Notice2024-14065
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 (“BOX”)
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 27, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 124 (Thursday, June 27, 2024)</title>
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[Federal Register Volume 89, Number 124 (Thursday, June 27, 2024)]
[Notices]
[Pages 53693-53698]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-14065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100396; File No. SR-BOX-2024-15]
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 (``BOX'')
June 21, 2024.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 13, 2024, BOX Exchange LLC (the ``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 Terms of 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 the Fee Schedule for trading on BOX
to establish fees and rebates for the FLEX Open Outcry (``FOO'') Order
type on the BOX Trading Floor.
The Exchange represented in its filing with the Securities and
Exchange Commission (``SEC'' or the ``Commission'') to establish FOO
Orders that, ``the Exchange has not yet determined the fees for FOO
transactions executed on the Trading Floor. Prior to commencing trading
of the FOO Order type on the Trading Floor, the Exchange intends to
submit a proposed rule change to the Commission setting forth the
proposed fees.'' \5\ The Exchange now proposes to
[[Page 53694]]
establish transaction fees and rebates that will be applicable to the
FOO Order type on the BOX Trading Floor.
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\5\ See Securities Exchange Act Release No. 100156 (May 15,
2024), 89 FR 44721 (May 21, 2024) (Notice of Filing of Amendment No.
3 and Order Granting Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment No. 3, to Adopt Rules to Govern FLEX Equity
Options and a New Order Type to Trade FLEX Equity Options on the BOX
Trading Floor).
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FLEX Equity Options are options with flexible terms such that
Participants \6\ can customize expiration date, exercise price, and
exercise style. FLEX Equity Options are subject to Rule 5055 and are
traded as FLEX Open Outcry (``FOO'') Orders on the BOX Trading Floor
under Rule 7605. As such, the Exchange is now proposing to establish
fees and rebates for FOO Orders on the BOX Trading Floor.
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\6\ The term ``Participant'' means a firm, or organization that
is registered with the Exchange pursuant to the Rule 2000 Series for
purposes of participating in trading on a facility of the Exchange
and includes an ``Options Participant'' and ``BSTX Participant.''
See BOX Rule 100(a)(42).
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First, the Exchange proposes to include FOO Orders in current
Section V.A, to update the title to reflect this addition, and to
assess FOO Order manual transaction fees based on account type. The
Exchange notes that the proposed fees for FOO Orders are identical to
the fees currently assessed to Qualified Open Outcry (``QOO'') Orders
on the BOX Trading Floor. For Public Customers, the Exchange proposes
to assess a $0.00 per contract fee for FOO manual transactions in Penny
and Non-Penny Pilot Classes. For Professional Customers, the Exchange
proposes to assess a $0.10 per contract fee for FOO manual transactions
in Penny and Non-Penny Pilot Classes. For Broker Dealers and Market
Makers, the Exchange proposes to assess a $0.25 and $0.35,
respectively, per contract fee for manual transactions in Penny and
Non-Penny Pilot classes. Additionally, the Exchange proposes to assess
a $0.00 per contract fee for Broker Dealers Facilitating a Public
Customer in FOO transactions in Penny and Non-Penny Pilot Classes.\7\
The Exchange notes that other exchanges with physical trading floors
assess identical fees for FLEX orders and non-FLEX orders executed on
their respective exchanges.\8\
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\7\ For example, if a Floor Broker presents a FOO Order on the
Trading Floor where the initiating side is a Public Customer and the
contra side is the Broker Dealer guaranteeing the full size of the
order, the Public Customer will be assessed a $0.00 per contract fee
on the initiating side and the Broker Dealer will be assessed a
$0.00 per contract fee for the contra-side.
