
change amends Rule 12140 by: (1) adding certain rule violations that
the Exchange believes to be minor in nature and consistent with
violations at other options exchanges; (2) updating the fine schedule
applicable to minor rule violations related to certain rule violations;
and (3) making other clarifying and non-substantive changes.
The MRVP provides that in lieu of commencing a disciplinary
proceeding, the Exchange may, subject to the certain requirements set
forth in the Rule, impose a fine, not to exceed $5,000, on any Options
Participant, or person associated with or employed by an Options
Participant, with respect to any Rule violation listed in Rule 12140(d)
or (e) discussed below. Any fine imposed pursuant to this Rule that (i)
does not exceed $2,500 and (ii) is not contested, shall be reported on
a periodic basis, except as may otherwise be required by Rule 19d-1
under the Act or by any other regulatory authority. Further, the Rule
provides that any person against whom a fine is imposed under the Rule
shall be served with a written statement setting forth: (i) the Rule(s)
allegedly violated; (ii) the act or omission constituting each such
violation; (iii) the fine imposed for each violation; and (iv) the date
by which such determination becomes final and such fine must be paid or
contested, which date shall be not less than twenty-five (25) calendar
days after the date of service of such written statement. Rule 12140
(d) and (e) set forth the list of specific Exchange Rules under which
an Options Participant or person associated with or employed by an
Options Participant may be subject to a fine for violations of such
Rules and the applicable fines that may be imposed by the Exchange. As
with all the violations incorporated into its MRVP, the Exchange will
proceed under this Rule only for violations that are minor in nature.
Any other violation will be addressed pursuant to Rules 12030 (Letters
of Consent) or 12040 (Charges).
As stated above, the Exchange is proposing to make clarifying and
non-substantive changes to the MRVP. The Exchange is proposing to
update language within the MRVP to remove the term ``occurrence'' and
replace it with ``violation'' when the term is being used to represent
a singular instance and ``offense'' when the term may be used to
represent multiple violations aggregated together. The Exchange is
proposing these changes to improve the consistency of the use of these
terms within the MVRP. The Exchange is also proposing to update any use
of the term ``running'' to ``rolling'' within the MRVP fine schedules.
There is no substantive difference in the Exchange's interpretation of
the term ``running'' and ``rolling.'' The purpose of these changes is
to provide greater clarity within the Exchange's MRVP by using more
consistent terminology throughout. The Exchange believes these
technical and non-substantive changes are reasonable and appropriate
because they will increase readability of the MRVP and help prevent
investor confusion. Further, these proposed changes will allow the
Exchange to carry out its regulatory responsibility more quickly and
efficiently by reducing confusion regarding terminology in the
administration of the MRVP. The Exchange notes that the proposed
changes are intended to provide for greater consistency within the
Exchange's MRVP itself and with the MRVPs of the other options
exchanges.
Exercise Limits
First, the Exchange proposes to amend 12140(d)(1), Position Limits
to include violations of Exercise limits pursuant to Rule 3140.\8\ The
Exchange believes that amending Rule 12140(d)(1), Position Limits, to
include violations of Exercise Limits pursuant to BOX Rule 3140 is
appropriate because it will allow the Exchange to carry out its
regulatory responsibility more efficiently and in a manner that is
consistent with the way it handles violations of position limits.
Violations of position and exercise limits on the Exchange generally
occur together, so adding exercise limits to the existing position
limits minor rule violation will allow the Exchange to address these
related violations more effectively. The Exchange proposes that the
fine levels for exercise limit violations match the current fine levels
for position limits. The Exchange is also proposing to update the
language in the heading of the fine schedule to change ``violations''
to ``offenses''. The Exchange believes this change is reasonable as it
adds detail and clarity to the fine schedules by clarifying the
Exchange's use of these terms as used within the fine schedules. The
Exchange believes this change may help reduce Participant confusion
over the Exchange's application of the fines within BOX Rule
12140(d)(1).
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\8\ The Exchange notes that BOX Rule 3140 establishes a limit on
the number of option contracts of a single class that an Options
Participant can exercise within any five consecutive business days.
Exercise limits are fixed by the Exchange pursuant to Rule 3140 and
vary by class of options. See BOX Rule 3140.
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Under this rule, any Participant who violates Rule 3120 or Rule
3140 regarding position or exercise limits shall be subject to the
fines listed below. The Exchange notes that this proposal is consistent
with the MRVPs in place at

[[Page 41800]]

Cboe Exchange, Inc. (``Cboe Options''), NYSE American, LLC (``NYSE
American'') and NYSE Arca, Inc. (``NYSE Arca'').\9\
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\9\ See Cboe Options Rule 13.15(g)(1). See also NYSE American
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(21).

------------------------------------------------------------------------
Number of cumulative offenses within any rolling
twenty-four month period Sanction
------------------------------------------------------------------------
First Offense......................................... $500
Second Offense........................................ 1,000
Third Offense......................................... 2,500
Fourth and Each Subsequent Offense.................... 5,000
------------------------------------------------------------------------

Requests for Trade Data
As stated above, the Exchange is proposing to make clarifying and
non-substantive changes. As such, the Exchange is proposing to amend
Rule 12140(d)(3) Requests for Trade Data pursuant to Rule 10040, to
change ``offense'' to ``violation'' within the fine schedule. The
Exchange is proposing this change to clarify the distinction between
offense and violation by updating the terminology to only use the term
``offense'' when the listed fines are meant to cover multiple
violations. The purpose of these changes is to provide greater clarity
within the Exchange's MRVP by using more consistent terminology
throughout. As such, the Exchange is proposing to amend Rule
12140(d)(3) Requests for Trade Data pursuant to Rule 10040, to change
``offense'' to ``violation'' within the fine schedule. The Exchange
believes this proposed clarifying and non-substantive change is
appropriate because it will help clarify this distinction between
offense and violation by updating the terminology to only use the term
``offense'' when the listed fines are meant to cover multiple
violations. The Exchange believes these technical and non-substantive
changes are reasonable and appropriate because they will increase
readability of the MRVP and help prevent investor confusion. Further,
these proposed changes will allow the Exchange to carry out its
regulatory responsibility more quickly and efficiently by reducing
confusion regarding terminology in the administration of the MRVP. The
Exchange notes that the proposed change is intended to provide for
greater consistency within the Exchange's MRVP itself and with the
MRVPs of the other options exchanges. The Exchange is not proposing to
amend the sanctions under this Rule 12140(d)(3). The Exchange proposes
to update the fine schedule as follows:

------------------------------------------------------------------------
Number of violations within one calendar
year Sanction
------------------------------------------------------------------------
2nd Violation.............................. $500.
3rd Violation.............................. $1,000.
4th Violation.............................. $2,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Quotation Parameters
The Exchange is also proposing to amend Rule 12140(d)(5) Quotation
Parameters to increase and strengthen the sanctions imposed under this
section. The Exchange believes that increasing and strengthening these
sanctions is appropriate as the proposed more robust fine schedules may
help deter violative conduct on BOX. The Exchange believes that
increasing these sanctions will allow the Exchange to provide more
appropriate punishments and more effectively deter violations of this
nature. The Exchange believes that removing the lesser penalty (Letter
of Caution) for the first, second, and third offenses in order to
provide fines for the first, second, and third offenses and,
ultimately, formal disciplinary proceedings for the fourth offense and
thereafter during one calendar year is appropriate. The Exchange
believes this fine structure may serve to deter repeat-offenders more
effectively. The Exchange notes this proposed change will bring the
sanctions for violations regarding spread parameters or market maker
quotations in line with the sanctions imposed by NYSE Arca.\10\
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\10\ See NYSE Arca Rule 10.12(k)(i)(41).
---------------------------------------------------------------------------

Rule 12140(d)(5) currently permits the Exchange to issue a Letter
of Caution for the first, second, and third occurrence within a one
calendar year running basis. For the fourth, fifth, sixth occurrences
during a one-year running period, the fine schedule currently permits
the Exchange to issue a fine of $250, $500, and $1,000, respectively.
The fine schedule also provides that for the seventh occurrence and
thereafter, during a one-year running period, the sanction is
discretionary with the Hearing Committee. The proposed rule change
updates the fine schedule to provide that, on a one-year rolling basis,
the Exchange may apply a fine of $1,000 for a first offense, may apply
a fine of $2,500 for a second offense, may apply a fine of $3,500 for a
third offense, and may proceed with formal disciplinary action for a
fourth offense and thereafter.
As described above, the Exchange is proposing to update the
language to use ``offense'' or ``violation'' instead of ``occurrence''
and ``rolling'' instead of ``running'' within the fine schedule for
consistency within the MRVP and to clarify the Exchange's usage of such
terms. The Exchange believes these technical and non-substantive
changes are reasonable and appropriate because they will increase
readability of the MRVP and help prevent investor confusion. Further,
these proposed changes will allow the Exchange to carry out its
regulatory responsibility more quickly and efficiently by reducing
confusion regarding terminology in the administration of the MRVP. The
Exchange notes that the proposed change is intended to provide for
greater consistency within the Exchange's MRVP itself and with the
MRVPs of the other options exchanges. Under this proposed amendment,
any Participant who violates Rule 8040(a)(7) regarding spread
parameters or market maker quotations shall be subject to the fines
listed below.

