Notice2024-01393
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 Modify Certain Electronic Non-Auction Transaction Fees
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
January 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 17 (Thursday, January 25, 2024)</title>
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[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5054-5058]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01393]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99401; File No. SR-BOX-2024-05]
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 Modify
Certain Electronic Non-Auction Transaction Fees
January 19, 2024.
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 January 12, 2024, 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
[[Page 5055]]
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 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="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.A, Non-Auction
Transactions, of the BOX Fee Schedule. Specifically, the Exchange
proposes to establish separate fees and rebates on electronic Non-
Auction Transactions for options overlying the INVESCO QQQ Trust\SM\,
Series 1 (``QQQ''), and iShares Russell 2000 Index Fund (``IWM'').
Non-Auction Transactions
Currently, in Section IV.A of the BOX Fee Schedule, fees and
credits for electronic 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 QQQ and IWM
electronic Non-Auction Transactions. Currently, when a Public Customer
QQQ or IWM order is a liquidity taker contra to a Professional
Customer, Broker Dealer, or a Market Maker, the Public Customer is
provided a $0.20 rebate. The Exchange now proposes to increase Public
Customer taker fees on QQQ and IWM electronic Non-Auction Transactions.
Accordingly, when a Public Customer QQQ or IWM order is a liquidity
taker contra to a Professional Customer, Broker Dealer, or a Market
Maker, the Public Customer will be assessed $0.10. Further, under this
proposal, Public Customer QQQ or IWM orders that interact with a Public
Customer QQQ or IWM order will continue to not be assessed a fee.
Further, when a Professional Customer or Broker Dealer QQQ or IWM
order interacts with a Public Customer QQQ or IWM order, the Exchange
proposes to assess a $0.50 fee when making liquidity or $0.50 when
taking liquidity. When a Professional Customer or Broker Dealer QQQ or
IWM order interacts with a Professional Customer, Broker Dealer, or
Market Maker QQQ or IWM order, the Exchange proposes to assess $0.15
for making liquidity or $0.50 for taking liquidity. The Exchange notes
that these fees are the same as fees currently assessed to QQQ and IWM
transactions as QQQ and IWM are Penny Interval Classes.\5\
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\5\ 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 QQQ or IWM order interacts with a Public
Customer QQQ or IWM order, the Exchange proposes to assess $0.00 when
making liquidity or $0.50 when taking liquidity. The Exchange notes
that assessing Market Maker QQQ and IWM orders that interact with
Public Customers $0.00 for making liquidity is a fee decrease from the
current fee, which is $0.50. Lastly, when a Market Maker QQQ or IWM
order interacts with a Professional Customer, Broker Dealer, or Market
Maker QQQ or IWM order, the Exchange proposes to assess no fee when
making liquidity or $0.50 when taking liquidity, which is the same as
the currently assessed fee for QQQ and IWM orders.
The proposed fee structure for QQQ and IWM electronic Non-Auction
Transactions will be as follows:
------------------------------------------------------------------------
SPY, QQQ, and IWM
Account type --------------------------------------
Contra party Maker Taker
------------------------------------------------------------------------
Public Customer.................. Public Customer.... $0.00 $0.00
Professional 0.00 0.10
Customer/Broker
Dealer.
Market Maker....... 0.00 0.10
Professional Customer or Broker Public Customer.... 0.50 0.50
Dealer.
Professional 0.15 0.50
Customer/Broker
Dealer.
Market Maker....... 0.15 0.50
Market Maker..................... Public Customer.... 0.00 0.50
Professional 0.00 0.50
Customer/Broker
Dealer.
Market Maker....... 0.00 0.50
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For example, under the proposal, if a Public Customer submitted a
QQQ order to the BOX Book (making liquidity), the Public Customer would
not be charged a fee if the order interacted with a Market Maker's QQQ
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 QQQ
and IWM transactions for Public Customers in Non-Auction Transactions.
For Tier 1, where percentage thresholds of Public
[[Page 5056]]
Customer volume is 0.000%--0.249%, the Exchange proposes no rebates.