\8\ See Cboe Exchange, Inc. (``Cboe'') Fee Schedule (Rate
Table--All Products Excluding Underlying List A, Manual Transaction
Fees for Equity, ETN, and ETF Options by Capacity). The Exchange
notes that Cboe assesses different fees for specific types of FLEX
options products that BOX does not list. The Exchange believes that
FLEX options on CBOE comparable to FLEX Equity Options on BOX are
assessed the fees for Equity, ETN, and ETF Options such that CBOE
assesses the same fees for FLEX and non-FLEX options. See also NYSE
American LLC (``NYSE American'') Fee Schedule (Section I. Options
Transaction Fees and Credits, Rate Per Contract Manual Transactions
by Participant) and NYSE Arca, Inc. (``NYSE Arca'') Fee Schedule
(Trade-Related Charges for Standard Options) (Standard Options in
this context refers to options that are not mini-options contracts,
see Securities Exchange Act Release No. 69246 (March 27, 2013), 78
FR 19784 (April 2, 2013) (SR-NYSEArca-2013-25) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Modifying the NYSE
Arca Options Fee Schedule To Establish Fees for Mini-Options
Contracts)). The Exchange believes that NYSE American and NYSE Arca
FLEX options are assessed ``Rates for Options transactions'' and
``Transaction Fee for Manual Executions,'' respectively, such that
NYSE American and NYSE Arca assess the same fees for FLEX and non-
FLEX options. See, e.g., Securities Exchange Act Release No. 71015
(December 6, 2013), 78 FR 75642 (December 12, 2013) (SR-NYSEMKT-
2013-98) (including FLEX Option transactions in the strategy
execution fee cap and noting that FLEX Options are not
differentiated for purposes of other pricing categories within the
Fee Schedule).
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Next, the Exchange proposes to include FOO Orders in current
Section V.C (``QOO Order Rebate'') and change the title of the section
to reflect this addition. The Exchange proposes that Floor Brokers will
receive a $0.075 per contract rebate for all Broker Dealer and Market
Maker FOO Orders presented on the Trading Floor and $0.05 per contract
rebate for all Professional Customer FOO Orders presented on the
Trading Floor. The rebate will not apply to Public Customer executions,
executions subject to Section V.D, or Broker Dealer executions where
the Broker Dealer is facilitating a Public Customer. The Exchange notes
that the proposed rebates are identical to the rebates that are
currently applied to QOO Orders on the BOX Trading Floor. The Exchange
notes further that another exchange offers rebates for FLEX option
transactions.\9\
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\9\ See NYSE American Fee Schedule (Floor Broker Fixed Cost
Prepayment Incentive Program (the ``FB Prepay Program''). The
Exchange believes that the NYSE American FB Prepay Program is
applicable to FLEX options, such that NYSE American offers the same
rebates to both FLEX and non-FLEX options. See, e.g., Securities
Exchange Act Release No. 71015 (December 6, 2013), 78 FR 75642
(December 12, 2013) (SR-NYSEMKT-2013-98) (including FLEX Option
transactions in the strategy execution fee cap and noting that FLEX
Options are not differentiated for purposes of other pricing
categories within the Fee Schedule).
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Lastly, the Exchange proposes to include FOO Orders in current
Section V.D. (``Strategy QOO Order Fee Cap and Rebate'') and update the
title to reflect this addition.\10\ The Exchange proposes that the
manual transaction fees for certain Strategy FOO Orders will be capped
on a daily basis: Short stock interest, long stock interest, merger,
reversal, conversion, jelly roll, and box spread strategies \11\
executed on the same trading day will be capped at $500 per day per
customer. Further, the Exchange proposes that on each trading day,
Floor Brokers are eligible to receive a $500 rebate per customer for
presenting Strategy FOO Orders other than dividend strategies on the
Trading Floor. The rebate will be applied once the $500 fee cap, per
customer, for all short stock interest, long stock interest, merger,
reversal, conversion, jelly roll, and box spread strategies is met.\12\
The Exchange notes that an identical fee cap and rebate currently
exists for these Strategy QOO Orders on the BOX Trading Floor. The
Exchange notes that Strategy QOO Orders and Strategy FOO Orders will
not be counted together in order to satisfy the respective fee
caps.\13\ The Exchange notes that other
[[Page 53695]]
exchanges include FLEX options in Strategy Caps.\14\
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\10\ The Exchange also notes that it is making certain
clarifying changes throughout Section V.D in order to include the
addition of the FOO Order type.