[[Page 41801]]

------------------------------------------------------------------------
Fine schedule (implemented on a one-year
rolling basis) Sanction
------------------------------------------------------------------------
1st Offense................................ $1,000.
2nd Offense................................ $2,500.
3rd Offense................................ $3,500.
4th Offense and Thereafter................. Formal Disciplinary Action.
------------------------------------------------------------------------

Lead Market Maker Continuous Quoting
Next the Exchange proposes to amend Rule 12140(d)(6), Continuous
Quotes to include continuous quoting violations by Lead Marker Makers
pursuant to BOX Rule 8050(e) and Rule 8055(c)(1). The Exchange believes
that amending Rule 12140(d)(6), Continuous Quotes to include continuous
quoting violations by Lead Marker Makers pursuant to BOX Rule
8055(c)(1) is appropriate because it will allow the Exchange to carry
out its regulatory responsibility quickly and efficiently in a manner
that is consistent with the way it handles continuous quoting
violations for all types of Market Makers.\11\
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\11\ The Exchange adopted Rule 7135 (Execution and Pro Rata
Priority) to establish and govern pro rate execution on BOX and Rule
8055 (Lead Market Makers) which details the designation and
obligations of Lead Market Makers on BOX. Rule 7350(c)(2) details
Lead Market Maker Priority and Lead Market Makers may be assigned by
the Exchange in each options class in accordance with Rule 8055. The
Exchange now proposes to include Lead Market Maker Continuous
Quoting in its MRVP. See Securities Exchange Act Release No. 91897
(May 14, 2021), 86 FR 27490 (May 20, 2021) (SR-BOX-2021-11).
---------------------------------------------------------------------------

The Exchange is also proposing to increase and strengthen the
sanctions imposed under this section, which the Exchange believes will
more effectively deter violative conduct. The Exchange notes that this
proposed change will bring the sanctions for violations of continuous
quoting obligations in line with the sanctions imposed by Cboe
Options.\12\ Rule 12140(d)(6) currently permits the Exchange to give a
Letter of Caution for the first violation within one calendar year. For
subsequent violations during the same period, the fine schedule permits
the Exchange to issue a fine of $300 per day. The Exchange proposes to
update the fine schedule as follows:
---------------------------------------------------------------------------

\12\ See Cboe Options Rule 13.15(g)(9).

------------------------------------------------------------------------
Violations within one calendar year Sanction
------------------------------------------------------------------------
1st Violation.............................. Letter of Caution.
2nd Violation.............................. $1,500.
3rd Violation.............................. $3,000.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

The proposed rule change updates the fine schedule to provide that,
during one calendar year, the Exchange may give a Letter of Caution for
a first violation, may apply a fine of $1,500 for a second violation,
may apply a fine of $3,000 for a third violation, and may proceed with
formal disciplinary action for subsequent violations.\13\ As described
above, and as is the case for all rule violations covered under Rule
12140(d) and (e), the Exchange may determine that a violation of
Market-Maker quoting obligations is intentional, egregious, or
otherwise not minor in nature and choose to proceed under the
Exchange's formal disciplinary rules rather than its MRVP. The Exchange
believes that maintaining the lesser penalty (Letter of Caution) for a
first violation and then providing higher fines for second and third
violations and, ultimately, formal disciplinary proceedings for any
subsequent violations during one calendar year is appropriate. This
will allow the Exchange to levy progressively larger fines and greater
penalties against repeat-offenders (as opposed to a smaller fine range
for any violations that may come after a first violation). The Exchange
believes this fine structure may serve to deter repeat-offenders while
providing reasonable warning for a first violation within one calendar
year.
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\13\ The Exchange notes that Cboe Options has identical
sanctions in place. See Cboe Options Rule 13.15(g)(9).
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Under this proposed amendment, any Participant who violates Rule
8050(e) or Rule 8055(c)(1) regarding Market Maker or Lead Market Maker
continuous quotes shall be subject to the fines listed above. In
calculating fine thresholds for each Market Maker or Lead Market Maker,
all violations occurring within the Surveillance Review Period as
defined within the Exchange Surveillance Procedures in any of that
Market Maker or Lead Market Maker's appointed classes are to be added
together.\14\
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\14\ The referenced Surveillance Review Period is a quarterly
review period that is specified within the Exchange Surveillance
Procedures, which are utilized by FINRA's options surveillance
group. As specified within the referenced Exchange Surveillance
Procedures, staff will determine the total number of days throughout
the quarter in which the market maker quoted less than 60% of the
aggregate quotable time of all its appointed classes after each
series was opened.
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The Exchange is also proposing to remove language from Rule
12140(d)(6) that states ``Violations of Rule 8050(e) or Rule 8055(c)(1)
that continue over consecutive trading days will be subject to a
separate fine, pursuant to this paragraph (6), for each day during
which the violation occurs and is continuing up to a limit of fifteen
consecutive trading days.'' With the proposed updates to the fine
schedule replacing the fine of $300 per day with a fine of $1,500, this
language is no longer necessary. This language was originally included
to allow the Exchange to fine a Participant $300 per day for each
consecutive trading day during which a violation occurs. The Exchange
is proposing to reformat the fine schedule and remove the listed fine
of $300 per day. The Exchange is now proposing a fine of $1,500 for a
second violation, a fine of $3,000 for a third violation, and formal
disciplinary action for any subsequent violations. Under the new
format, the language allowing consecutive trading day violations for up
to fifteen days to be fined separately is no longer consistent or
feasible. Under the MRVP, a Participant may only be fined a maximum of
$5,000 and with the greater fines being proposed the previous fine
structure no longer applies. The Exchange believes that removing this
language will clarify the proposed updates to the fine schedule and may
help reduce Participant confusion over the Exchange's application of
the fines within BOX Rule 12140(d)(6). The Exchange notes that Cboe
Options, and NYSE Arca have similar rule provisions in their MRVPs
addressing Market Maker and Lead

[[Page 41802]]

Market Maker continuous quoting obligations.\15\
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\15\ See Cboe Options Rule 13.15(g)(9). See also NYSE American
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
---------------------------------------------------------------------------

Mandatory Systems Testing
The Exchange is also proposing to make clarifying and non-
substantive changes to amend the language within the fine schedules to
use the terms ``and thereafter'' and ``subsequent'' instead of ``or
more'' when detailing the number of violations. There is no substantive
difference in the Exchange's interpretation between ``or more'' and
``subsequent'' or ``and thereafter''. The purpose of the change is to
provide greater clarity within the Exchange's own MRVP by using more
consistent terminology. The Exchange proposes to amend 12140(d)(7),
Mandatory Systems Testing pursuant to BOX Rule 3180, to change ``or
more'' to ``and thereafter'' within the fine schedule. The Exchange
believes these technical and non-substantive changes are reasonable and
appropriate because they will increase readability of the MRVP and help
prevent investor confusion. Further, these proposed changes will allow
the Exchange to carry out its regulatory responsibility more quickly
and efficiently by reducing confusion regarding terminology in the
administration of the MRVP. The Exchange notes that the proposed change
is intended to provide for greater consistency within the Exchange's
MRVP itself and with the MRVPs of the other options exchanges. Under
this rule, any Participant who violates Rule 3180 regarding the failure
to conduct or participate in the testing of computer systems, or
failure to provide required reports or maintain required documentation,
shall be subject to the fines listed below.

------------------------------------------------------------------------
Violations within one calendar year Sanction
------------------------------------------------------------------------
First Violation............................ $250.
Second Violation........................... $500.
Third Violation............................ $1,000.
Fourth Violation........................... $2,000.
Fifth Violation and Thereafter............. Formal Disciplinary Action.
------------------------------------------------------------------------

Maintenance, Retention and Furnishing of Books, Records and Other
Information
Next, the Exchange proposes to adopt 12140(d)(10), Maintenance,
Retention and Furnishing of Books, Records and Other Information
pursuant to BOX Rule 10000. Under this rule, any Participant who
violates Rule 10000 regarding the failure to make, keep current, and
preserve such books and records as required, or failure to furnish such
books and records in a timely manner upon request by the Exchange shall
be subject to the fines listed below.