For Tier 2, where percentage thresholds of Public Customer volume is
0.250%--0.499%, the Exchange proposes to offer a $0.05 rebate when
making liquidity or no rebate when taking liquidity. For Tier 3, where
percentage thresholds of Public Customer volume is 0.500%--0.749%, the
Exchange proposes a $0.10 rebate when making liquidity or no rebate
when taking liquidity. For Tier 4, where percentage thresholds of
Public Customer volume is 0.750%--0.999%, the Exchange proposes a $0.20
rebate when making liquidity or no rebate for taking liquidity. In Tier
5, where percentage thresholds of Public Customer volume is 1.000% and
above, the Exchange proposes a $0.27 rebate when making liquidity or
$0.11 rebate when taking liquidity. The proposed rebate structure will
be as follows:
------------------------------------------------------------------------
Percentage Per contract rebate
thresholds of -------------------------------
national customer SPY, QQQ, and IWM
Tier volume in multiply- -------------------------------
listed options
classes (monthly) Maker Taker
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1................. 0.000%-0.249%....... $0.00 $0.00
2................. 0.250%-0.499%....... (0.05) 0.00
3................. 0.500%-0.749%....... (0.10) 0.00
4................. 0.750%-0.999%....... (0.20) 0.00
5................. 1.000% and Above.... (0.27) (0.11)
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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,\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's proposal to adopt separate fees for QQQ and IWM
electronic 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 notes that the proposed fees are
identical to the fees currently assessed for SPY transactions on BOX.
The Exchange also notes that other exchanges assess separate fees and
credits for QQQ and IWM transactions.\7\ Further, QQQ and IWM are two
of the most actively traded options and therefore the Exchange believes
that separate fees are appropriate to more effectively attract order
flow to BOX.
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\7\ See Cboe C2 Exchange, Inc. Fee Schedule and MIAX PEARL, LLC
Fee Schedule and Nasdaq BX, Inc. Fee Schedule.
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Non-Auction Transactions
The Exchange believes the proposed electronic Non-Auction
Transaction fees for Public Customer QQQ and IWM transactions are
reasonable. Under the proposal, Public Customers will never pay a fee
for their QQQ or IWM Non-Auction Transactions when making liquidity
against Public Customer or Non-Public Customer QQQ or IWM orders. The
Exchange notes that Public Customers are not currently assessed a fee
for their QQQ or IWM Non-Auction Transactions when making liquidity
against Public Customer or Non-Public Customer QQQ or IWM orders. 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 assessing no fee will attract Public Customer order flow,
which provides increased opportunities to interact with Public Customer
order flow to the benefit of all Participants. Accordingly, the
Exchange believes that charging no fee for Public Customers when making
liquidity for their QQQ and IWM transactions is appropriate and not
unfairly discriminatory.
Under the proposal, Public Customer taker fees for QQQ and IWM
electronic Non-Auction Transactions when taking liquidity against
Professional Customers, Broker Dealers, or Market Makers will be $0.10,
which is a fee increase from what is currently assessed. The Exchange
believes the proposed electronic Non-Auction transaction fees for
Public Customer QQQ and IWM transactions are reasonable as the proposed
fees are lower than similar transaction fees assessed at other
exchanges.\8\ The Exchange further believes that the proposed QQQ and
IWM taker fee for electronic Non-Auction Public Customer transactions
will not disincentivize Public Customer order flow because BOX's
electronic Non-Auction Transactions fee structure is designed to
attract competitive quotes and orders, which results in liquid markets
that Public Customers may find attractive. The Exchange believes that
Public Customers may be willing to pay a fee of $0.10 to access such
competitive markets.
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\8\ See e.g., Cboe C2 Exchange, Inc. Fee Schedule (``Transaction
Fees'' applicable to QQQ and IWM for Public Customer Remove rates of
$0.37); MIAX PEARL, LLC Fee Schedule (``Transaction Rebates/Fees''
for Priority Customer QQQ and IWM Taker in Tier 1 of $0.48).