\11\ A ``short stock interest strategy'' is defined as a
transaction done to achieve a short stock interest arbitrage
involving the purchase, sale, and exercise of in-the-money options
of the same class. A ``long stock interest strategy'' is defined as
a transaction done to achieve long stock involving the purchase,
sale, and exercise of in-the-money options of the same class. A
``merger strategy'' is defined as transactions done to achieve a
merger arbitrage involving the purchase, sale and exercise of
options of the same class and expiration date, each executed prior
to the date on which shareholders of record are required to elect
their respective form of consideration, i.e., cash or stock. A
``reversal strategy'' is established by combining a short security
position with a short put and a long call position that shares the
same strike and expiration. A ``conversion strategy'' is established
by combining a long position in the underlying security with a long
put and a short call position that shares the same strike and
expiration. A ``jelly roll strategy'' is created by entering into
two separate positions simultaneously. One position involves buying
a put and selling a call with the same strike price and expiration.
The second position involves selling a put and buying a call, with
the same strike price, but with a different expiration from the
first position. A ``box spread strategy'' is a strategy that
synthesizes long and short stock positions to create a profit.
Specifically, a long call and short put at one strike is combined
with a short call and long put at a different strike to create
synthetic long and synthetic short stock positions, respectively.
\12\ For example, when Customer A sends box spread Strategy FOO
Orders to Floor Broker 1 on the Trading Floor, Customer A's fees for
these orders will be capped at $500 per day. If Customer A reaches
the $500 fee cap, Floor Broker 1, who entered these orders on behalf
of Customer A into the BOX system, will receive the $500 rebate.
Customer B may also send box spread Strategy FOO Orders to Floor
Broker 1 for execution on the BOX Trading Floor. Customer B's fees
for these orders will also be capped at $500 per day and Floor
Broker 1, who entered these orders, will receive the $500 rebate if
Customer B reaches the $500 daily fee cap.
\13\ For example, Customer A may send both box spread Strategy
FOO Orders and box spread Strategy QOO Orders to Floor Broker 1 on
the Trading Floor; however, the FOO Order fees and QOO Order fees
will be capped separately from each other resulting in a $500 fee
cap for FOO Orders and a $500 fee cap for QOO Orders.
\14\ See Nasdaq Phlx Rules Options 7, Section 6.B (FLEX
Transaction Fees) (``The Monthly Firm Fee Cap, Monthly Market Maker
Cap, Strategy Caps and the Options Surcharge in BKX, described in
Options 7, Section 4 will apply to this Section 6.B. No other fees
described in Options 7, Section 4 will apply to this Section 6.B.'')
and Securities Exchange Act Release No. 71015 (December 6, 2013), 78
FR 75642 (December 12, 2013) (SR-NYSEMKT-2013-98) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the
NYSE Amex Options Fee Schedule To Include FLEX Option Transactions
in the Strategy Execution Fee Cap). The Exchange notes that strategy
fee caps are applicable to FLEX and non-FLEX options on Nasdaq Phlx
and NYSE American.
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Further, the Exchange proposes that manual transaction fees for FOO
Order dividend strategies \15\ will be capped on both a daily and
monthly basis: Dividend strategy FOO Orders executed on the same
trading day in the same options class will be capped at $1,000 per day
per customer. The Exchange also proposes that on each trading day,
Floor Brokers are eligible to receive a $500 rebate per customer for
presenting dividend strategy FOO Orders on the Trading Floor. For
dividend strategy FOO Orders, this Floor Broker rebate of $500 will be
applied per customer once the $1,000 fee cap is met. Further, the
Exchange proposes that dividend strategy FOO Orders executed in the
same month will be capped at $65,000 per month per customer. Lastly,
the Exchange proposes that Floor Brokers will not be eligible to
receive a $500 daily rebate per customer for presenting dividend
strategy FOO Orders once the monthly cap is met. The Exchange notes
that an identical fee cap and rebate currently exists for dividend
strategy QOO Orders on the BOX Trading Floor. The Exchange notes that
dividend strategy QOO Orders and dividend strategy FOO Orders will not
be counted together in order to satisfy the respective fee caps. The
Exchange also notes that other exchanges include FLEX options in
Strategy Caps.\16\
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\15\ A ``dividend strategy'' is defined as a transaction done to
achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed the
first business day prior to the date on which the underlying stock
goes ex-dividend.
