Notice2023-12663
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Separate Fees and Rebates on Non-Auction Transactions for Options Overlying the Standard and Poor's Depositary Receipts Trust
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
June 14, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 114 (Wednesday, June 14, 2023)</title>
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[Federal Register Volume 88, Number 114 (Wednesday, June 14, 2023)]
[Notices]
[Pages 38926-38929]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-12663]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97673; File No. SR-BOX-2023-15]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Establish
Separate Fees and Rebates on Non-Auction Transactions for Options
Overlying the Standard and Poor's Depositary Receipts Trust
June 8, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 31, 2023, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 38927]]
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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\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
establish separate fees and rebates on Non-Auction transactions for
options overlying the Standard and Poor's Depositary Receipts Trust
(``SPY'') on the BOX Options Market LLC (``BOX'') options facility.
While changes to the fee schedule pursuant to this proposal will be
effective upon filing, the changes will become operative on June 1,
2023. 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="https://rules.boxexchange.com/rulefilings">https://rules.boxexchange.com/rulefilings</a>.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section IV, Non-Auction
Transactions, of the BOX Fee Schedule. Specifically, the Exchange
proposes to establish separate fees and rebates on Non-Auction
transactions for options overlying the Standard and Poor's Depositary
Receipts Trust (``SPY'').\5\
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\5\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
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Non-Auction Transactions
Currently, in Section IV.A of the BOX Fee Schedule, fees and
credits for Non-Auction transactions are assessed depending on three
factors: (i) the account type of the Participant submitting the order;
(ii) whether the Participant is a liquidity provider or liquidity
taker; and (iii) the account type of the contra party.
The Exchange now proposes to assess separate fees for SPY Non-
Auction transactions. Specifically, when a Public Customer SPY order
interacts with a Public Customer or non-Public Customer SPY order, the
Exchange will not assess a fee or credit.
Further, when a Professional Customer or Broker Dealer SPY order
interacts with a Public Customer SPY order, the Exchange proposes to
assess a $0.60 fee when making liquidity or $0.50 when taking
liquidity. When a Professional Customer or Broker Dealer SPY order
interacts with a Professional Customer, Broker Dealer, or Market Maker
SPY order, the Exchange proposes to assess $0.15 for making liquidity
or $0.50 for taking liquidity. The Exchange notes that these fees are
currently assessed to SPY transactions today as SPY is a Penny Interval
Class.\6\
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\6\ See BOX Informational Circular 2022-11 available at <a href="https://boxoptions.com/assets/IC-2022-11-Penny-Program-Class-Removals-1.pdf">https://boxoptions.com/assets/IC-2022-11-Penny-Program-Class-Removals-1.pdf</a>.
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When a Market Maker SPY order interacts with a Public Customer SPY
order, the Exchange proposes to assess no fee when making liquidity or
$0.50 when taking liquidity. When a Market Maker SPY order interacts
with a Professional Customer, Broker Dealer, or Market Maker SPY order,
the Exchange proposes to assess no fee when making liquidity or $0.50
when taking liquidity.
The proposed fee structure for SPY Non-Auction Transactions will be
as follows:
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SPY
Account type Contra party -------------------------------
Maker Taker
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Public Customer............................... Public Customer................. $0.00 $0.00
Professional Customer/Broker 0.00 0.00
Dealer.
Market Maker.................... 0.00 0.00
Professional Customer or Broker Dealer........ Public Customer................. 0.60 0.50
Professional Customer/Broker 0.15 0.50
Dealer.
Market Maker.................... 0.15 0.50
Market Maker.................................. Public Customer................. 0.00 0.50
Professional Customer/Broker 0.00 0.50
Dealer.
Market Maker.................... 0.00 0.50
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For example, under the proposal, if a Public Customer submitted a
SPY order to the BOX Book (making liquidity), the Public Customer would
not be offered a rebate or charged a fee if the order interacted with a
Market Maker's SPY order and the Market Maker (taking liquidity) would
be charged $0.50.
Tiered Volume Rebate for Non-Auction Transactions
The Exchange also proposes to amend Section IV.A.1 of the Fee
Schedule, Tiered Volume Rebate for Non-Auction Transactions.