------------------------------------------------------------------------
Number of violations within any twenty-four
month rolling period Sanction
------------------------------------------------------------------------
Initial Violation.......................... $500.
Second Violation........................... $1,000.
Third Violation............................ $2,500.
Fourth Violation and Thereafter............ $5,000 or Formal
Disciplinary Action.
------------------------------------------------------------------------

The Exchange believes the adoption of Rule 12140(d)(10) into the
MRVP is appropriate because it will allow the Exchange to carry out its
regulatory responsibility more efficiently and help deter BOX
Participants from failing to make, keep current, and preserve such
books and records as required, or failure to furnish such books and
records in a timely manner upon request by the Exchange. The Exchange
notes that adding this provision will help ensure consistency within
the MRVP's of the various options exchanges. NYSE American and NYSE
Arca have rule provisions within their respective minor rule violation
plans that addresses similar recordkeeping violations.\16\ Further, the
proposed fine schedule for these types of violations is similar to the
recordkeeping sanctions imposed by NYSE American and NYSE Arca.\17\
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\16\ NYSE American and NYSE Arca have subsections within their
MRVPs listing numerous specific recordkeeping violations. NYSE
American Rule 9217 and NYSE Arca Rule 10.12 contain minor rule
violations regarding failures to comply with the books and records
requirements of Rule 324 and failures to furnish in a timely manner
books, records or other requested information or testimony in
connection with an examination of financial responsibility and/or
operational conditions. See NYSE American Rule 9217(ii). See also
NYSE Arca Rule 10.12(k)(iii).
\17\ The NYSE American and NYSE Arca MRVPs contain numerous
recordkeeping minor rule violations with fines ranging from $500 to
$5,000 depending on the specific violation and the fine level. See
NYSE American Rule 9217 (ii). See also NYSE Arca Rule 10.12(k)(iii).
\18\ See NYSE American Rule 9217(ii)(12). See also NYSE Arca
Rule 10.12(k)(iii)(12).
---------------------------------------------------------------------------

Anti-Money Laundering Compliance Program
The Exchange also proposes to adopt 12140(d)(11), Anti-Money
Laundering Compliance Program pursuant to BOX Rule 10070. Under this
Rule any Participant who violates Rule 10070 regarding the failure to
satisfy the anti-money laundering compliance program requirements shall
be subject to the fines listed below. The Exchange believes the
adoption of Rule 12140(d)(11), is appropriate because it will help
deter BOX Participants from failing to satisfy the requirements of the
anti-money laundering compliance program. The Exchange believes that
adding this rule to the MRVP will allow the Exchange to carry out its
regulatory responsibility more quickly and efficiently with respect to
violations of BOX Rule 10070. The Exchange notes that this proposed
addition is consistent with the minor rule violations relating to anti-
money laundering program failure with the MRVPs at NYSE American and
NYSE Arca.\18\ Additionally, Cboe Options has a rule provision in its
MRVP that addresses violations related to anti-money laundering
implementation relating to the failure to designate a person
responsible for implementing and monitoring the anti-money laundering
compliance program.\19\ The proposed fine schedule provides that,
within any twenty-four-month rolling period, the Exchange may apply a
fine of $1,000 for an initial violation and $2,500 for

[[Page 41803]]

subsequent violations. The Exchange believes that the proposed
sanctions are appropriate, as they will provide sufficient warning to
first time offenders, while deterring repeat offenders. These sanctions
are identical to the sanctions applied by Cboe Options and similar to
the sanctions applied by NYSE American and NYSE Arca for minor rule
violations relating to anti-money laundering compliance program
violations.\20\
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\19\ See Cboe Options Rule 13.15(g)(13).
\20\ Cboe Options applies sanctions of $1,000 for a first
offense and $2,500 for subsequent offenses, while NYSE American and
NYSE Arca have sanctions of $2,000 for 1st level, $4,000 for 2nd
level, and $5,000 for third level. See Cboe Options Rule
13.15(g)(13). See also NYSE American Rule 9217(ii)(12). See also
NYSE Arca Rule 10.12(k)(iii)(12).

------------------------------------------------------------------------
Number of violations within any twenty-four month
rolling period Sanction
------------------------------------------------------------------------
Initial Violation..................................... $1,000
Subsequent Violations................................. 2,500
------------------------------------------------------------------------

Locked and Crossed Market Violations
The Exchange is proposing to amend current Rule 12140(d)(10) \21\
Locked and Crossed Market Violations to increase and strengthen the
sanctions imposed under this section. The Exchange believes that
increasing and strengthening these sanctions for violations relating to
locked and crossed markets is appropriate as the proposed more robust
fine schedules may help deter violative conduct on BOX. The Exchange
believes that increasing these sanctions will allow the Exchange to
provide more appropriate punishments and more effectively deter
violations of this nature. The Exchange notes this proposed change will
bring the sanctions for violations regarding procedures to be followed
in the instance of a Locked Market or a Crossed Market more in line
with the sanctions imposed by Cboe Options.\22\ Rule 12140(d)(10)
currently permits the Exchange to issue a Letter of Caution for an
initial violation within a twelve-month rolling period. The current
fine schedule also permits the Exchange to apply a fine of $250 for a
second violation, $500 for a third violation, and formal disciplinary
action for the fourth violation or more within a twelve-month rolling
period. The proposed rule change updates the fine schedule to provide
that, within any twelve-month rolling period, the Exchange may apply a
fine of $500 for an initial violation, may apply a fine of $2,500 for a
second violation, and may apply a fine of $5,000 or proceed with formal
disciplinary action for subsequent violations. Under this proposed
amendment, any Participant who violates Rule 15020 regarding procedures
to be followed in the instance of a Locked or Crossed Market shall be
subject to the fines listed below.
---------------------------------------------------------------------------

\21\ As discussed above, this proposed rule change subsequently
renumbers current Rule 12140 (d)(10) to (d)(12) as a result of the
proposed addition of Rules 12140(d)(10), and (d)(11).
\22\ Cboe Option's MRVP provides for sanctions of $500-1,000 for
a first offense, $1,000-2,500 for a second offenses, and $2,500-
5,000 and a Staff Interview for subsequent offenses. See Cboe
Options Rule 13.15(g)(8).

------------------------------------------------------------------------
Number of violations within any twelve-
month rolling period Sanction
------------------------------------------------------------------------
Initial Violation.......................... $500.
Second Violation........................... $2,500.
Subsequent Violations...................... $5,000 or Formal
Disciplinary Action.
------------------------------------------------------------------------

Market Maker Assigned Activity Violations
As stated above, the Exchange is proposing to make clarifying and
non-substantive changes to amend the language within the fine schedules
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or
more'' when detailing the number of violations. There is no substantive
difference in the Exchange's interpretation between ``or more'' and
``subsequent'' or ``and thereafter''. The purpose of the change is to
provide greater clarity within the Exchange's MRVP by using more
consistent terminology. The Exchange proposes to amend current Rule
12140(d)(11),\23\ Market Maker Assigned Activity Violations pursuant to
BOX Rule 8030(e), to change ``or more'' to ``and thereafter'' within
the fine schedule. The Exchange believes these technical and non-
substantive changes are reasonable and appropriate because they will
increase readability of the MRVP and help prevent investor confusion.
Further, these proposed changes will allow the Exchange to carry out
its regulatory responsibility more quickly and efficiently by reducing
confusion regarding terminology in the administration of the MRVP. The
Exchange notes that the proposed change is intended to provide for
greater consistency within the Exchange's MRVP itself and with the
MRVPs of the other options exchanges. Under this rule, any Participant
who violates Rule 8030(e) regarding the failure of Market Makers to
limit their execution in options classes outside of their appointed
classes to twenty-five percent (25%) of the total number of contracts
executed during a quarter by such Market Maker, is subject to the fines
listed below.
---------------------------------------------------------------------------

\23\ As discussed above, this proposed rule change subsequently
renumbers Rule 12140 (d)(11) to (d)(13) as a result of the proposed
addition of Rules 12140(d)(10), and (d)(11).

------------------------------------------------------------------------
Number of violations within any twelve-
month rolling period Sanction
------------------------------------------------------------------------
Initial Violation.......................... Letter of Caution.
Second Violation........................... $500.
Third Violation............................ $1,000.
Fourth Violation........................... $2,500.
Fifth Violation and Thereafter............. Formal Disciplinary Action.
------------------------------------------------------------------------

[[Page 41804]]

Request for Quote Violations
As detailed above, the Exchange is proposing to make clarifying and
non-substantive changes to amend the language within the fine schedules
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or
more'' when detailing the number of violations. There is no substantive
difference in the Exchange's interpretation between ``or more'' and
``subsequent'' or ``and thereafter''. The purpose of the change is to
provide greater clarity within the Exchange's MRVP by using more
consistent terminology. The Exchange proposes to amend current Rule
12140(d)(12),\24\ Request for Quote Violations pursuant to BOX Rule
8050(c)(2)-(c)(4), to change ``or more'' to ``and thereafter'' within
the fine schedule. The Exchange believes these technical and non-
substantive changes are reasonable and appropriate because they will
increase readability of the MRVP and help prevent investor confusion.
Further, these proposed changes will allow the Exchange to carry out
its regulatory responsibility more quickly and efficiently by reducing
confusion regarding terminology in the administration of the MRVP. The
Exchange notes that the proposed change is intended to provide for
greater consistency within the Exchange's MRVP itself and with the
MRVPs of the other options exchanges. Under this rule, any Participant
who violates Rule 8050(c)(2)-(c)(4) regarding the failure of a Market
Maker to respond to a Request for Quote (``RFQ'') on BOX, is subject to
the fines listed below.
---------------------------------------------------------------------------

\24\ As discussed above, this proposed rule change subsequently
renumbers Rule 12140 (d)(12) to (d)(14) as a result of the proposed
addition of Rules 12140(d)(10), and (d)(11).

------------------------------------------------------------------------
Number of violations within any twelve-
month rolling period Sanction
------------------------------------------------------------------------
Initial Violation.......................... Letter of Caution.
Second Violation........................... $250.
Third Violation............................ $500.
Fourth Violation and Thereafter............ Formal Disciplinary Action.
------------------------------------------------------------------------

Trade Through Violations

As stated above, the Exchange is proposing to make clarifying and
non-substantive changes to amend the language within the fine schedules
to use the terms ``and thereafter'' and ``subsequent'' instead of ``or
more'' when detailing the number of violations. There is no substantive
difference in the Exchange's interpretation between ``or more'' and
``subsequent'' or ``and thereafter''. The purpose of the change is to
provide greater clarity within the Exchange's MRVP by using more
consistent terminology. The Exchange proposes to amend current Rule
12140(d)(13),\25\ Trade Through Violations pursuant to BOX Rule 15010,
to change ``or more'' to ``and thereafter'' within the fine schedule.
The Exchange believes these technical and non-substantive changes are
reasonable and appropriate because they will increase readability of
the MRVP and help prevent investor confusion. Further, these proposed
changes will allow the Exchange to carry out its regulatory
responsibility more quickly and efficiently by reducing confusion
regarding terminology in the administration of the MRVP. The Exchange
notes that the proposed change is intended to provide for greater
consistency within the Exchange's MRVP itself and with the MRVPs of the
other options exchanges. Under this rule, any Participant who violates
Rule 15010(a) regarding trade throughs is subject to the fines listed
below.
---------------------------------------------------------------------------

\25\ As discussed above, this proposed rule change subsequently
renumbers Rule 12140 (d)(13) to (d)(15) as a result of the proposed
addition of Rules 12140(d)(10), and (d)(11).

