Notice2023-15861
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 Change How Certain Complex Orders Are Assessed Within the Fee Structure
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
July 27, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 143 (Thursday, July 27, 2023)</title>
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[Federal Register Volume 88, Number 143 (Thursday, July 27, 2023)]
[Notices]
[Pages 48498-48501]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15861]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97959; File No. SR-BOX-2023-19]
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 Change
How Certain Complex Orders Are Assessed Within the Fee Structure
July 21, 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 July 18, 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 for
trading on the BOX Options Market LLC (``BOX'') options facility to
change how certain Complex Orders are assessed within the fee
structure, specifically each leg of a Complex Orders that executes
against the BOX Book \5\ instead of the Complex Order Book.\6\ 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>.
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\5\ The term ``Central Order Book'' or ``BOX Book'' means the
electronic book of orders on each single option series maintained by
the BOX Trading Host. See BOX Rule 100(a)(10).
\6\ The term ``Complex Order Book'' means the electronic book of
Complex Orders maintained by the BOX Trading Host. See BOX Rule
7240(a)(8).
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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 change how certain Complex Orders are assessed within the fee
structure, specifically each leg of a Complex Orders that executes
against the BOX Book \7\ instead of the Complex Order Book.\8\
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\7\ The term ``Central Order Book'' or ``BOX Book'' means the
electronic book of orders on each single option series maintained by
the BOX Trading Host. See BOX Rule 100(a)(10).
\8\ The term ``Complex Order Book'' means the electronic book of
Complex Orders maintained by the BOX Trading Host. See BOX Rule
7240(a)(8).
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While a Participant may enter a Complex Order with the intent of
that Order executing against another Complex Order on the Complex Order
Book, the BOX Trading System allows single legs within the Complex
Order to execute against orders on the BOX Book.\9\ Currently, each leg
of a Complex Order executed against the BOX Book is treated as a
Complex Order for purposes of the Fee Schedule and subject to the fees
detailed in Section VI (Complex Order Transaction Fees). The Exchange
now proposes to amend Section VI.B (Orders on BOX Book Executed Against
Complex Orders) of the BOX Fee Schedule to include language stating
that each leg of a Complex Order executed against the BOX Book will be
treated as a standard order for purposes of the Fee Schedule and now be
subject to Section IV (Electronic Transaction Fees). Specifically, the
Exchange proposes to amend Section VI.B as follows:
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\9\ See BOX Rule 7240.
Each order on the BOX Book executed against a Complex Order and
each leg of a Complex Order executed against the BOX Book will be
treated as a standard order for purposes of the Fee Schedule and
subject to Section IV.A (Electronic Transaction Fees for Non-Auction
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Transactions).
The Exchange believes the proposed change is reasonable because the
Exchange's fee structures for electronic non-auction transactions and
Complex Orders are designed to independently attract liquidity and to
reward Participants for their order flow. Specifically, when a Complex
Order interacts with the BOX Book, the orders in the BOX Book are
assessed electronic transaction fees for non-auction transactions.\10\
In contrast, the legs of the Complex Order involved in the same
transaction are assessed fees from a different section of the BOX Fee
Schedule, which may be confusing to Participants.\11\ As such, the
Exchange proposes to assess each leg of a Complex Order that trades
against the BOX Book the electronic transaction fees for non-auction
transactions detailed in Section IV.A of the BOX Fee Schedule. The
Exchange believes that assessing each leg of a Complex Order according
to the fee structure applicable to electronic non-auction transactions
(which may increase or decrease fees or result in BOX providing no
rebate or a smaller rebate), is reasonable because such orders may
benefit from the liquidity on the BOX Book in addition to the liquidity
on the Complex Order Book. The Exchange believes further that the
proposed changes are reasonable because they add clarity to the Fee
Schedule by expressly providing which fees will be assessed to the legs
of a Complex Order when the legs of a Complex Order interact with the
BOX Book.
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\10\ See BOX Fee Schedule Section VI.B.