Specifically, the Exchange proposes to adopt separate rebates for SPY
transactions for Public Customers in Non-Auction Transactions. For Tier
1, where percentage thresholds of Public Customer volume is 0.000%-
0.129%, the Exchange proposes no rebates. For Tier 2, where percentage
thresholds of Public Customer volume is 0.130%-0.339%, the Exchange
proposes to assess a $0.05 rebate when making liquidity or no rebate
when taking liquidity. For Tier 3, where percentage thresholds of
Public Customer volume is 0.340%-0.549%, the Exchange proposes
[[Page 38928]]
a $0.10 rebate when making liquidity or no rebate when taking
liquidity. For Tier 4, where percentage thresholds of Public Customer
volume is 0.550% and above, the Exchange proposes a $0.27 rebate when
making liquidity or no rebate for taking liquidity. The proposed rebate
structure will be as follows:
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Percentage Per contract rebate
thresholds of -------------------------------
national SPY
customer volume -------------------------------
Tier in multiply-
listed options
classes Maker Taker
(monthly)
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1..................... 0.000%-0.129%... $0.00 $0.00
2..................... 0.130%-0.339%... (0.05) 0.00
3..................... 0.340%-0.549%... (0.10) 0.00
4..................... 0.550% and Above (0.27) 0.00
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act, in general, and Section
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Participants and other persons using its facilities
and does not unfairly discriminate between customers, issuers, brokers
or dealers.
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\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange's proposal to adopt separate fees for SPY Non-Auction
Transactions is reasonable, equitable, and not unfairly discriminatory
because pricing by symbol is a common practice on many U.S. options
exchanges as a means to incentivize order flow to be sent to an
exchange for execution in the most actively traded options classes. The
Exchange believes that eliminating maker fees for Market Makers when
trading against Public Customers will incentivize Market Makers to
provide tighter spreads in SPY which may lead to increased order flow
to BOX and result in increased liquidity on the Exchange, benefitting
all market participants. The Exchange also proposes to eliminate Public
Customer rebates for transactions when the Market Maker is a maker and
the Public Customer is a taker because BOX will no longer receive fees
when the Market Maker is a maker and the Public Customer is a taker.
The Exchange notes that other exchanges assess separate fees and
credits for SPY transactions,\8\ and that it currently assesses
separate fees and rebates for SPY transactions for PIP and COPIP
Transactions on BOX.\9\ The Exchange also notes that SPY has the most
actively traded options \10\ and therefore the Exchange believes that
separate fees are appropriate to more effectively attract order flow to
BOX.
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\8\ See Nasdaq Phlx LLC (``Phlx'') Fee Schedule, Section 3
(Rebates and Fees for Adding and Removing Liquidity in SPY). The
Exchange notes that while PHLX differentiates SPY from other symbols
for fee purposes, the structure and amount of the fees are different
than the proposal discussed herein.
\9\ See BOX Fee Schedule, Section IV.B (PIP and COPIP
Transactions).
\10\ See <a href="https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options">https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options</a> (providing a daily list of the most
active options by type).
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Non-Auction Transactions
The Exchange believes the proposed Non-Auction Transaction fees for
Public Customer SPY transactions are reasonable. Under the proposal,
Public Customers will never pay a fee for their SPY Non-Auction
Transactions and may be eligible for a rebate depending on their
monthly volume for all transactions executed on BOX under Section
IV.A.1. The Exchange believes that charging no fee to Public Customers
for SPY Non-Auction Transactions is 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. Accordingly, the Exchange believes that charging no
fee for Public Customers for their SPY transactions is appropriate and
not unfairly discriminatory. The Exchange notes that where the Public
Customer is a taker against Professional Customer/Broker Dealer or
Market Maker, the Public Customer will no longer receive a rebate. The
Exchange believes that any disincentive created by removing this rebate
will be more than offset by Market Makers providing tighter spreads in
response to the elimination of maker fees for Market Makers trading
against Public Customers. Tighter spreads may attract a higher level of
Public Customer order flow to the BOX Book and create liquidity, which
will ultimately benefit all Participants trading on BOX.