\16\ See supra note 14.
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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,\17\ 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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\17\ 15 U.S.C. 78f(b)(4) and (5).
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FOO Order Fees
The Exchange believes the proposed fees for FOO Orders on the BOX
Trading Floor are reasonable as they are similar to the FLEX order fees
currently assessed on other trading floors.\18\ The proposed fees are
designed to attract order flow and to compete with other options
exchanges. Participants are under no obligation to trade on BOX and may
execute FLEX transactions on another exchange. The Exchange also notes
that the proposed FOO Order fees are identical to the fees currently
assessed to QOO Orders on the BOX Trading Floor.\19\ The Exchange
believes that charging identical fees for QOO Orders and FOO Orders is
appropriate because both QOO Orders and FOO Orders are solely traded on
the BOX Trading Floor and each order type is represented and processed
similarly by Floor Brokers and BOX's system. As proposed, the fees for
all manual transactions on the BOX Trading Floor will be the same,
which will simplify the BOX Fee Schedule and reduce investor confusion
with regard to what fees will be assessed for transactions executed on
the BOX Trading Floor.
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\18\ See supra note 8.
\19\ The Exchange notes that the current QOO Order fees have
been in place since 2021. See Securities Exchange Act Release No.
92238 (June 23, 2021), 86 FR 34290 (June 29, 2021) (SR-BOX-2021-15)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend the Fee Schedule on the BOX Options Market LLC
Facility).
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Further, the Exchange believes it is equitable and not unfairly
discriminatory that Public Customers be charged lower fees for FLEX
transactions than Professional Customers, Broker Dealers, and Market
Makers on BOX. 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 customer benefit. As
such, the Exchange believes that not assessing a fee for Public
Customer FLEX transactions is appropriate, equitable and not unfairly
discriminatory. The Exchange believes it promotes the best interests of
investors to have lower transaction costs for Public Customers, and
having no fee for FOO Orders will attract Public Customer order flow to
the BOX Trading Floor. The Exchange believes further that Public
Customer order flow is attractive to other Participants and that
greater opportunities to interact with Public Customer order flow will
benefit other Participants. As such, the industry in general and the
Exchange in particular have historically created fee structures to
benefit Public Customers because increased Public Customer order flow
benefits all market participants.
The Exchange believes the proposed fees for Broker Dealer FLEX
transactions are equitable as they will be assessed to all Broker
Dealers on the BOX Trading Floor. Further, the Exchange believes the
proposed fees for Broker Dealer FLEX transactions is not unfairly
discriminatory given that the proposed rates (and resulting disparities
between Broker Dealers and other account types) are identical to fees
currently assessed at other options exchanges for FLEX
transactions.\20\
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\20\ See supra note 8.
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The Exchange believes that not charging a Broker Dealer
facilitating a Public Customer is reasonable because it will encourage
Broker Dealers to facilitate Public Customer orders through the Trading
Floor and increase participation in open outcry, which will in turn
promote increased executions on the Exchange which will benefit all BOX
Participants.
The Exchange believes it is equitable and not unfairly
discriminatory to assess Professional Customers lower fees for FLEX
transactions than Broker Dealers and Market Makers because, by
definition, Professional Customers are a different type of market
participant. Specifically, Professional Customers are not brokers or
dealers in securities; they are persons (or entities) that place more
than 390 orders per day on average for their own beneficial account.
The Exchange notes that assessing lower fees for Professional Customers
compared to Broker Dealers and Market Makers is not novel as BOX
currently assesses lower fees for Professional Customers than Broker
Dealers and Market Makers for QOO transactions on the BOX Trading
Floor.
The Exchange believes the proposed fees for Market Maker FLEX
transactions are equitable as they will be assessed to all Market
Makers on the BOX Trading Floor. Further, the Exchange believes the
proposed fees for Market Maker FLEX transactions is not unfairly
discriminatory given that the proposed rates (and resulting disparities
between Market Makers and other account types) are identical to fees
currently assessed at other options exchanges for FLEX
transactions.\21\
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\21\ See supra note 8.
