Notice2023-12664
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule for Trading on the BOX Options Market LLC Facility To Amend Certain 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
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 38913-38915]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-12664]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97674; File No. SR-BOX-2023-13]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule for Trading on the BOX Options Market LLC Facility To Amend
Certain Rebates for Qualified Contingent Cross Transactions
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. 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 Fee Schedule [sic] for trading on BOX to amend certain
rebates for Qualified Contingent Cross (``QCC'') transactions 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="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 certain rebates for Qualified Contingent Cross (``QCC'')
transactions. 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.\5\
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\5\ See BOX Rule 7110(c)(6).
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Currently, BOX assesses $0.20 per contract to Broker Dealers and
Market Makers for both the Agency Order and contra order of a QCC
transaction. Public Customers and Professional Customers are not
assessed a QCC Transaction Fee. Further, rebates are paid on all
qualifying orders pursuant to Section IV.D.1 of the BOX Fee Schedule.
Specifically, a QCC Rebate is paid to the Participant that entered the
order into the BOX system when at least one party to the QCC
transaction is a Broker Dealer or Market Maker. The Participant
receives a per contract rebate on QCC transactions according to the
tier achieved. Volume thresholds are calculated on a monthly basis by
totaling the Participant's QCC Agency Order volume on BOX. The Exchange
notes that the QCC Rebate is intended to incentivize the sending of
more QCC Orders to BOX.
The Exchange now proposes to amend the QCC Rebate structure in
Section IV.D.1 of the BOX Fee Schedule. Specifically, the Exchange
proposes to amend the volume thresholds in Tiers 1, 2, and 3 and
proposes to eliminate Tier 4 entirely. For Tier 1, the Exchange
proposes to amend the volume threshold to 0 to 999,999 contracts. For
Tier 2, the Exchange proposes to amend the volume threshold to
1,000,000 to 1,999,999 contracts. For Tier 3, the Exchange proposes to
amend the volume threshold to 2,000,000+ contracts. Additionally, the
Exchange proposes to amend the rebates in Tiers 2 and 3. Specifically,
in Tier 2, the Exchange proposes to increase Rebate 2 to $0.25 from
$0.24. In Tier 3, the Exchange proposes to increase Rebate 1 to $0.17
from $0.16 and increase Rebate 2 to $0.27 from $0.25.
The QCC Rebate tier structure will be as follows:
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QCC Agency order volume on BOX Rebate 1 (per Rebate 2 (per
Tier (per month) contract) contract)
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1............................................ 0 to 999,999 contracts......... ($0.14) ($0.22)
2............................................ 1,000,000 to 1,999,999 (0.16) (0.25)
contracts.
3............................................ 2,000,000+ contracts........... (0.17) (0.27)
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[[Page 38914]]
The Exchange also proposes to amend the QCC Growth Rebate to
account for the changes discussed above. Specifically, the Exchange
proposes that if a Participant's QCC Agency Order volume on BOX
achieves Tier 2 (formerly Tier 3) of the QCC Rebate in the month AND
the Participant's total QCC volume combined with total QOO volume
exceeds 6 million (formerly 11 million) contracts per month, then the
Participant will qualify for the rebates in Tier 3 (formerly Tier 4) of
the QCC Rebate. The Exchange believes that the proposed changes
discussed above will encourage Participants to send increased QCC and
QOO order flow to BOX in order to achieve a high rebate, which will
result in increased liquidity on BOX to the benefit of all market
participants.
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,\6\ 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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\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes the proposed changes to the QCC Rebate
structure are reasonable because the proposed changes provide
opportunities for Participants to receive higher rebates for their QCC
Order volume on BOX. Further, the Exchange believes the proposed
changes to the QCC rebate structure are equitable and not unfairly
discriminatory as the proposed rebates will apply uniformly to the
Participants that reach the applicable tiers.
The Exchange continues to believe that the proposed rebate
structure and rebate amounts 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.\7\
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\7\ 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 Growth Rebate
is reasonable because this rebate provides incentives for BOX
Participants to engage in substantial amounts of trading activity which
would serve to bring additional open outcry liquidity to the Trading
Floor and additional QCC order flow to BOX. This incentive may also
encourage Participants to begin sending such order flow to BOX for the
opportunity to earn this rebate because the threshold to qualify is
being lowered.
The Exchange believes that the proposed QCC Growth Rebate
Qualifications are reasonable because they offer Participants an
opportunity to achieve a higher QCC rebate. Additionally, the Exchange
believes the proposed changes to the QCC Growth Rebate are equitable
and not unfairly discriminatory because any Participant may qualify for
this rebate.\8\ All BOX Participants may enter order flow to obtain a
QCC Growth Rebate.
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\8\ The Exchange notes that all BOX Participants may transact an
options business electronically or on the BOX Trading Floor with a
registered Trading Permit. BOX Participants may transact business on
the Trading Floor through a Floor Broker.
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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 proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact its business. The Exchange notes
that it operates in a highly competitive market in which market
participants can readily favor competing venues if they deem fee levels
at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges. Because competitors are free to
modify their own fees and rebates in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee changes in this market
may impose any burden on competition is extremely limited.
The proposed changes do not impose an undue burden on intra-market
competition. In terms of intra-market competition, the Exchange does
not believe that its proposals will place any category of market
participant at a competitive disadvantage. The Exchange believes that
the proposed changes will encourage market participants to send their
QCC orders to BOX for execution in order to obtain greater rebates and
lower their costs.
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 \9\ and Rule 19b-4(f)(2)
thereunder,\10\ because it establishes or changes a due, or fee.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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#98eaedf4fdb5fbf7f5f5fdf6ecebd8ebfdfbb6fff7ee"><span class="__cf_email__" data-cfemail="cbb9bea7aee6a8a4a6a6aea5bfb88bb8aea8e5aca4bd">[email protected]</span></a>. Please include
file number SR-BOX-2023-13 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-2023-13. This file
[[Page 38915]]
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-2023-13 and should be
submitted on or before July 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12664 Filed 6-13-23; 8:45 am]
BILLING CODE 8011-01-P
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