Notice2024-25636
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
November 5, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 214 (Tuesday, November 5, 2024)</title>
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[Federal Register Volume 89, Number 214 (Tuesday, November 5, 2024)]
[Notices]
[Pages 87921-87924]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25636]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101480; File No. SR-BOX-2024-25]
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'')
October 30, 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 October 15, 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 the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule to
assess a $0.00 Complex Surcharge for certain Complex Order transactions
on the BOX Options Market LLC (``BOX'') options
[[Page 87922]]
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 assess a $0.00 Complex Surcharge for certain Complex Order
transactions.
Currently, BOX assesses a Complex Surcharge of $0.12 per contract
to any electronic non-Public Customer Complex Order that executes
against an electronic Public Customer Complex Order.\5\
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\5\ See BOX Fee Schedule Section VI.A (All Complex Orders).
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The Exchange now proposes that a $0.00 per contract Complex
Surcharge will be applied for transactions in SPY, QQQ, and IWM when
the Public Customer Complex Order is entered by an affiliate or
Appointed OFP.\6\ Section VI.A. of the Fee Schedule currently provides,
in relevant part, ``A $0.12 per contract Complex Surcharge will be
applied to any electronic non-Public Customer Complex Order that
executes against an electronic Public Customer Complex Order.'' The
Exchange now proposes to add text to Section VI.A. providing, ``The
Complex Surcharge will not be applied for transactions in SPY, QQQ, and
IWM when the Public Customer Complex Order is entered by an affiliate
or Appointed OFP.''
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\6\ For purposes of the Exchange Fee Schedule, the term
``affiliate'' of a Participant shall mean any Participant under 75%
common ownership or control of that Participant. An ``Appointed
OFP'' is an OFP that has been designated by a BOX Market Maker. See
BOX Fee Schedule Section IX.A (Aggregate Billing).
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For example, currently, if a Public Customer submitted a SPY order
to the Complex Order Book (making liquidity) that interacted with a
Market Maker's SPY order (taking liquidity), the Market Maker would be
charged $0.62.\7\ Under the proposal, if the Public Customer SPY order
was entered by an affiliate or Appointed OFP of the Market Maker, then
the Market Maker would only be charged the taker fee of $0.50 and not
the $0.12 Complex Surcharge. The proposed change would effectively
decrease the Complex Surcharge assessed in this case from $0.12 to
$0.00.
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\7\ A $0.50 fee plus the $0.12 Complex Surcharge.
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The Exchange does not believe that the proposed rule change is
novel as a similar discount structure currently exists at another
exchange.\8\ Further, the Exchange believes that the proposal will
encourage Participants to send increased SPY, QQQ, and IWM Complex
Order flow to BOX because this proposal will decrease the cost of
certain transactions. Specifically, Participants with an affiliate or
an Appointed OFP will not be assessed the Complex Surcharge for
transactions in SPY, QQQ, and IWM when the Public Customer Complex
Order that they trade with is entered by their affiliate or Appointed
OFP.
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\8\ See Nasdaq ISE, LLC (``Nasdaq ISE'') Rules Options 7,
Section 4, footnote 3 (Taker Fee discounted from $0.50 to $0.38 per
contract when executed against Priority Customer Complex Orders in
Select Symbols entered by an Affiliated Member or Affiliated Entity,
excluding Complex Orders executed in the Facilitation Mechanism,
Solicited Order Mechanism, and Price Improvement Mechanism). The
Exchange believes that Nasdaq ISE's taker fee discount structure is
similar to the proposal in that it applies to a subset of symbols
entered by affiliated or assigned firms. The Exchange notes that
while ISE offers a discounted fee, the Exchange is proposing to not
apply a surcharge, which similarly results in a decreased fee.
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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,\9\ 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. Specifically, the Exchange's proposal to not apply the
Complex Surcharge for transactions in SPY, QQQ, and IWM when the Public
Customer Complex Order is entered by an affiliate or Appointed OFP is
reasonable because this discount will incentivize BOX Participants to
send their SPY, IWM, and QQQ order flow to BOX which would increase
Complex Order liquidity and benefit all market participants (including
those market participants that are not currently affiliates and/or opt
not to become an Appointed OFP) by providing more trading opportunities
and tighter spreads in SPY, QQQ, and IWM.