Trading Floor Violations Fine Schedules
The Exchange is proposing to update the fine schedules applicable
to minor rule violations related to certain Trading Floor violations
listed in Rule 12140(e) to increase and strengthen the sanctions. The
Exchange adopted the minor rule violations and corresponding fines
under Rule 12140(e) in 2017 following the establishment of the BOX
Trading Floor.\26\ In adopting its current trading floor minor rule
violations, the Exchange believed it appropriate to adopt a lower fine
amount than in place at NYSE Arca as the new trading floor was
established and to be more consistent with the other fines within the
Exchange's own MRVP. However, the Exchange's Trading Floor is now well-
established, with a greater number of Participants, and the Exchange
believes that increasing and strengthening these sanctions is
appropriate as the proposed more robust fine schedules may help deter
violative conduct on BOX. The Exchange believes that increasing these
trading floor related sanctions to be more consistent with the other
options exchanges will allow the Exchange to more effectively deter
trading floor violations. The Exchange notes that this proposed change
will bring the sanctions more in line with the fine schedules in place
at NYSE Arca.\27\
---------------------------------------------------------------------------

\26\ See Securities Exchange Act Release No. 81398 (August 15,
2017), 82 FR 39630 (August 21, 2017) (SR-BOX-2017-26).
\27\ See NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

The Exchange is also proposing to update the language within each
minor rule violation listed within Rule 12140(e) to use the term
``violation'' instead of ``occurrence'' when detailing the number of
violations within the fine schedules to provide consistency in the
terminology used within the Exchange's MRVP. Within the MRVP, the
Exchange interprets violation to mean one instance, while multiple
violations may be deemed to constitute one offense. As noted above, the
Exchange believes that changing ``occurrence'' to ``violation'' in BOX
Rule 12140(e)(1)-(12) is appropriate to provide consistency within the
terms used and the Exchange's interpretation of the terms.

[[Page 41805]]

The Exchange is proposing to remove the term ``occurrence'' from the
MRVP and proposes to replace ``occurrence'' with ``violation'' for a
singular violation and ``offense'' when the listed fines are meant to
cover multiple violations. The Exchange is proposing these changes to
improve consistency within the usage of these terms and to conform the
fine schedules to the Exchange's new understanding that a violation
covers a singular rule violation, while multiple violations may be
aggregated to constitute an offense. The Exchange believes these
technical and non-substantive changes are reasonable and appropriate
because they will increase readability of the MRVP and help prevent
investor confusion. Further, these proposed changes will allow the
Exchange to carry out its regulatory responsibility more quickly and
efficiently by reducing confusion regarding terminology in the
administration of the MRVP. The Exchange notes that the proposed change
is intended to provide for greater consistency within the Exchange's
MRVP itself and with the MRVPs of the other options exchanges.
General Responsibilities of Floor Brokers. The Exchange is
proposing to amend Rule 12140(e)(1), General Responsibilities of Floor
Brokers pursuant to BOX Rule 7570, to increase and strengthen the
sanctions imposed under this section. The Exchange believes that
increasing and strengthening these sanctions is appropriate as the
proposed more robust fine schedules may help deter violative conduct on
BOX. The Exchange believes that increasing these trading floor related
sanctions to be more consistent with the other options exchanges will
allow the Exchange to more effectively deter trading floor violations.
The Exchange notes that this proposed change will bring the sanctions
in line with the sanctions imposed by NYSE Arca.\28\ Rule 12140(e)(1)
currently permits the Exchange to apply a fine of $500 for the first
occurrence, $1,000 for a second occurrence, $2,000 for a third
occurrence, and formal disciplinary action for subsequent occurrences
within any rolling twenty-four-month period. The proposed rule change
updates the fine schedule to provide that, within any twenty-four-month
rolling period, the Exchange may apply a fine of $1,000 for the first
violation, $2,500 for a second violation, $5,000 for a third violation,
and formal disciplinary action for subsequent violations. Under this
proposed amendment, any Floor Broker who violates Rule 7580(e)
regarding the failure to use due diligence when handling an order, to
cause the order to be executed at the best price or prices available to
him in accordance with the Rules of the Exchange shall be subject to
the fines listed below.
---------------------------------------------------------------------------

\28\ See NYSE Arca Rule 10.12 (k)(i)(1).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,500.
Third Violation............................ $5,000.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Failure to Properly Record Orders. The Exchange is also proposing
to amend Rule 12140(e)(2) Failure to Properly Record Orders pursuant to
BOX Rule 7580(e), to increase and strengthen the sanctions imposed
under this section. The Exchange believes that increasing and
strengthening these sanctions is appropriate as the proposed more
robust fine schedules may help deter violative conduct on BOX. The
Exchange believes that increasing these trading floor related sanctions
to be more consistent with the other options exchanges will allow the
Exchange to more effectively deter trading floor violations. The
Exchange notes that this proposed change brings these sanctions in line
with the sanctions imposed by NYSE Arca.\29\ Rule 12140(e)(2) currently
permits the Exchange to apply a fine of $500 for the first occurrence,
$1,000 for a second occurrence, $2,000 for a third occurrence, and
formal disciplinary action for subsequent occurrences within any
twenty-four-month rolling period. The proposed rule change updates the
fine schedule to provide that, within any twenty-four-month rolling
period, the Exchange may apply a fine of $500 for the first violation,
$1,000 for a second violation, $2,500 for a third violation, and formal
disciplinary action for subsequent violations. Under this proposed
amendment, any Floor Participant who violates Rule 7580(e) regarding
the failure to comply with the order format and system entry
requirements on the Trading Floor shall be subject to the fines listed
below.
---------------------------------------------------------------------------

\29\ See NYSE Arca Rule 10.12 (k)(i)(2).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $500.
Second Violation........................... $1,000.
Third Violation............................ $2,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Failure to Properly Execute a QOO Order. As stated above, the
Exchange is proposing to make clarifying and non-substantive changes.
As such, the Exchange is proposing to amend Rule 12140(e)(3) Failure to
Properly Execute a QOO Order pursuant to Rule 7600, to change
``occurrence to ``violation'' within the fine schedule. The Exchange is
proposing this change to update the language within the MRVP to remove
the term ``occurrence'' and replace it with ``violation'' when the term
is being used to represent a singular instance and ``offense'' when the
term may be used to represent multiple violations aggregated together.
The Exchange is proposing these changes to improve the consistency of
the use of these terms within the MVRP. The Exchange believes these
proposed technical and non-substantive changes are reasonable and
appropriate because they will increase readability of the MRVP and help
prevent investor confusion. Further, these proposed changes will allow
the Exchange to carry out its regulatory responsibility more quickly
and efficiently by reducing confusion regarding terminology in the

[[Page 41806]]

administration of the MRVP. The Exchange notes that the proposed change
is intended to provide for greater consistency within the Exchange's
MRVP itself and with the MRVPs of the other options exchanges. The
Exchange is not proposing to amend the sanctions under this Rule
12140(e)(3). The Exchange proposes to update the fine schedule as
follows:

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $500.
Second Violation........................... $1,000.
Third Violation............................ $2,000.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Trading Conduct and Order & Decorum on the Trading Floor. The
Exchange is also proposing to amend Rule 12140(e)(4) Trading Conduct
and Order & Decorum on the Trading Floor pursuant to BOX Rule 2120(b)-
(d), to increase and strengthen the sanctions imposed under this
section. The Exchange believes that increasing and strengthening these
sanctions is appropriate as the proposed more robust fine schedules may
help deter violative conduct on BOX. The Exchange believes that
increasing these trading floor related sanctions to be more consistent
with the other options exchanges will allow the Exchange to more
effectively deter trading floor violations. The Exchange notes that
this proposed change brings these sanctions in line with the sanctions
imposed by NYSE Arca.\30\ Rule 12140(e)(4) currently permits the
Exchange to apply a fine of $250 for the first occurrence, $500 for a
second occurrence, $1,000 for a third occurrence, and formal
disciplinary action for subsequent occurrences within any twenty-four-
month rolling period. The proposed rule change updates the fine
schedule to provide that, within any twenty-four-month rolling period,
the Exchange may apply a fine of $1,000 for the first violation, $2,000
for a second violation, $3,500 for a third violation, and formal
disciplinary action for subsequent violations. Under this proposed
amendment, any Floor Participant who violates Rule 2120(b)-(d)
regarding Trading Floor Conduct and decorum shall be subject to the
fines listed below.
---------------------------------------------------------------------------