\11\ Although this is not specified expressly in the Fee
Schedule, the legs of Complex Orders trading against the BOX Book
are currently assessed Complex Order transaction fees in BOX Fee
Schedule Section VI.A.
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The Exchange notes that Complex Orders from Public Customers are
assessed no fee or provided a rebate of $0.50 depending on the contra
party and whether the order is making or taking liquidity in Penny
Interval Classes and are assessed no fee or provided a rebate
[[Page 48499]]
of $0.90 depending on the contra party and whether the order is making
or taking liquidity in Non-Penny Interval Classes. Electronic
transaction fees in non-auction transactions for Public Customers are
currently assessed no fee or provided a rebate of $0.20 depending on
the contra party and whether the order is making or taking liquidity in
Penny Interval Classes, are assessed no fee or provided a rebate of
$0.50 depending on the contra party and whether the order is making or
taking liquidity in Non-Penny Interval Classes, and are assessed no fee
or rebate for transactions in SPY. Complex Order SPY transactions are
assessed the fee or provided the rebate for Penny Interval Classes as
SPY is a Penny Interval Class. Therefore, the proposal will result in
no fee assessment or BOX providing a smaller rebate for the legs of
Public Customer Complex Orders that trade against the BOX Book.
Similarly, Complex Orders from Professional Customers and Broker
Dealers are currently provided a rebate of $0.30 or assessed a fee of
$0.50 depending on the contra party and whether the order is making or
taking liquidity in Penny Interval Classes and are provided a rebate of
$0.30 or assessed a fee between $0.98 and $1.00 depending on the contra
party and whether the order is making or taking liquidity in Non-Penny
Interval Classes. Electronic transaction fees in non-auction
transactions for Professional Customers and Broker Dealers are
currently assessed a fee between $0.15 and $0.60 depending on the
contra party and whether the order is making or taking liquidity in
Penny Interval Classes, are assessed a fee between $0.15 and $0.95
depending on the contra party and whether the order is making or taking
liquidity in Non-Penny Interval Classes, and are assessed a fee between
$0.15 and $0.60 depending on the contra party and whether the order is
making or taking liquidity for transactions in SPY. Complex Order SPY
transactions are assessed the fee or provided the rebate for Penny
Interval Classes as SPY is a Penny Interval Class. Therefore, the
proposal may increase or decrease fees or result in BOX providing no
rebate for the legs of Professional Customer and Broker Dealer Complex
Orders that trade against the BOX Book depending on the contra party
and whether the class traded is a Penny Interval Class, a Non-Penny
Interval class, or SPY.
Lastly, Complex Orders from Market Makers are currently provided a
rebate of $0.30 or assessed a fee of $0.50 depending on the contra
party and whether the order is making or taking liquidity in Penny
Interval Classes and are provided a rebate of $0.30 or a fee between
$0.98 and $1.00 depending on the contra party and whether the order is
making or taking liquidity in Non-Penny Interval classes. Electronic
transaction fees in non-auction transactions for Market Makers are
currently assessed a fee between $0.00 and $0.50 depending on the
contra party and whether the order is making or taking liquidity in
Penny Interval Classes, are assessed a fee between $0.00 and $0.95
depending on the contra party and whether the order is making or taking
liquidity in Non-Penny Interval Classes, and are assessed a fee between
$0.00 and $0.50 depending on the contra party and whether the order is
making or taking liquidity for transactions in SPY. Complex Order SPY
transactions are assessed the fee or provided the rebate for Penny
Interval Classes as SPY is a Penny Interval Class. Therefore, the
proposal may increase or decrease fees or result in BOX providing no
rebate for the legs of Market Maker Complex Orders that trade against
the BOX Book depending on the contra party and whether the class traded
is a Penny Interval Class, a Non-Penny Interval Class, or SPY.
The Exchange believes that the proposed change discussed above will
allow both sides of a transaction executed on BOX to be assessed
consistently and will add clarity by expressly providing how fees will
be assessed for each leg of a Complex Order executed against the BOX
Book.