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\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that this proposal is reasonable, equitable,
and not unfairly discriminatory as it is consistent with the discount
structure at another exchange.\10\ Specifically, ISE currently provides
a taker fee discount in Select Symbols \11\ when entered against
Priority Customer \12\ Complex Orders \13\ by an Affiliated Member \14\
or Affiliated Entity.\15\ The Exchange believes that its proposal is
similar to the discount structure in place at Nasdaq ISE in that it is
proposing to apply a Complex Surcharge of $0.00 (an effective $0.12
discount) to certain transactions in a subset of symbols when the
Public Customer Complex Order is entered by an affiliate or Appointed
OFP.\16\
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\10\ See supra note 8.
\11\ The Nasdaq ISE Options Pricing Schedule defines ``Select
Symbols'' as options overlying all symbols listed on the Nasdaq ISE
that are in the Penny Interval Program. See Nasdaq ISE Rules Options
7, Section 1(c).
\12\ The Nasdaq ISE Options Pricing Schedule provides that a
``Priority Customer'' is a person or entity that is not a broker/
dealer in securities, and does not place more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq ISE Options 1,
Section 1(a)(37). See Nasdaq ISE Rules Options 7, Section 1(c).
\13\ The Nasdaq ISE Options Pricing Schedule defines a ``Complex
Order'' as any order involving the simultaneous purchase and/or sale
of two or more different options series in the same underlying
security, as provided in Nasdaq ISE Options 3, Section 14, as well
as Stock-Option Orders. See Nasdaq ISE Rules Options 7, Section
1(c).
\14\ The Nasdaq ISE Options Pricing Schedule defines an
``Affiliated Member'' as a Member that shares at least 75% common
ownership with a particular Member as reflected on the Member's Form
BD, Schedule A. See Nasdaq ISE Rules Options 7, Section 1(c).
\15\ The Nasdaq ISE Options Pricing Schedule provides that an
``Affiliated Entity'' is a relationship between an Appointed Market
Maker and an Appointed OFP for purposes of qualifying for certain
pricing specified in the Schedule of Fees. See Nasdaq ISE Rules
Options 7, Section 1(c).
\16\ See supra note 8. The Exchange further notes that it is
proposing to not apply the Complex Surcharge to transactions in SPY,
QQQ, and IWM, while the Nasdaq ISE discount is applicable to all
options within their Penny Interval Program.
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The Exchange further believes that this proposal is reasonable,
equitable, and not unfairly discriminatory because all non-Public
Customers would not be assessed a Complex Surcharge for transactions in
SPY, QQQ, and IWM when executing against a Public
[[Page 87923]]
Customer Complex Order that was entered by an affiliate or Appointed
OFP. Additionally, the criteria for not applying the Complex Surcharge
for transactions in SPY, QQQ, and IWM that execute against Public
Customer Complex Orders that were entered by an affiliate or Appointed
OFP would be uniformly applied for all Participants.
The Exchange also believes that offering Participants the
opportunity to not be assessed the Complex Surcharge for transactions
in SPY, QQQ, and IWM when they execute against Public Customer Complex
Orders that were entered by an affiliate or Appointed OFP is equitable
and not unfairly discriminatory as it relates to Participants who are
not affiliates or Appointed OFPs because any Participant may enter into
such a relationship for the purpose of aggregating volume executed on
the Exchange.
The Exchange believes further that discounting the Complex
Surcharge when the Public Customer Complex Order is entered by an
affiliate or Appointed OFP is reasonable because the discount is
designed to increase SPY, QQQ, and IWM order flow to BOX, which would
benefit all market participants.
The Exchange believes its proposal to establish different pricing
for SPY, QQQ, and IWM Complex Order in this case 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 separate
fees and rebates for SPY, QQQ, and IWM and currently assessed for non-
auction electronic transactions and Complex Orders.\17\ The Exchange
notes further that other exchanges design fee structures to compete
specifically for volume in these (and other high volume) symbols.\18\
SPY, QQQ, and IWM are among the most actively traded options \19\ and
therefore the Exchange believes that not assessing the Complex
Surcharge on qualifying Complex Orders for these classes is appropriate
to more effectively attract order flow to BOX. The Exchange further
believes that assessing different pricing for SPY, QQQ and IWM, as
compared to other symbols, is reasonable because SPY, QQQ and IWM are
highly liquid symbols, have higher volumes, and other exchanges design
fee structures to specifically compete for executions in these symbols.