\30\ See NYSE Arca Rule 10.12 (k)(i)(16).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,000.
Third Violation............................ $3,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Discretionary Transactions. As stated above, the Exchange is
proposing to make clarifying and non-substantive changes. As such, the
Exchange is proposing to amend Rule 12140(e)(5) Discretionary
Transactions pursuant to Rule 7590, to change ``occurrence'' to
``violation'' within the fine schedule. The Exchange is proposing this
change to update the language within the MRVP to remove the term
``occurrence'' and replace it with ``violation'' when the term is being
used to represent a singular instance and ``offense'' when the term may
be used to represent multiple violations aggregated together. The
Exchange is proposing these changes to improve the consistency of the
use of these terms within the MVRP. The Exchange believes these
proposed technical and non-substantive changes are reasonable and
appropriate because they will increase readability of the MRVP and help
prevent investor confusion. Further, these proposed changes will allow
the Exchange to carry out its regulatory responsibility more quickly
and efficiently by reducing confusion regarding terminology in the
administration of the MRVP. The Exchange notes that the proposed change
is intended to provide for greater consistency within the Exchange's
MRVP itself and with the MRVPs of the other options exchanges. The
Exchange is not proposing to amend the sanctions under this Rule
12140(e)(5). The Exchange proposes to update the fine schedule as
follows:

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $250.
Second Violation........................... $500.
Third Violation............................ $1,000.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Floor Participant Not Available to Reconcile an Uncompared Trade.
The Exchange is proposing to amend Rule 12140(e)(6) Floor Participant
Not Available to Reconcile an Uncompared Trade pursuant to BOX Rule
8530, to increase and strengthen the sanctions imposed under this
section. The Exchange believes that increasing and strengthening these
sanctions is appropriate as the proposed more robust fine schedules may
help deter violative conduct on BOX. The Exchange believes that
increasing these trading floor related sanctions to be more consistent
with the other options exchanges will allow the Exchange to more
effectively deter trading floor violations. The Exchange notes that
this proposed change brings these sanctions in line with the sanctions
imposed by NYSE Arca.\31\ Rule 12140(e)(6) currently permits the
Exchange to apply a fine of $500 for the first occurrence, $1,000 for a
second occurrence, $2,000 for a third occurrence, and formal
disciplinary action for subsequent occurrences

[[Page 41807]]

within any twenty-four-month rolling period. The proposed rule change
updates the fine schedule to provide that the Exchange may apply a fine
of $500 for the first violation, $1,000 for a second violation, $2,500
for a third violation, and may proceed with formal disciplinary action
for any subsequent violations within any rolling twenty-four-month
period. Under this proposed amendment, any Floor Participant who
violates Rule 8530 regarding the resolution of uncompared trades shall
be subject to the fines listed below.
---------------------------------------------------------------------------

\31\ See NYSE Arca Rule 10.12(k)(i)(9).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $500.
Second Violation........................... $1,000.
Third Violation............................ $2,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Floor Participant Communications and Equipment. The Exchange is
also proposing to amend Rule 12140(e)(7) Floor Participant
Communications and Equipment pursuant to BOX Rule 7660, to increase and
strengthen the sanctions imposed under this section. The Exchange
believes that increasing and strengthening these sanctions is
appropriate as the proposed more robust fine schedules may help deter
violative conduct on BOX. The Exchange believes that increasing these
trading floor related sanctions to be more consistent with the other
options exchanges will allow the Exchange to more effectively deter
trading floor violations. The Exchange notes that this proposed change
brings these sanctions in line with the sanctions imposed by NYSE
Arca.\32\ Rule 12140(e)(7) currently permits the Exchange to apply a
fine of $250 for the first occurrence, $500 for a second occurrence,
$1,000 for a third occurrence, and formal disciplinary action for
subsequent occurrences within any twenty-four-month rolling period. The
proposed rule change updates the fine schedule to provide that, within
any twenty-four-month rolling period, the Exchange may apply a fine of
$1,000 for the first violation, $2,500 for a second violation, and
$3,500 for a third violation, and formal disciplinary action for
subsequent violations. Under this proposed amendment, any Floor
Participant who violates Rule 7660 regarding Floor Participant
Communications and Equipment shall be subject to the fines listed
below.
---------------------------------------------------------------------------

\32\ See NYSE Arca Rule 10.12(k)(i)(12).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,500.
Third Violation............................ $3,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Improper Vocalization of a Trade. The Exchange is also proposing to
amend Rule 12140(e)(8) Improper Vocalization of a Trade pursuant to BOX
Rule 100(b)(5), to increase and strengthen the sanctions imposed under
this section. The Exchange believes that increasing and strengthening
these sanctions is appropriate as the proposed more robust fine
schedules may help deter violative conduct on BOX. The Exchange
believes that increasing these trading floor related sanctions to be
more consistent with the other options exchanges will allow the
Exchange to more effectively deter trading floor violations. The
Exchange notes that this proposed change will bring these sanctions in
line with the sanctions imposed by NYSE Arca.\33\ Rule 12140(e)(8)
currently permits the Exchange to apply a fine of $250 for the first
occurrence, $500 for a second occurrence, $1,000 for a third
occurrence, and formal disciplinary action for subsequent occurrences
within any rolling twenty-four-month period. The proposed rule change
updates the fine schedule to provide that, within any rolling twenty-
four-month period, the Exchange may apply a fine of $1,000 for the
first violation, $2,500 for a second violation, $3,500 for a third
violation, and formal disciplinary action for subsequent violations.
Under this proposed amendment, any Floor Participant who violates Rule
100(b)(5) regarding the requirements for public outcry shall be subject
to the fines listed below.
---------------------------------------------------------------------------

\33\ See NYSE Arca Rule 10.12(k)(i)(14).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,500.
Third Violation............................ $3,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Floor Market Maker Failure to Comply with Quotation Requirements.
The Exchange is also proposing to amend Rule 12140(e)(9) Floor Market
Maker Failure to Comply with Quotation Requirements pursuant to BOX
Rule 8510(c)(2), to increase and strengthen the sanctions imposed under
this section. The Exchange believes that increasing and strengthening
these sanctions is appropriate as the proposed more robust fine
schedules may help deter violative conduct on BOX. The Exchange
believes that increasing these trading floor related sanctions to be
more consistent with the other options exchanges will allow the
Exchange to more effectively deter trading floor violations. The
Exchange notes that this proposed change will bring these sanctions in
line with the sanctions

[[Page 41808]]

imposed by NYSE Arca.\34\ Rule 12140(e)(9) currently permits the
Exchange to apply a fine of $250 for the first occurrence, $500 for a
second occurrence, $1,000 for a third occurrence, and formal
disciplinary action for subsequent occurrences within any rolling
twenty-four-month period. The proposed rule change updates the fine
schedule to provide that, within any rolling twenty-four-month period,
the Exchange may apply a fine of $1,000 for the first violation, $2,500
for a second violation, and $3,500 for a third violation, and formal
disciplinary action for subsequent violations. Under this proposed
amendment, any Floor Participant who violates Rule 8510(c)(2) regarding
a Floor Market Maker's Obligation of Continuous Open Outcry Quoting
shall be subject to the fines listed below.
---------------------------------------------------------------------------

\34\ See NYSE Arca Rule 10.12(k)(i)(39).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,500.
Third Violation............................ $3,500.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Floor Market Maker Quote Spread Parameters. The Exchange is also
proposing to amend Rule 12140(e)(10) Floor Market Maker Quote Spread
Parameters pursuant to BOX Rule 8510(d)(1), to increase and strengthen
the sanctions imposed under this section. The Exchange believes that
increasing and strengthening these sanctions is appropriate as the
proposed more robust fine schedules may help deter violative conduct on
BOX. The Exchange believes that increasing these trading floor related
sanctions to be more consistent with the other options exchanges will
allow the Exchange to more effectively deter trading floor violations.
The Exchange notes that this proposed change will bring these sanctions
in line with the sanctions imposed by NYSE Arca.\35\ Rule 12140(e)(10)
currently permits the Exchange to give a Letter of Caution for a first
occurrence, apply a fine of $250 for a second occurrence, apply a fine
of $500 for a third occurrence, and proceed with formal disciplinary
action for subsequent occurrences within any rolling twenty-four-month
period. The proposed rule change updates the fine schedule to provide
that, within any rolling twenty-four-month period, the Exchange may
apply a fine of $1,000 for the first violation, $2,500 for a second
violation, $3,500 for a third violation, and formal disciplinary action
for subsequent violations. Under this proposed amendment, any Floor
Participant who violates Rule 8510(d)(1) regarding legal bid/ask
differential requirements shall be subject to the fines listed below.
---------------------------------------------------------------------------

\35\ See NYSE Arca Rule 10.12(k)(i)(41).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $1,000.
Second Violation........................... $2,500.
Third Violation............................ $3,500/
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

Floor Broker Failure to Honor the Priority of Bids and Offers. The
Exchange is also proposing to amend Rule 12140(e)(11) Floor Broker
Failure to Honor the Priority of Bids and Offers pursuant to BOX Rule
7610(d), to increase and strengthen the sanctions imposed under this
section. The Exchange believes that increasing and strengthening these
sanctions is appropriate as the proposed more robust fine schedules may
help deter violative conduct on BOX. The Exchange believes that
increasing these trading floor related sanctions to be more consistent
with the other options exchanges will allow the Exchange to more
effectively deter trading floor violations. The Exchange notes that
this proposed change will bring these sanctions in line with the
sanctions imposed by NYSE Arca.\36\ Rule 12140(e)(11) currently permits
the Exchange to apply a fine of $500 for a first occurrence, $1,000 for
a second occurrence, $2,000 for a third occurrence, and may proceed
with formal disciplinary action for subsequent occurrences within any
rolling twenty-four-month period. The proposed rule change updates the
fine schedule to provide that, within any rolling twenty-four-month
period, the Exchange may apply a fine of $1,000 for the first
violation, $2,500 for a second violation, $5,000 for a third violation,
and formal disciplinary action for subsequent violations. Under this
proposed amendment, any Floor Participant who violates Rule 7610(d)
regarding a Floor Broker's obligations in determining Time Priority
Sequence shall be subject to the fines listed below.
---------------------------------------------------------------------------

\36\ See NYSE Arca Rule 10.12(k)(i)(40).