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,\12\ 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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\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes the proposed change is reasonable because the
Exchange's fee structures for both electronic non-auction transactions
and Complex Orders are designed to independently attract liquidity and
to reward Participants for their order flow. Specifically, when a
Complex Order interacts with the BOX Book, the orders in the BOX Book
are assessed electronic transaction fees for non-auction
transactions.\13\ In contrast, the legs of the Complex Order involved
in the same transaction are assessed fees from a different section of
the BOX Fee Schedule, which may be confusing to Participants.\14\ As
such, the Exchange proposes to assess each leg of a Complex Order
traded against the BOX Book the electronic transaction fees for non-
auction transactions in Section IV.A of the BOX Fee Schedule. The
Exchange believes it is reasonable to assess the same fees for the legs
of Complex Orders as single-leg orders because the legs of Complex
Orders executed against the BOX Book are executed as if they were
single-leg orders.\15\ The Exchange believes that the proposed change
will allow both sides of a transaction executed on BOX to be assessed
consistently, and will add clarity by expressly providing how fees will
be assessed for each leg of a Complex Order executed against the BOX
Book.
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\13\ See BOX Fee Schedule Section VI.B.
\14\ Although this is not specified expressly in the Fee
Schedule, the legs of Complex Orders trading against the BOX Book
are currently assessed Complex Order transaction fees in BOX Fee
Schedule Section VI.A.
\15\ The Exchange notes that Complex Orders will be
automatically executed against bids and offers on the BOX Book for
the individual legs of the Complex Order to the extent that the
Complex Order can be executed in full or in a permissible ratio by
such bids and offers. See BOX Rule 7240(b)(3)(ii).
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Further, the Exchange believes that to the extent the legs of
Complex Orders are assessed lower or higher fees or provided a smaller
rebate or no rebate, this proposal is reasonable because such orders
may benefit from the liquidity on the BOX Book in addition to the
liquidity on the Complex Order Book. The Exchange notes that Complex
Orders may receive executions for each leg of a Complex Order against
the BOX Book when the Complex Order would not otherwise have received
an execution in the Complex Order Book. The Exchange notes further that
another exchange assesses fees similarly to the proposal.\16\ The
Exchange believes that, although some transactions will be assessed
lower or higher fees or provided a smaller rebate or no rebate under
the proposal, the Complex Order fee structure is still designed to
attract order flow and will allow BOX to remain a competitive venue for
Complex Order flow. The Exchange
[[Page 48500]]
believes further that the proposed changes are reasonable because they
add clarity to the Fee Schedule by expressly providing which fees will
be assessed to the legs of a Complex Order when the legs of a Complex
Order interact with the BOX Book.
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\16\ See Cboe EDGX Exchange, Inc. (``Cboe EDGX'') Options Fee
Schedule (providing that standard fee codes are applicable to
Complex Orders that leg into the Simple Book). The Simple Book on
Cboe EDGX is the regular electronic book of orders. There is an
exception for fee code ZD which corresponds to: ``Complex order legs
into Simple Book, Customer'' and a fee of ``FREE.'' The Exchange
notes that, although such Customer Complex Orders are free, the
standard Cboe EDGX rates would provide a credit. The Exchange
believes that the Cboe EDGX fee structure for Complex Orders that
leg into the Simple Book uses different rates but is similar in
operation to the proposal.
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The Exchange notes another mechanism in the BOX Fee Schedule where
both sides of a transaction are assessed fees, in a consistent manner,
from the same section of the Fee Schedule. In Section IV.B of the BOX
Fee Schedule for PIP and COPIP transactions, each PIP Order or COPIP
Order that executes against an Unrelated Order on the BOX Book shall be
treated as a non-auction transaction.\17\ Specifically, both sides of
the same transaction where one is an Unrelated Order entered into the
BOX market during a PIP and the other is a PIP Order, are assessed fees
from the same section of the BOX Fee Schedule--Section IV.A (Electronic
Transaction Fees for Non-Auction Transactions). The Exchange believes
that this structure provides clarity to the Fee Schedule and reduces
Participant confusion about how these executions are treated.