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FOO Order Rebate
The Exchange believes that the proposed $0.075 and $0.05 FOO Order
[[Page 53696]]
rebates for Floor Brokers are reasonable, equitable and not unfairly
discriminatory. As proposed, Floor Brokers will receive a $0.075 per
contract rebate for all Broker Dealer and Market Maker FOO Orders
presented on the Trading Floor and $0.05 per contract rebate for all
Professional Customer FOO Orders presented on the Trading Floor. The
proposed rebates are identical to the rebates currently applied to QOO
Orders on the BOX Trading Floor. The Exchange believes that offering
identical rebates for QOO Orders and FOO Orders is appropriate because
both QOO Orders and FOO Orders are solely traded on the BOX Trading
Floor and each order type is represented and processed similarly by
Floor Brokers and BOX's system. As proposed, the rebates for all manual
transactions on the BOX Trading Floor will be the same, which will
simplify the BOX Fee Schedule and reduce investor confusion with regard
to what rebates will be offered for transactions executed on the BOX
Trading Floor.
The Exchange notes that it does not offer a front-end for order
entry on the Trading Floor, unlike some competing exchanges. As such,
the Exchange believes it is necessary from a competitive standpoint to
offer this rebate to the executing Floor Broker on a FOO order. The
Exchange notes that Participants have two possible means of bringing
orders to BOX's Trading Floor for possible execution: (1) they can
invest in the technology, systems and personnel to participate on the
Trading Floor and deliver the order to the Exchange matching engines
for validation and execution; or (2) they can utilize the services of
another Participant acting as a Floor Broker. The Exchange believes
that offering the proposed rebates will allow Floor Brokers to price
their services at a level that would enable them to attract FOO order
flow from participants who would otherwise utilize the front-end order
entry mechanism offered by BOX's competitors instead of incurring the
cost in time and resources to install and develop their own internal
systems to deliver FOO Orders directly to the Exchange system.
Further, the Exchange believes to the extent that the rebate allows
Floor Brokers to attract FOO Orders; they will gain increased
opportunities to interact with the parties to the FOO Orders for
potential participation in other trades on BOX. This will in turn,
increase order flow to BOX and benefit other Participants through the
additional trading opportunities and increased liquidity on the Trading
Floor that could occur as a result.
The Exchange believes it is equitable and not unfairly
discriminatory to only apply the rebate to Floor Brokers and not to
Floor Market Makers. Floor Market Makers only represent their own
interest on the Trading Floor and therefore do not need a similar
incentive. Further, the Exchange believes it is equitable and not
unfairly discriminatory to not apply the rebate to Public Customers or
Broker Dealers where the Broker Dealer is facilitating a Public
Customer, as these executions are not assessed a fee for their FOO
Orders. Additionally, the Exchange believes it is equitable and not
unfairly discriminatory to not apply the rebate to executions subject
to Section V.D (Strategy QOO Order Fee Cap and Rebate \22\) because
Strategy FOO Orders will be subject to different fee caps and rebates.
As such, these orders do not need a similar incentive.
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\22\ The title of Section V.D ``Strategy QOO Order Fee Cap and
Rebate'' is proposed, infra, to become ``Strategy QOO Order Fee Cap
and Rebate & Strategy FOO Order Fee Cap and Rebate'' to reflect the
proposal for Section V.D to be applicable to both QOO Orders and FOO
Orders, separately.
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The Exchange again notes that the proposed Floor Broker rebates are
identical to rebates currently offered for QOO Orders on the BOX
Trading Floor. The Exchange believes that establishing identical
rebates for Floor Brokers will simplify the BOX Fee Schedule and
increase transparency with regard to what types of rebates are offered
for manual transactions on the BOX Trading Floor.