Floor Broker Failure to Identify a Broker Dealer Order. The
Exchange is also proposing to amend Rule 12140(e)(12) Floor Broker
Failure to Identify a Broker Dealer Order pursuant to BOX Rule IM-7580-
2 to increase and strengthen the sanctions imposed under this section.
The Exchange believes that increasing and strengthening these sanctions
is appropriate as the proposed more robust fine schedules may help
deter violative conduct on BOX. The

[[Page 41809]]

Exchange believes that increasing these trading floor related sanctions
to be more consistent with the other options exchanges will allow the
Exchange to more effectively deter trading floor violations. The
Exchange notes that this proposed change will bring these sanctions in
line with the sanctions imposed by NYSE Arca.\37\ Rule 12140(e)(12)
currently permits the Exchange to apply a fine of $250 for a first
occurrence, $500 for a second occurrence, $1,000 for a third
occurrence, and may proceed with formal disciplinary action for
subsequent offenses within any rolling twenty-four-month period. The
proposed rule change updates the fine schedule to provide that, within
any rolling twenty-four-month period, the Exchange may apply a fine of
$500 for the first violation, $1,500 for a second violation, $3,000 for
a third violation, and formal disciplinary action for subsequent
violations. Under this proposed amendment, any Floor Participant who
violates Rule IM-7580-2 regarding a Floor Broker's responsibility to
identify its orders shall be subject to the fines listed below.
---------------------------------------------------------------------------

\37\ See NYSE Arca Rule 10.12(k)(i)(11).

------------------------------------------------------------------------
Number of violations within any rolling 24-
month period Sanction
------------------------------------------------------------------------
First Violation............................ $500.
Second Violation........................... $1,500.
Third Violation............................ $3,000.
Subsequent Violations...................... Formal Disciplinary Action.
------------------------------------------------------------------------

The Exchange believes Exercise Limits (Rule 3140), Lead Market
Maker Continuous Quoting (Rule 8050(e)), Maintenance, Retention, and
Furnishing of Books, Records, and Other Information (Rule 10000), and
Anti-Money Laundering Compliance Program (Rule 10070) to be minor in
nature and consistent with violations at other options exchanges, and
therefore proposes to add them to the list of rules in Rule 12140(d)
eligible for a minor rule fine disposition. Particularly, the Exchange
believes that violations of each of the rules listed above are suitable
for incorporation into the MRVP because these violations are minor in
nature and consistent with violations at other options exchanges. The
Exchange notes that the proposed change is intended to provide for
greater consistency across the Exchange's MRVP and the MRVPs of the
other options exchanges. As detailed above, the Exchange is also
proposing to increase and strengthen the fines for certain minor rule
violations under Rule 12140. The Exchange believes that the proposed
increased fines will strengthen the Exchange's ability to carry out its
oversight and enforcement responsibilities in cases where full
disciplinary proceedings are unwarranted in view of the minor nature of
the particular violation. Specifically, the proposed rule change is
designed to prevent fraudulent and manipulative acts and practices
because it will provide the Exchange the ability to issue greater fines
and more effectively deter violative conduct.
The Exchange is also proposing to make additional technical and
non-substantive changes to provide greater clarity and consistency
within the Exchange's MRVP and with the MRVPs of the other options
exchanges. As a result of the proposed addition of Rules 12140(d)(10)
and (d)(11) above, the proposed rule change subsequently renumbers
current Rules 12140(d)(10), (11), (12), (13), and (14), to Rules
12140(d)(12), (13), (14), (15), and (16), respectively. The Exchange is
also proposing to amend the language within the fine schedules to use
the terms ``and thereafter'' and ``subsequent'' instead of ``or more''
when detailing the number of violations. The Exchange proposes to
update ``or more'' to ``and thereafter'' in Rule 12140(d)(7), (13),\38\
(14),\39\ and (15),\40\ and ``or more'' to ``subsequent'' in Rules
12140(d)(6) and (12).\41\ There is no substantive difference in the
Exchange's interpretation between ``or more'' and ``subsequent'' or
``and thereafter.'' The purpose of the change is to provide greater
clarity within the Exchange's MRVP by using more consistent
terminology. The Exchange believes these technical and non-substantive
changes are reasonable and appropriate because they will increase
readability of the MRVP and help prevent investor confusion. Further,
these proposed changes will allow the Exchange to carry out its
regulatory responsibility more quickly and efficiently by reducing
confusion regarding terminology in the administration of the MRVP. The
Exchange notes that the proposed change is intended to provide for
greater consistency within the Exchange's MRVP itself and with the
MRVPs of the other options exchanges.
---------------------------------------------------------------------------

\38\ As noted above, this is current Rule 12140(d)(11),but the
Exchange is proposing to renumber certain subsections under 12140(d)
due to the proposed addition of Rule 12140(d)(10) and (11).
\39\ As noted above, this is current Rule 12140(d)(12), but the
Exchange is proposing to renumber certain subsections under 12140(d)
due to the proposed addition of Rule 12140(d)(10) and (11).
\40\ As noted above, this is current Rule 12140(d)(13), but the
Exchange is proposing to renumber certain subsections under 12140(d)
due to the proposed addition of Rule 12140(d)(10) and (11).
\41\ As noted above, this is current Rule 12140(d)(10), but the
Exchange is proposing to renumber certain subsections under 12140(d)
due to the proposed addition of Rule 12140(d)(10) and (11).
---------------------------------------------------------------------------

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\42\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \43\ 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. The Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \44\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers. The Exchange further believes that the proposed rule changes
to Rule 12140(d) are consistent with Section 6(b)(6) of the Act,\45\
which provides that members and persons associated with members shall
be appropriately disciplined for

[[Page 41810]]

violation of the provisions of the rules of the exchange, by expulsion,
suspension, limitation of activities, functions, and operations, fine,
censure, being suspended or barred from being associated with a member,
or any other fitting sanction. As noted, the proposed rule change adds
certain rules as eligible for a minor rule fine disposition under the
Exchange's MRVP. The Exchange believes that violations of these
proposed rules are minor in nature and will be more appropriately
disciplined through the Exchange's MRVP and is proposing to amend the
fine schedules applicable to these additional rules to appropriately
sanctions such failures.
---------------------------------------------------------------------------

\42\ 15 U.S.C. 78f(b).
\43\ 15 U.S.C. 78f(b)(5).
\44\ Id.
\45\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

The Exchange also believes that the proposed change is designed to
provide a fair procedure for the disciplining of members and persons
associated with members, consistent with Sections 6(b)(7) and 6(d) of
the Act.\46\ Rule 12140, currently and as amended, does not preclude a
Participant or person associated with or employed by a Participant from
contesting an alleged violation and receiving a hearing on the matter
with the same procedural rights through a litigated disciplinary
proceeding. Finally, the Exchange believes that the proposed rule
change will strengthen its ability to carry out its oversight
responsibilities as a self-regulatory organization pursuant to the Act
and reinforce its surveillance and enforcement functions.
---------------------------------------------------------------------------

