Notice2022-24507
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC Facility To Amend Certain Fees and Rebates for Qualified Contingent Cross Transactions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 10, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 217 (Thursday, November 10, 2022)</title>
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[Federal Register Volume 87, Number 217 (Thursday, November 10, 2022)]
[Notices]
[Pages 67980-67982]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24507]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96234; File No. SR-BOX-2022-28]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule on the BOX Options Market LLC Facility To Amend Certain Fees
and Rebates for Qualified Contingent Cross Transactions
November 4, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 28, 2022, BOX Exchange LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the Exchange. The Exchange filed the proposed rule
change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing
with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule to
amend the certain fees and rebates for Qualified Contingent Cross
(``QCC'') transactions on the BOX Options Market LLC (``BOX'') options
facility. The text of the proposed rule change is available from the
principal office of the Exchange, at the Commission's Public Reference
Room and also on the Exchange's internet website at <a href="http://boxexchange.com">http://boxexchange.com</a>.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule for trading on BOX
to amend the certain fees and rebates for Qualified Contingent Cross
(``QCC'') transactions.\5\ A QCC Order is defined as an originating
order (Agency Order) to buy or sell at least 1,000 standard option
contracts, or 10,000 mini-option contracts, that is identified as being
part of a qualified contingent trade, coupled with a contra side order
to buy or sell an equal number of contracts.\6\
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\5\ BOX was made aware that competing options exchanges intend
to make similar changes to their respective QCC fees and rebates
effective for October 3, 2022. As such, the Exchange is filing this
proposal so that BOX can remain competitive with respect to QCC
transactions within the options industry.
\6\ See BOX Rule 7110(c)(6).
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The Exchange proposes to amend the transactions fees for all Broker
Dealers and Market Makers for their QCC transactions on BOX.
Specifically, the Exchange proposes to increase the QCC fees for Broker
Dealers and Market Makers to $0.20 from $0.17 for both the Agency Order
and the Contra Order. The Exchange notes that the proposed fees are
identical to another exchange in the industry.\7\
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\7\ See Cboe EDGX Exchange, Inc. (``CboeEDGX'') Fee Schedule.
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The Exchange also proposes to amend certain rebates for QCC
transactions.\8\ Specifically, the Exchange proposes to amend the
rebates in Tiers 2, 3, and 4, for both Rebate 1 and Rebate 2 in the QCC
Rebate subsection. In Tier 2, if a Participant's QCC Agency Order
Volume on BOX is 1,500,000 to 2,499,999 contracts, the Exchange
proposes to increase Rebate 1 to $0.16 from $0.15 and increase Rebate 2
to $0.24 from $0.23. In Tier 3, if a Participant's QCC Agency Order
Volume on BOX is 2,500,000 to 3,499,999 contracts, the Exchange
proposes to increase Rebate 1 to $0.16 from $0.15 and increase Rebate 2
to $0.25 from $0.24. Lastly, in Tier 4, if a Participant's QCC Agency
Order Volume on BOX is 3,500,000 contracts or above, the Exchange
proposes to increase Rebate 1 to $0.17 from $0.15 and increase Rebate 2
to $0.27 from $0.25. The Exchange notes that the proposed rebates are
in line with (or in some instances higher than) rebates currently
assessed at another exchange.\9\
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\8\ The Exchange notes that the order volume thresholds in Tiers
1 through 4 remain the same.
\9\ See supra note 7.
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Lastly, the Exchange proposes to delete the sentence in Section
IV.D.1 that states that ``if the Participant qualifies for both
rebates, only the larger rebate will be applied to the QCC
transaction.'' The Exchange notes that under the current fee schedule,
a market participant can only qualify for 1 of the 2 rebates set forth
in Section IV.D.1 and therefore, the Exchange proposes to remove this
sentence.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act, in general, and Section
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Participants and other persons using its facilities
and does not unfairly discriminate between customers, issuers, brokers
or dealers.
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\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed changes to the QCC Rebate
structure are reasonable because the proposed changes provide
opportunities for Participants to receive higher rebates for increasing
the Participant's Agency QCC Order volume on BOX. The Exchange again
notes that a volume-based incentive structure with similar rebates for
QCC transactions currently exists at another exchange and that the
Exchange is filing this proposal so that BOX can remain competitive
with respect to QCC transactions within the options industry.\11\ The
Exchange also believes that the proposed QCC Rebates are equitable and
not unfairly discriminatory as the proposed rebates will apply
uniformly to the Participants that reach the applicable tiers. Further,
the Exchange continues to believe that applying the proposed rebates
where at least one party to the QCC transaction is a Broker Dealer or
Market Maker is reasonable, equitable, and not unfairly discriminatory
because Public
[[Page 67981]]
Customers and Professional Customers are not assessed fees for these
transactions and, in turn, do not need the incentive of the rebate.