Strategy FOO Order Fee Cap and Rebate
The Exchange believes the proposed fee cap for certain Strategy FOO
Orders (short stock interest, long stock interest, merger, reversal,
conversion, jelly roll, and box spread strategies) is reasonable and
appropriate. The proposed fee cap is identical to the fee cap currently
in place for QOO Orders on the BOX Trading Floor. The Exchange believes
that an identical fee cap for QOO Orders and FOO Orders is appropriate
because both QOO Orders and FOO Orders are solely traded on the BOX
Trading Floor and each order type is represented and processed
similarly by Floor Brokers and BOX's system. As proposed, the fee caps
for all manual transactions on the BOX Trading Floor will be the same,
which will simplify the BOX Fee Schedule and reduce investor confusion
with regard to what fee caps are applicable for transactions executed
on the BOX Trading Floor. Further, the Exchange notes that other
exchanges apply similar strategy fee caps for FLEX transactions.\23\
The Exchange believes the proposed fee cap is equitable and not
unfairly discriminatory because it provides incentives for all
Participants to submit certain strategy orders to the BOX Trading
Floor, which brings increased liquidity and order flow to the floor for
the benefit of all market participants.
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\23\ See supra note 14.
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The Exchange believes that the proposed rebate for presenting
Strategy FOO Orders (other than dividend strategy FOO Orders) is
reasonable, equitable, and not unfairly discriminatory. The Exchange
believes the proposed rebate is reasonable as an identical rebate is
currently assessed to these Strategy QOO Orders on the Trading Floor.
The Exchange believes that offering identical rebates for QOO Orders
and FOO Orders is appropriate because both QOO Orders and FOO Orders
are solely traded on the BOX Trading Floor and each order type is
represented and processed similarly by Floor Brokers and BOX's system.
As proposed, the rebates for all manual transactions on the BOX Trading
Floor will be the same, which will simplify the BOX Fee Schedule and
reduce investor confusion with regard to what rebates will be offered
for transactions executed on the BOX Trading Floor. Further, the
Exchange believes that offering the proposed rebate will allow Floor
Brokers to price their services at a level that would enable them to
attract Strategy FOO order flow to the BOX Trading Floor. As such, the
Exchange believes that the proposed rebate is reasonable.
The Exchange believes that the proposed rebate is equitable and not
unfairly discriminatory as the rebate is available to all Floor
Brokers.\24\ Further, the Exchange believes that applying the proposed
rebate to Floor Brokers and not to Floor Market Makers is equitable and
not unfairly discriminatory as Floor Market Makers only represent their
own interest on the Trading Floor and therefore do not need a similar
incentive. As discussed herein, Floor Brokers serve an important
function in facilitating the execution of orders via open outcry for
customers who do not have their own technology, systems and personnel
to participate on the BOX Trading Floor. As such, the Exchange believes
that offering the proposed rebate will allow Floor Brokers to price
their services at a level that would enable them to attract Strategy
FOO
[[Page 53697]]
order flow from participants who would otherwise utilize other front-
end order entry mechanisms offered by BOX's competitors instead of
incurring the cost in time and resources to install and develop their
own internal systems to deliver Strategy FOO Orders directly to BOX's
system.
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\24\ The Exchange notes that no Floor Broker shall effect any
transaction in FLEX Equity Options unless a Letter of Authorization
has been issued by a clearing member organization and filed with the
Exchange specifically accepting responsibility for the clearance of
FLEX Equity Option transactions of the Floor Broker. See BOX Rule
5055(l).
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The Exchange believes the proposed daily and monthly fee caps for
dividend strategy FOO Orders are reasonable and appropriate. The
proposed fee caps are identical to the fee caps currently in place for
dividend strategy QOO Orders on the BOX Trading Floor. The Exchange
believes that identical fee caps for QOO Orders and FOO Orders is
appropriate because both QOO Orders and FOO Orders are solely traded on
the BOX Trading Floor and each order type is represented and processed
similarly by Floor Brokers and BOX's system. As proposed, the fee caps
for all manual transactions on the BOX Trading Floor will be the same,
which will simplify the BOX Fee Schedule and reduce investor confusion
with regard to what fee caps will be applicable for transactions
executed on the BOX Trading Floor. Further, the Exchange notes that
other exchanges apply a similar dividend strategy fee cap for FLEX
transactions.\25\ The Exchange believes the proposed fee cap is
equitable and not unfairly discriminatory because it provides
incentives for all Participants to submit dividend strategy FOO Orders
to the BOX Trading Floor, which brings increased liquidity and order
flow to the floor for the benefit of all market participants.