\46\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change to add certain
rules as eligible for a minor rule fine disposition under its MRVP,
which it considers violations of such rules to be minor in nature and
consistent with violations at other options exchanges, will assist the
Exchange in preventing fraudulent and manipulative acts and practices
and promoting just and equitable principles of trade, and will serve to
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. The Exchange believes violations of the above-
listed rules to be minor in nature and therefore proposes to add them
to the list of rules in Rule 12140(d) eligible for a minor rule fine
disposition. Particularly, the Exchange believes that violations of
each of the rules listed above are suitable for incorporation into the
MRVP because these violations are generally minor in nature and
consistent with violations at other options exchanges. Further, the
Exchange will be able to carry out its regulatory responsibility more
quickly and efficiently by incorporating these violations into the
MRVP.
Specifically, the Exchange believes the adoption of Rule
12140(d)(10) Maintenance, Retention and Furnishing of Books, Records
and Other Information pursuant to BOX Rule 10000 is appropriate because
it will help deter BOX Participants from failing to make, keep current,
and preserve such books and records as required, or failure to furnish
such books and records in a timely manner upon request by the Exchange.
The Exchange believes that adding this rule to the MRVP will allow the
Exchange to carry out its regulatory responsibility more quickly and
efficiently. The Exchange believes that the lesser penalty of $500 for
an initial violation and then providing higher fines for second and
third violations and the option of a fine of $5,000 or formal
disciplinary proceedings for a fourth violation and thereafter during a
rolling twenty-four-month period is appropriate. This will allow the
Exchange to levy progressively larger fines and greater penalties
against repeat-offenders. The Exchange believes this fine structure may
serve to deter repeat-offenders while providing a reasonable penalty
for a first offense within a rolling twenty-four-month period. The
Exchange believes that adding this rule to the MRVP will allow the
Exchange to carry out its regulatory responsibility more quickly and
efficiently in regard to violations of BOX Rule 10000.
The Exchange believes the adoption of Rule 12140(d)(11), Anti-Money
Laundering Compliance Program pursuant to BOX Rule 10070 is appropriate
because it will help deter BOX Participants from failing to satisfy the
requirements of the anti-money laundering compliance program. The
Exchange believes that adding this rule to the MRVP will allow the
Exchange to carry out its regulatory responsibility more quickly and
efficiently in regard to violations of BOX Rule 10070. The Exchange
believes that the proposed fine structure permitting the Exchange to
apply a fine of $1,000 for a first violation and $2,500 for subsequent
violations is appropriate as this will effectively penalize both first
time and repeat offenders. The Exchange believes that the proposed
fines will be sufficient to warn against and help deter potentially
violative conduct. The Exchange believes that adding this rule to the
MRVP will allow the Exchange to carry out its regulatory responsibility
more quickly and efficiently in regard to violations of BOX Rule 10070.
The Exchange believes that amending Rule 12140(d)(6), Continuous
Quotes to include continuous quoting violations by Lead Marker Makers
pursuant to BOX Rule 8055(c)(1) is appropriate because it will allow
the Exchange to carry out its regulatory responsibility quickly and
efficiently in a manner that is consistent with the way it handles
Market Maker continuous quoting violations. The Exchange notes that
Cboe Options, and NYSE Arca have rule provisions in their minor rule
violation plans that address Market Maker and Lead Market Maker
continuous quoting obligations.\47\ Rule 12140(d)(6) currently permits
the Exchange to give a Letter of Caution for the first violation within
one calendar year. For subsequent violations during the same period,
the fine schedule permits the Exchange to issue a fine of $300 per day.
The proposed rule change increases and strengthens the fine schedule to
provide that, during one calendar year, the Exchange may give a Letter
of Caution for a first violation, may apply a fine of $1,500 for a
second violation, may apply a fine of $3,000 for a third violation, and
may proceed with formal disciplinary action for subsequent violations.
The Exchange believes that maintaining the lesser penalty (Letter of
Caution) for a first violation and then providing higher fines for
second and third violations and, ultimately, formal disciplinary
proceedings for any subsequent violations during one calendar year is
appropriate. This will allow the Exchange to levy progressively larger
fines and greater penalties against repeat-offenders (as opposed to a
fine range for any violations that may come after a first violation).
The Exchange believes this fine structure may serve to deter repeat-
offenders while providing reasonable warning for a first violation
within one calendar year. The Exchange believes that removing the
language from Rule 12140(d)(6) that states ``Violations of Rule 8050(e)
or Rule 8055(c)(1) that continue over consecutive trading days will be
subject to a separate fine, pursuant to this paragraph (6), for each
day during which the violation occurs and is continuing up to a limit
of fifteen consecutive trading days'' is reasonable because with the
proposed updates to the fine schedule replacing the fine of $300 per
day with a fine of $1,500, this language is no longer necessary. This
language was originally included to allow the Exchange to fine a
Participant $300 per day for each consecutive trading day during which
a violation occurs. The Exchange is proposing to

[[Page 41811]]

reformat the fine schedule and remove the listed fine of $300 per day.
The Exchange is now proposing a fine of $1,500 for a second violation,
a fine of $3,000 for a third violation, and formal disciplinary action
for any subsequent violations. Under the new format, the language
allowing consecutive trading day violations for up to fifteen days to
be fined separately is no longer consistent or feasible. Under the
MRVP, a Participant may only be fined a maximum of $5,000 and with the
greater fines being proposed the previous fine structure no longer
applies. The Exchange also believes that removing this language will
clarify the proposed updates to the fine schedule and may help reduce
Participant confusion over the Exchange's application of the fines
within BOX Rule 12140(d)(6). The Exchange notes that Cboe Options, and
NYSE Arca have similar rule provisions in their MRVPs addressing Market
Maker and Lead Market Maker continuous quoting obligations.\48\ The
Exchange also notes that the proposed fines will bring the sanctions
for violations of continuous quoting obligations in line with the
sanctions currently imposed by Cboe Options.\49\
---------------------------------------------------------------------------

\47\ See Cboe Options Rule 13.15(g)(9). See also NYSE American
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
\48\ See Cboe Options Rule 13.15(g)(9). See also NYSE American
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(39).
\49\ See Cboe Options Rule 13.15(g)(9).
---------------------------------------------------------------------------

The Exchange believes that adding Lead Market Maker Continuous
Quoting to Rule 12140(d)(6) within the MRVP will allow the Exchange to
carry out its regulatory responsibility more quickly and efficiently in
regard to violations of BOX Rule 8055(c)(1). The Exchange notes that
the proposed change will also provide for greater consistency across
the Exchange's MRVP and the MRVPs of the other options exchanges. The
Exchange believes violations of these rules to be minor in nature and
would be more appropriately disciplined through the Exchange's MRVP. As
described above, and as is the case for all rule violations covered
under Rule 12140(d) and (e), the Exchange may determine that a
violation of Market-Maker quoting obligations is intentional,
egregious, or otherwise not minor in nature and choose to proceed under
the Exchange's formal disciplinary rules rather than its MRVP.
The Exchange believes that amending Rule 12140(d)(1), Position
Limits, to include violations of exercise limits pursuant to BOX Rule
3140 is appropriate because it will allow the Exchange to carry out its
regulatory responsibility quickly and efficiently in a manner that is
consistent with the way it handles violations of position limits.
Violations of position and exercise limits on the Exchange generally
occur contemporaneously, so adding exercise limits to the existing
position limits minor rule violation will allow the Exchange to address
these related violations more effectively. The Exchange is proposing to
keep the fine levels for exercise limit violations the same as the
current fine levels for position limits. The Exchange believes that
updating the language in the heading of the fine schedule to change
``violations'' to ``offenses'' is reasonable as it adds detail and
clarity to the fine schedules by clarifying the Exchange's use of these
terms as used within the fine schedules. The Exchange believes this
change may help reduce Participant confusion over the Exchange's
application of the fines within BOX Rule 12140(d)(1). The Exchange
notes that this proposal is consistent with the MRVPs in place at Cboe
Options, NYSE American, and NYSE Arca.\50\
---------------------------------------------------------------------------

\50\ See Cboe Options Rule 13.15(g)(1). See also NYSE American
Rule 9217(iii)(17). See also NYSE Arca Rule 10.12(k)(i)(21).
---------------------------------------------------------------------------

The Exchange believes that increasing and strengthening the
sanctions in Rule 12140(d)(5) and current Rule 12140(d)(10) \51\ is
appropriate as the proposed more robust fine schedules may help deter
violative conduct on BOX. The Exchange believes that increasing these
sanctions will allow the Exchange to provide more appropriate
punishments and more effectively deter violations of this nature. As
such, the Exchange believes that this will assist the Exchange in
preventing fraudulent and manipulative acts and practices and promoting
just and equitable principles of trade and will serve to 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.
---------------------------------------------------------------------------

\51\ See supra note 41.
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change to adopt Rules
12140(d)(10) and (11), and amend current Rules 12140(d)(1), (5), (6),
(10),\52\ (11),\53\ (12),\54\ (13),\55\ and (14) \56\ will assist the
Exchange in preventing fraudulent and manipulative acts and practices
and promoting just and equitable principles of trade and will serve to
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. The Exchange notes that the proposed updates
to the minor rule violations and subsequent sanctions will bring them
more in line with the MRVPs in place at NYSE American, NYSE Arca, and
Cboe Options, will promote greater consistency across the options
exchanges and reduce investor confusion.
---------------------------------------------------------------------------

\52\ Id.
\53\ See supra note 38.
\54\ See supra note 39.
\55\ See supra note 40.
\56\ As noted above, this proposed rule change subsequently
renumbers current Rule 12140(d)(14) to (d)(16) as a result of the
proposed addition of Rules 12140(d)(10), and (d)(11).
---------------------------------------------------------------------------

The Exchange believes that the proposed technical and clarifying
changes are appropriate and benefit investors by adding clarity to the
rules. The Exchange believes that the proposed rule change to renumber
current Rules 12140(d)(10), (11), (12), (13), and (14), to Rules
12140(d)(12), (13), (14), (15), and (16), respectively, will benefit
investors by adding clarity to the rules. The Exchange believes that
updating the language to use ``offense'' or ``violation'' instead of
``occurrence'' and ``rolling'' instead of ``running'' within the fine
schedule is appropriate will provide greater consistency in the
terminology used within the Exchange's MRVP and with the MRVPs of the
other options exchanges. The purpose of the change is to provide
greater clarity within the Exchange's MRVP by using more consistent
terminology throughout. The Exchange also believes that amending the
language within the fine schedules to use the terms ``and thereafter''
and ``subsequent'' instead of ``or more'' when detailing the number of
violations will provide more clarity and may reduce investor confusion.
There is no substantive difference in the Exchange's interpretation
between ``or more'' and ``subsequent'' or ``and thereafter''. The
purpose of the change is to provide greater clarity within the
Exchange's MRVP by using more consistent terminology. The Exchange
believes these technical and non-substantive changes are reasonable and
appropriate because they will increase readability of the MRVP and help
prevent investor confusion. Further, these proposed changes will allow
the Exchange to carry out its regulatory responsibility more quickly
and efficiently by reducing confusion regarding terminology in its
administration of the MRVP. The Exchange notes that the proposed change
will also provide for greater consistency between the Exchange's MRVP
and the MRVPs of the other options exchanges, which is designed to
benefit investors by providing more consistent language among the
various options exchanges.
The Exchange believes that the proposed rule change to update the
fine