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for SPY Non-Auction
Transactions is equitable and not unfairly discriminatory. Professional
Customers, while Public Customers by virtue of not being Broker
Dealers, generally engage in trading activity more similar to Broker
Dealer proprietary trading accounts (submitting more than 390 standard
orders per day on average). The Exchange believes that the higher level
of trading activity from these Participants will draw a greater amount
of BOX system resources than that of non-professional, Public
Customers. Because this higher level of trading activity will result in
greater ongoing operational costs, the Exchange aims to recover its
costs by assessing Professional Customers and Broker Dealers higher
fees for transactions. The Exchange notes that the proposed SPY
transaction fees for Professional Customers and Broker Dealers is
identical to what their SPY transactions are assessed today.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to assess no maker fee for BOX Market Makers trading
against Public Customers and to eliminate rebates when the Public
Customer is a taker against a Professional Customer, Broker Dealer, or
Market Maker for SPY Non-Auction Transactions because, when being
charged no fee for their transactions, Market Makers may tighten their
spreads in SPY and therefore will increase market quality in SPY
options. Specifically, Market Makers can provide higher volumes of
liquidity and lowering certain fees will help attract a higher level of
Market Maker order flow to the BOX Book and create liquidity, which the
Exchange believes will make Public Customer taker rebates unnecessary
to attract order flow. As such, the Exchange believes it is appropriate
that Market Makers be charged lower transaction fees than Professional
Customers and Broker Dealers for SPY Non-Auction Transactions and that
Public Customers not receive rebates when the Public Customer is a
taker against a
[[Page 38929]]
Professional Customer, Broker Dealer, or Market Maker.
Tiered Volume Rebate for Non-Auction Transactions
The Exchange believes that the proposed Public Customer SPY rebates
in the Tiered Volume Rebate for Non-Auction Transactions structure are
reasonable, equitable, and not unfairly discriminatory. The proposed
volume thresholds and applicable rebates for SPY are meant to
incentivize Public Customers to post orders on the Exchange to obtain
the benefit of the rebate, which will in turn benefit all market
participants by increasing liquidity on the Exchange. The Exchange
notes that the proposed SPY maker rebates are identical to the rebates
that are currently assessed to SPY transactions today. The Exchange
believes that offering no rebate for SPY taker transactions is
reasonable and appropriate because assessing no maker fee for Market
Makers may result in tighter spreads in SPY, thus eliminating the need
for additional volume-based incentives for Public Customers to take
liquidity on BOX.
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 the proposed changes to the fees in the Non-
Auction Transactions fee structure will not impose a burden on
intramarket competition as BOX believes that the changes will result in
the Participants being charged appropriately for their SPY transactions
and are designed to incentivize order flow to BOX by incentivizing
Market Makers to provide tighter spreads. Submitting an order is
entirely voluntary and Participants can determine which type of order
they wish to submit, if any, to BOX. Further, the Exchange believes the
proposed changes in the Non-Auction Transaction fee structure will not
impose a burden on intermarket competition as another exchange
currently assesses separate fees for SPY transactions.\11\
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\11\ See supra note 8.
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The Exchange believes the proposed changes to the rebate structure
for Public Customer Non-Auction Transactions will not impose a burden
on competition among various Exchange Participants. The Exchange
believes that the proposed changes will result in Public Customers
being rebated appropriately for their SPY transactions. Further, the
Exchange believes that this proposal will enhance competition between
exchanges because it is designed to allow the Exchange to better
compete with other exchanges for this order flow.
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 \12\ and Rule 19b-4(f)(2)
thereunder,\13\ because it establishes or changes a due, or fee.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7"><span class="__cf_email__" data-cfemail="1d6f687178307e7270707873696e5d6e787e337a726b">[email protected]</span></a>. Please include
file number SR-BOX-2023-15 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-2023-15. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-BOX-2023-15 and should be
submitted on or before July 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12663 Filed 6-13-23; 8:45 am]
BILLING CODE 8011-01-P
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