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\11\ Id.
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The Exchange continues to believe that the current rebate structure
and proposed rebates are reasonable as it provides an incremental
incentive for Participants to strive for the higher tier levels, which
provide increasingly higher rebates for incrementally more QCC volume
achieved, which the Exchange believes is a reasonably designed
incentive for Participants to grow their QCC order flow to receive the
enhanced rebates. The Exchange also believes that continuing to have
two alternative rebates (depending on the capacity of the parties to
the transaction) is reasonable and appropriate as this is how the
Exchange assesses the rebates for QCC transactions today.\12\
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\12\ The Exchange notes that Rebate 1 assesses lower rebates
than rebates in Rebate 2 because when only one side of the QCC
transaction is a Broker Dealer or Market Maker then only one side of
the QCC transaction is assessed a fee, therefore the total fees
assessed are lower and the corresponding rebate is also lower.
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The Exchange believes the proposed changes to the QCC transaction
fees are reasonable as they are identical to fees currently assessed
for QCC transactions at another exchange.\13\ The Exchange also
believes that the proposed fees are equitable and not unfairly
discriminatory as they will apply equally to all Broker Dealers and
Market Makers on BOX. Further, the Exchange believes that increasing
QCC transaction fees for Broker Dealers and Market Makers (and not
Public Customers and Professional Customers) is reasonable, equitable
and not unfairly discriminatory because Broker Dealers and Market
Makers are offered increased rebates (as discussed above) for their QCC
transactions where Public Customers and Professional Customers are not
assessed fees for these transactions. As such, the Exchange believes
that continuing to assess no fee to Public Customers and Professional
Customers is reasonable, equitable, and not unfairly discriminatory.
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\13\ See supra note 7.
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Further, the Exchange believes that charging Broker Dealers and
Market Makers more than Public Customers and Professional Customers for
QCC Orders is reasonable equitable and not unfairly discriminatory. The
securities markets generally, and BOX in particular, have historically
aimed to improve markets for investors and develop various features
within the market structure for Public Customer benefit. The Exchange
believes that continuing to charge no fees to Public Customers and
Professional Customers in QCC transactions is reasonable and,
ultimately, will benefit all Participants trading on the Exchange by
attracting Public Customer and Professional Customer order flow.
Further, as discussed above, the Exchange believes that the proposed
fees for Broker Dealers and Market Makers are equitable and not
unfairly discriminatory as they will be assessed to all Broker Dealers
and Market Makers on BOX. The Exchange continues to believe that
charging no fee to Professional Customers is reasonable and,
ultimately, will benefit all Participants trading on the Exchange by
attracting additional order flow.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed changes to the QCC transactions fees will not cause an
unnecessary burden on intermarket competition as the proposed fees are
identical to fees at another exchange. Rather, the Exchange believes
that offering similar fees as another exchange could promote
competition in the industry. Further, the Exchange notes that the
proposed QCC transactions fees will be applied uniformly to all
similarly situated Broker Dealers and Market Makers on BOX and thus
will not cause any burden on intramarket competition. Further, the
Exchange believes that the proposed changes to the QCC Rebates will not
cause an unnecessary burden on intermarket competition as the proposed
rebates are in line with similar QCC rebates assessed at another
exchange. The Exchange also notes that the proposed QCC rebates will be
applied uniformly to the Participants that reach the applicable tiers.
The Exchange believes that the proposed changes related to QCC
transactions would not impose any burden on intramarket competition,
but rather, serves to increase intramarket competition by incentivizing
market participants to direct their QCC orders to the Exchange which in
turn may allow market participants to offer more competitive prices for
their services.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and rebates to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed rule change reflects this
competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act \14\ and Rule 19b-4(f)(2)
thereunder,\15\ because it establishes or changes a due, or fee.
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d4a6a1b8b1f9b7bbb9b9b1baa0a794a7b1b7fab3bba2"><span class="__cf_email__" data-cfemail="2e5c5b424b034d4143434b405a5d6e5d4b4d00494158">[email protected]</span></a>. Please include
File Number SR-BOX-2022-28 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-2022-28. 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 (http://www.sec.gov/
[[Page 67982]]
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-2022-28, and should be
submitted on or before December 1, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24507 Filed 11-9-22; 8:45 am]
BILLING CODE 8011-01-P
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