[[Page 41812]]

schedule and language applicable to minor rule violations related to
certain Trading Floor violations listed in Rule 12140(e) to increase
the sanctions will assist the Exchange in preventing fraudulent and
manipulative acts and practices and promoting just and equitable
principles of trade, and will serve to 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.
Particularly, the Exchange believes that updating the fine schedule
applicable to minor rule violations related to certain Trading Floor
violations does not directly impact trading on the Exchange,
maintenance of a fair and orderly market, and/or customer protection.
The Exchange adopted the minor rule violations and corresponding fines
under Rule 12140(e) in 2017 following the establishment of the BOX
Trading Floor.\57\ In 2017, the Exchange believed it appropriate to
adopt lower fine amounts as the new trading floor was established and
to be more consistent with the other fines listed within the Exchange's
MRVP. However, the Exchange's Trading Floor is now well-established,
and the Exchange believes that increasing and strengthening these
sanctions is appropriate as the proposed more robust fine schedules may
help deter violative conduct on BOX. The Exchange believes that
increasing certain trading floor related sanctions to be more
consistent with the other options exchanges will allow the Exchange to
more effectively deter trading floor violations. The Exchange notes
that this proposed change will bring the sanctions more in line with
the fine schedules at NYSE Arca.\58\ As such, the proposed rule change
is also designed to benefit investors by providing more consistent
penalties across the MRVPs of the Exchange and another exchange.
---------------------------------------------------------------------------

\57\ See supra note 26.
\58\ See NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

The Exchange believes that updating the language within certain
minor rule violations listed within Rule 12140 to use the term
``violation'' instead of ``occurrence'' when detailing the number of
violations within the fine schedules will provide greater clarity and
consistency in the terminology used within the Exchange's MRVP. Within
the MRVP, the Exchange interprets a violation to mean a singular rule
violation, while and multiple violations may be deemed to constitute
one offense. The Exchange believes that changing ``offense'' to
``violation'' in Rule 12140(d)(3), ``occurrence'' to ``offense'' in
Rule 12140(d)(5), and ``occurrence'' to ``violation'' in Rule
12140(e)(1)-(12) is appropriate because it will help clarify this
distinction between offense and violation by updating the language in
the MRVP to only use the term offense when the listed fines cover
multiple violations grouped together. The Exchange also believes that
the proposed technical changes to renumber and update the language in
certain minor rule violations would not be inconsistent with the public
interest and the protection of investors because investors will not be
harmed and in fact would benefit from increased clarity and
transparency, thereby reducing potential confusion.
In requesting the proposed additions to BOX Rule 12140(d), the
Exchange in no way minimizes the importance of compliance with Exchange
Rules and all other rules subject to the imposition of fines under the
MRVP. Minor rule fines provide a meaningful sanction for minor or
technical violations of rules when the conduct at issue does not
warrant stronger, immediately reportable disciplinary sanctions. The
inclusion of a rule in the Exchange's MRVP does not minimize the
importance of compliance with the rule, nor does it preclude the
Exchange from choosing to pursue violations of eligible rules through a
Letter of Consent if the nature of the violations or prior disciplinary
history warrants more significant sanctions. Rather, the Exchange
believes that the proposed rule change will strengthen the Exchange's
ability to carry out its oversight and enforcement responsibilities in
cases where full disciplinary proceedings are unwarranted in view of
the minor nature of the particular violation. Rather, the option to
impose a minor rule sanction gives the Exchange additional flexibility
to administer its enforcement program in the most effective and
efficient manner while still fully meeting the Exchange's remedial
objectives in addressing violative conduct. Specifically, the proposed
rule change is designed to prevent fraudulent and manipulative acts and
practices because it will provide the Exchange the ability to issue a
minor rule fine for violations relating to the Anti-Money Laundering
Compliance Program (Rule 10070), Lead Market Maker Continuous Quoting
(Rule 8055), Exercise Limits (Rule 3140), and Maintenance, Retention
and Furnishing of Books, Records and Other Information (Rule 10000)
where a more formal disciplinary action may not be warranted or
appropriate.

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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather is concerned
solely with updating its MRVP in connection with rules eligible for a
minor rule fine disposition. The Exchange believes the proposed rule
changes, overall, will strengthen the Exchange's ability to carry out
its oversight and enforcement functions and deter potential violative
conduct. The Exchange notes that the proposed additional violations are
similar to minor rule violations designated in the MRVPs on other
options exchanges.\59\
---------------------------------------------------------------------------

\59\ Cboe Options, NYSE American, and NYSE Arca have rule
provisions in their minor rule violation plans that address exercise
limits and market maker continuous quoting obligations. NYSE Arca
and Cboe Options have rule provisions in their MRVPs that address
failures related to AML Program Implementation. Additionally, NYSE
Arca has rule provisions in its MRVP that address various
recordkeeping violations. See Cboe Options Rule 13.15(g). See also
NYSE American Rule 9217. See also NYSE Arca Rule 10.12.
---------------------------------------------------------------------------

The Exchange believes the proposed rule changes, overall, will
strengthen the Exchange's ability to carry out its oversight and
enforcement functions and deter potential violative conduct. Further,
the proposal relates to the Exchange's role and responsibilities as a
self-regulatory organization and the manner in which it disciplines its
Participants and associated persons for violations of its rules. As
such, 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.

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. Discussion and Commission Findings

The Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\60\ In particular, the

[[Page 41813]]

Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\61\
which requires that the rules of an exchange be designed to promote
just and equitable principles of trade, to remove impediments and to
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The Commission also believes that the proposal, as modified by
Amendment No. 1, is consistent with Sections 6(b)(1) and 6(b)(6) of the
Act \62\ which require that the rules of an exchange enforce compliance
with, and provide appropriate discipline for, violations of Commission
and Exchange rules. Finally, the Commission finds that the proposal, as
modified by Amendment No. 1, is consistent with the public interest,
the protection of investors, or otherwise in furtherance of the
purposes of the Act, as required by Rule 19d-1(c)(2) under the Act,\63\
which governs minor rule violation plans.
---------------------------------------------------------------------------

\60\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\61\ 15 U.S.C. 78f(b)(5).
\62\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\63\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

As stated above, the Exchange proposes to amend Rule 12140 by: (1)
adding certain rule violations that the Exchange believes to be minor
in nature and consistent with violations at other options exchanges;
(2) updating the fine schedule applicable to minor rule violations
related to certain rule violations; and (3) making other clarifying and
non-substantive changes.
The Commission believes that Rule 12140 is an effective way to
discipline a member for a minor violation of a rule. More specifically,
the Commission finds that the Exchange's proposal, as modified by
Amendment No. 1, of adding certain rules to the Exchange's list of
current minor rule violations provides a reasonable means of addressing
violations that do not rise to the level of requiring formal
disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission also finds that amending
the associated fine schedule is consistent with the Act because it may
help the Exchange's ability to better carry out its oversight and
enforcement responsibilities by levying appropriate fines for minor
violations of the rules included in Rule 12140. Lastly, the Commission
also believes that the Exchange's proposal to make clarifying and non-
substantive changes to Rule 12140 is consistent with the Act because
such changes will add clarity to the Exchange's rules.
In approving the propose rule change, as modified by Amendment No.
1, the Commission in no way minimizes the importance of compliance with
the Exchange's rules and all other rules subject to fines under Rule
12140. The Commission believes that a violation of any self-regulatory
organization's rules, as well as Commission rules, is a serious matter.
However, Rule 12140 provides a reasonable means of addressing rule
violations that may not rise to the level of requiring formal
disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission expects that the Exchange
will continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case-by-case basis, whether a
fine of more or less than the recommended amount is appropriate for a
violation under Rule 12140 or whether a violation requires formal
disciplinary action.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change

Interested persons are invited to submit written views, data, and
arguments concerning whether Amendment No. 1 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#156760797038767a7878707b6166556670763b727a63"><span class="__cf_email__" data-cfemail="740601181159171b1919111a0007340711175a131b02">[email&#160;protected]</span></a>. Please include
File Number SR-BOX-2022-08 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-2022-08. 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-2022-08 and should be submitted on
or before August 3, 2022.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. In Amendment No. 1, the Exchange revised the
proposed rule change to: (1) provide additional detail and
clarification regarding the Exchange's usage of the terms ``violation''
and ``offense'' within Rule 12140; and (2) clarify the application of
fines under Rule 12140(d)(6). The Commission believes that Amendment
No. 1 provides additional accuracy and clarity to the proposed rule
change and does not raise any novel regulatory issues. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\64\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
---------------------------------------------------------------------------

\64\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\65\ that the proposed rule change (SR-BOX-2022-08), as modified by
Amendment No. 1 thereto, be, and it hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------

\65\ Id.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\66\
---------------------------------------------------------------------------

\66\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14883 Filed 7-12-22; 8:45 am]
BILLING CODE 8011-01-P

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