The Exchange believes that creating a separate category within the fee
structure for these classes is appropriate to more effectively attract
order flow to BOX in these classes.
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\17\ See BOX Fee Schedule Sections IV.A (Electronic Transaction
Fees) and VI (Complex Order Transaction Fees).
\18\ See e.g., Cboe C2 Exchange, Inc. Options Fee Schedule
(``Transaction Fees'' applicable to SPY, QQQ, and IWM among 9 other
symbols); MIAX PEARL, LLC Options Fee Schedule (``Transaction
Rebates/Fees'' for Priority Customer SPY, QQQ, and IWM Taker).
\19\ See <a href="https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options">https://www.optionseducation.org/toolsoptionquotes/today-s-most-active-options</a> (providing a daily list of the most
active options by type).
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The Exchange believes the proposal will create an incentive for
Participants to bring Complex Orders in SPY, QQQ, and IWM to BOX. The
Exchange believes that if the proposed incentive is effective, then an
ensuing increase in trading activity on BOX will improve the quality of
the market to the benefit of all market participants. Further, to the
extent this proposal attracts new Participant volume to BOX, all market
participants will benefit through increased liquidity and more trading
opportunities.
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 intermarket
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact its business. The Exchange notes
that it operates in a highly competitive market in which market
participants can readily favor competing venues if they deem fee levels
at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges. Because competitors are free to
modify their own fees and rebates in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee changes in this market
may impose any burden on competition is extremely limited.
The Exchange believes that the proposed discount will encourage
market participants to send greater amounts of Complex Orders in SPY,
QQQ, and IWM to BOX for execution in order to take advantage of the
proposed discount and lower their costs. The Exchange believes that the
additional liquidity in SPY, QQQ, and IWM will enhance the quality of
BOX's Complex Order market and increase related trading opportunities
on BOX. Accordingly, the Exchange believes that the proposed changes
may increase intermarket and intra-market competition by incentivizing
Participants to direct their SPY, QQQ, and IWM orders to the Exchange,
thereby increasing the volume of contracts traded on BOX and enhancing
the quality of the market in these classes. Enhanced market quality and
increased transaction volume that result from the anticipated increase
in SPY, QQQ, and IWM order flow directed to BOX would benefit all
market participants and improve competition on BOX in SPY, QQQ, and
IWM.
The Exchange further believes that its proposal will not place any
category of market participant at a competitive disadvantage and
therefore does not impose an undue burden on intra-market competition
because all non-Public Customers would be assessed a Complex Surcharge
of $0.00 for transactions in SPY, QQQ, and IWM when executing against a
Public Customer Complex Order that was entered by an affiliate or
Appointed OFP. Additionally, the criteria for applying a Complex
Surcharge of $0.00 for transactions in SPY, QQQ, and IWM that execute
against Public Customer Complex Orders that were entered by an
affiliate or Appointed OFP would be uniformly applied for all
Participants.
Additionally, offering Participants the opportunity to not be
assessed the Complex Surcharge for transactions in SPY, QQQ, and IWM
that execute against Public Customer Complex Orders that were entered
by an affiliate or Appointed OFP does not impose an undue burden on
competition as it relates to Participants who are not affiliates or
Appointed OFPs because any Participant may enter into such a
relationship for the purpose of aggregating volume executed on BOX .
Finally, the criteria for assessing a Complex Surcharge of $0.00 would
be uniformly applied to all Participants.
The Exchange again 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 discussed above, the Exchange believes
that the proposed change reflects this competitive environment.
[[Page 87924]]
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 \20\ and Rule 19b-4(f)(2)
thereunder,\21\ because it establishes or changes a due, or fee.
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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 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#dba9aeb7bef6b8b4b6b6beb5afa89ba8beb8f5bcb4ad"><span class="__cf_email__" data-cfemail="ea989f868fc7898587878f849e99aa998f89c48d859c">[email protected]</span></a>. Please include
file number SR-BOX-2024-25 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-2024-25. 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-2024-25 and should be
submitted on or before November 26, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25636 Filed 11-4-24; 8:45 am]
BILLING CODE 8011-01-P
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