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\17\ For the PIP, an Unrelated Order is a non-Improvement Order
entered into the BOX market during a PIP. For the COPIP, an
Unrelated Order is a non-Improvement Order entered on BOX during a
COPIP or BOX Book Interest during a COPIP.
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The Exchange notes that the BOX Fee Schedule, including Section VI
(Complex Order Transaction Fees), assesses fees and credits according
to the account type of the Participant originating the order and the
contra party.\18\ The result of this structure is that a Participant
does not know the fee it will be charged when submitting certain
orders. The Exchange believes that this uncertainty is reasonable
because each section of the BOX Fee Schedule is designed to
independently attract order flow and to compete with exchanges that
have similar fee structures.\19\ Similarly, the proposed change
contains some uncertainty about which fees will be assessed because
Participants may not know ahead of time whether their Complex Order
will interact with the Complex Order Book or the BOX Book. As a result,
Participants must recognize when submitting a Complex Order to BOX that
they could be assessed a range of fees or rebates and must expect the
highest applicable fee or lowest applicable rebate such that fees
(rebates) may be lower (higher) than their expectations. The Exchange
notes that under the proposal, Public Customer Complex Orders will not
pay a fee regardless of whether the Complex Order executes in the
Complex Order Book or the BOX Book, however, such orders will receive a
smaller rebate or no rebate if the legs of the Complex Order execute
against the BOX Book. Further, the Exchange believes the proposed
changes are equitable and not unfairly discriminatory as the proposed
fee structure will apply uniformly to all Participants.
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\18\ See BOX Fee Schedule Sections IV.A (Electronic Non-Auction
Transactions) and VI.A (Complex Order Transaction Fees).
\19\ See Nasdaq ISE, LLC (``Nasdaq ISE'') Options 7 Section 4
(Complex Order Fees and Rebates) and MIAX Emerald, LLC Options
Exchange Fee Schedule (Transaction Fees). The Exchange notes that
Nasdaq ISE assesses fees based on market participant, whether the
market participant is trading against a Priority Customer, maker/
taker, and whether the symbol is a Select or non-Select Symbol,
whereas BOX varies fees based on account type, contra party, maker/
taker, and whether the class is a Penny Interval Class or a Non-
Penny Interval Class.
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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, to the extent it
increases or decreases fees or provides smaller rebates or no rebates,
remains competitive with other options markets. 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 Exchange notes that another
exchange has a similar fee structure.\20\
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\20\ See supra note 16.
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The proposed changes do not impose an undue burden on intra-market
competition because the Exchange does not believe that the proposal
will place any category of market participant at a competitive
disadvantage. Specifically, the Exchange believes that applying Section
IV.A (Electronic Transaction Fees for Non-Auction Transactions) to the
legs of Public Customer Complex Orders that trade against the BOX Book
does not impose an undue burden on intra-market competition because the
fee structure contained in Section IV.A is designed to attract Public
Customer order flow which increases the number of executions on the
Exchange, thus benefiting all market participants. The Exchange notes
that, as discussed above, although the Public Customer rebates in
Section IV.A are smaller than Public Customer rebates in Section VI
(Complex Order Transaction Fees), Public Customers benefit from the
additional liquidity available on the BOX Book.
Lastly, the Exchange believes that the proposed changes will
provide all Participants with consistency and clarity regarding how
Complex Order fees are assessed on BOX. The Exchange notes that all
Participants sending a Complex Order to BOX that interacts with the BOX
Book will be subject to fees and rebates already in place on the
Exchange.
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 \21\ and Rule 19b-4(f)(2)
thereunder,\22\ because it establishes or changes a due, or fee.
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 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.
[[Page 48501]]
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#146661787139777b7979717a6067546771773a737b62"><span class="__cf_email__" data-cfemail="becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8">[email protected]</span></a>. Please include
file number SR-BOX-2023-19 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-2023-19. 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-2023-19 and should be
submitted on or before August 17, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-15861 Filed 7-26-23; 8:45 am]
BILLING CODE 8011-01-P
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