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The Exchange believes further that charging a fee of $0.10 to
Public Customers for QQQ and IWM electronic Non-Auction Transactions is
equitable and not unfairly discriminatory. The Exchange notes that
Professional Customer, Broker Dealer, and Market Maker taker fees for
QQQ and IWM electronic Non-Auction Transactions when taking liquidity
against any contra party are $0.50 while Public Customers will be
assessed $0.10 when taking liquidity against Professional Customers,
Broker Dealers, and Market Makers. The Exchange again notes that 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 assessing lower fees for Public Customers compared to
other account types will attract Public Customer order flow, which
provides increased opportunities to interact with Public Customer order
flow to the benefit of all Participants. Accordingly, the Exchange
believes that charging a lower fee for Public Customers for their QQQ
and IWM transactions compared to other account types on BOX is
appropriate and not unfairly discriminatory.
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for QQQ and IWM
electronic Non-Auction Transactions is equitable and not unfairly
discriminatory.
[[Page 5057]]
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 again notes that
Professional Customers and Broker Dealers are currently assessed the
same fees for their QQQ and IWM transactions as QQQ and IWM are Penny
Interval Classes.\9\
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\9\ See BOX Fee Schedule, Section IV.A.
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to assess no maker fee for BOX Market Makers trading
against a Public Customer, Professional Customer, Broker Dealer, or
Market Maker for QQQ and IWM electronic Non-Auction Transactions. The
Exchange notes that under this proposal Market Makers making liquidity
against a Public Customer for QQQ and IWM electronic Non-Auction
Transactions will not be assessed a fee, which is a fee decrease from
what is currently assessed. As a result of this change, Market Makers
may tighten their spreads in QQQ and IWM and therefore will increase
market quality in QQQ and IWM 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. As such, the Exchange believes it is appropriate that
Market Makers be charged lower transaction fees than Professional
Customers and Broker Dealers for QQQ and IWM electronic Non-Auction
Transactions.
Tiered Volume Rebate for Non-Auction Transactions
The Exchange believes that the proposed Public Customer QQQ and IWM
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 QQQ and IWM
transactions are meant to incentivize Public Customers to post orders
on BOX to obtain the benefit of the rebate, which will in turn benefit
all market participants by increasing liquidity on BOX. The Exchange
notes that the proposed QQQ and IWM rebates are identical to the
rebates that are currently assessed to SPY transactions today.
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 change will not impose a burden on intramarket competition as
BOX believes that the changes will result in the Participants being
charged appropriately for their QQQ and IWM transactions. Specifically,
the change to eliminate Market Maker maker fees when contra to Public
Customers is designed to incentivize order flow to BOX by incentivizing
Market Makers to provide tighter spreads thus improving market quality
to the benefit of all BOX Participants. Additionally, the Exchange
believes that eliminating Public Customer credits when taking liquidity
contra to a Professional Customer, Broker Dealer, or Market Maker and
instead assessing a fee will not disincentivize the sending of such
orders because BOX's electronic Non-Auction Transactions fee structure
is designed to attract competitive quotes and orders, which results in
liquid markets that Public Customers may find attractive. The Exchange
notes further that 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 will
not impose a burden on intermarket competition as another exchange
currently assesses separate fees for QQQ and IWM transactions.\10\
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\10\ See supra note 7.
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The Exchange believes the addition of QQQ and IWM to the rebate
structure for Public Customer electronic 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 QQQ and IWM
transactions. Further, the Exchange believes that this proposal will
enhance competition between exchanges because it is designed to allow
BOX 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 credits 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 \11\ and Rule 19b-4(f)(2)
thereunder,\12\ because it establishes or changes a due, or fee.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 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#0a787f666f27696567676f647e794a796f69246d657c"><span class="__cf_email__" data-cfemail="9defe8f1f8b0fef2f0f0f8f3e9eeddeef8feb3faf2eb">[email protected]</span></a>. Please include
file number
SR-BOX-2024-05 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-2024-05. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 5058]]
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-2024-05 and should be submitted on or before February 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01393 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-P
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