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\25\ See supra note 14.
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The Exchange believes that the proposed rebate for presenting
dividend strategy FOO Orders is reasonable, equitable, and not unfairly
discriminatory. The Exchange believes the proposed rebate is reasonable
as an identical rebate is currently provided to dividend strategy QOO
Orders on the Trading Floor. The Exchange believes that offering
identical rebates for QOO Orders and FOO Orders is appropriate because
both QOO Orders and FOO Orders are solely traded on the BOX Trading
Floor and each order type is represented and processed similarly by
Floor Brokers and BOX's system. As proposed, the rebates for all manual
transactions on the BOX Trading Floor will be the same, which will
simplify the BOX Fee Schedule and reduce investor confusion with regard
to what rebates will be offered for transactions executed on the BOX
Trading Floor. Further, the Exchange believes that offering the
proposed rebate will allow Floor Brokers to price their services at a
level that would enable them to attract dividend strategy FOO order
flow to the BOX Trading Floor. As such, the Exchange believes that the
proposed rebate is reasonable.
The Exchange believes that the proposed rebate for dividend
strategy FOO Orders is equitable and not unfairly discriminatory as the
rebate is available to all Floor Brokers. Further, the Exchange
believes that applying the proposed rebate to Floor Brokers and not to
Floor Market Makers is equitable and not unfairly discriminatory as
Floor Market Makers only represent their own interest on the Trading
Floor and therefore do not need a similar incentive.
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 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 to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, the Exchange believes that the degree to which fee changes in
this market may impose any burden on competition is limited. For the
reasons discussed above, the Exchange believes that the proposed
changes do not impose an undue burden on competition.
The Exchange does not believe that the proposed FOO Order fees will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act because, as noted herein, other
exchanges currently assess identical fees for FLEX and non-FLEX
transactions on their trading floors. Further, the Exchange believes
that the proposed FOO Order fees could promote competition between BOX
and other execution venues, including those that currently offer
identical or similar fees.
The Exchange does not believe that offering a rebate to Floor
Brokers for FOO Orders presented to the Trading Floor will impose an
undue burden on intramarket competition because all Floor Brokers are
eligible to transact FOO Orders and receive a rebate. Further, the
Exchange believes that the proposed rebates will promote competition by
allowing Floor Brokers to competitively price their services and for
BOX to remain competitive with other exchanges that offer front-end
order entry on their trading floors.
Lastly, the Exchange does not believe the proposed fee caps for
Strategy FOO Orders and dividend strategy FOO Orders on the BOX Trading
Floor will impose an undue burden on intramarket competition because
all Floor Participants are eligible for the fee caps. Further, the
Exchange believes that the proposed fee caps will promote competition
by allowing the Exchange to remain competitive with other exchanges
with open outcry trading floors. Further, the Exchange does not believe
that offering a rebate to Floor Brokers will impose an undue burden on
intramarket competition because all Floor Brokers are eligible to
transact Strategy FOO Orders and dividend strategy FOO Orders and
receive a rebate. Further, as discussed above, the Exchange believes
that applying the proposed rebates to Floor Brokers and not to Floor
Market Makers is appropriate as Floor Market Makers only represent
their own interest on the Trading Floor and therefore do not need
similar incentives. Lastly, the Exchange believes that the proposed
rebates will promote competition by allowing Floor Brokers to
competitively price their services and for BOX to remain competitive
with other exchanges with trading floors.
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 \26\ and Rule 19b-4(f)(2)
thereunder,\27\
[[Page 53698]]
because it establishes or changes a due, or fee.
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\26\ 15 U.S.C. 78s(b)(3)(A)(ii).
\27\ 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#9ae8eff6ffb7f9f5f7f7fff4eee9dae9fff9b4fdf5ec"><span class="__cf_email__" data-cfemail="ccbeb9a0a9e1afa3a1a1a9a2b8bf8cbfa9afe2aba3ba">[email protected]</span></a>. Please include
file number SR-BOX-2024-15 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-2024-15. 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-2024-15 and should be
submitted on or before July 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14065 Filed 6-26-24; 8:45 am]
BILLING CODE 8011-01-P
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