[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 19968-19971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07445]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88559; File No. SR-BOX-2020-08]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule on the BOX Options Market LLC (``BOX'') Facility To Reflect
Certain Pricing Changes That Will Be in Effect While the BOX Trading
Floor Is Inoperable
April 3, 2020.
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 April 2, 2020, 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
[[Page 19969]]
to amend the Fee Schedule on the BOX Options Market LLC (``BOX'')
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 http://boxexchange.com.
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
As a precautionary measure to prevent the potential spread of
coronavirus (COVID-19), BOX Exchange LLC (BOX) temporarily closed the
Trading Floor in Chicago after the close of business on Friday, March
20, 2020. The Exchange proposes to amend the Fee Schedule for trading
on BOX to govern certain pricing changes that will be in effect while
the BOX Trading Floor is inoperable.
Facilitation and Solicitation Transaction Fees
First, the Exchange proposes to amend Section I.C. (Facilitation
and Solicitation Transactions \5\) to establish a fee structure for
Facilitation and Solicitation Transactions in lieu of the current fees
for Facilitation and Solicitation Transactions while the BOX Trading
Floor is inoperable. Further, the Exchange proposes that the
Facilitation and Solicitation Transaction Rebate identified in Section
I.C.1 will not apply when the BOX Trading Floor is inoperable. With the
Trading Floor inoperable, Floor Participants will no longer be allowed
to enter Qualified Open Outcry Orders (``QOO'') Orders on BOX. Instead
these Participants must enter analogous types of electronic orders on
BOX, which are most similar to orders executed through the Facilitation
and Solicitation auction mechanism. Because of this, the Exchange
proposes to mimic the current structure for Facilitation and
Solicitation Transactions; however the Exchange proposes to make a few
minor changes to the fees assessed for these transactions when the
Trading Floor is inoperable. Specifically, the Exchange proposes to
assess no fees for Agency Orders submitted to the Facilitation and
Solicitation mechanisms for all Participants, regardless of account
type.\6\ Second, the Exchange proposes to assess no fees for
Facilitation and Solicitation Orders \7\ in Penny and Non-Penny Pilot
Classes. BOX also proposes to assess a $0.50 fee for Responses in the
Facilitation or Solicitation Auction Mechanisms in Penny Pilot Classes
and $1.15 for Responses in the Facilitation and Solicitation mechanisms
in Non-Penny Pilot Classes.\8\ The Exchange believes the proposed fee
structure will incentivize Participants who would normally execute
orders on the BOX Trading Floor to instead submit orders to the
Exchange's Facilitation and Solicitation auction mechanisms.\9\ Once
the Trading Floor reopens, the Exchange will make necessary changes to
the BOX Fee Schedule to remove obsolete text.
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\5\ Transactions executed through the Solicitation Auction
mechanism and Facilitation Auction mechanism.
\6\ The Exchange notes that no fees are currently assessed for
Agency Orders for any account type.
\7\ Facilitation and Solicitation Orders are the matching contra
orders submitted on the opposite side of the Agency Order.
\8\ The Exchange notes that the total fees for Responses in the
Facilitation and Solicitation auction mechanisms are not changing.
Currently, Participants are assessed a $0.25 fee for Responses in
the Facilitation and Solicitation mechanisms for Penny Pilot Classes
and an additional $0.25 liquidity fee in Section III.B totaling
$0.50 for their order. For Non-Penny Pilot Classes, Participants are
assessed a $0.40 fee for Responses in the Facilitation and
Solicitation mechanisms and an additional $0.75 liquidity fee in
Section III.B totaling $1.15 for their order. As discussed herein,
the Exchange proposes to eliminate Liquidity Fees and Credits for
Facilitation and Solicitation transactions when the Trading Floor is
inoperable. As such, the current liquidity fees are included in the
proposed Response fees for the Facilitation and Solicitation
mechanisms.
\9\ The Exchange notes that the QOO Orders are paired orders on
the BOX Trading Floor similar to Facilitation and Solicitation
orders submitted electronically through the Facilitation and
Solicitation auction mechanism. The Exchange believes that the
reduced Facilitation and Solicitation Order fees will incentivize
Floor Participants (who are also electronic Participants on BOX) to
execute orders electronically instead of directing this order flow
to another exchange.
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Liquidity Fees and Credits
The Exchange proposes to add text to Section III.B. (Liquidity Fees
and Credits for Facilitation and Solicitation Transactions).
Specifically, the Exchange proposes to add text which states that
Participants will not be assessed Liquidity Fees and Credits for
Facilitation and Solicitation Transactions when the BOX Trading Floor
is inoperable. Once the Trading Floor reopens, the Exchange will make
necessary changes to the BOX Fee Schedule to remove obsolete text.
Participant Fees
The Exchange proposes to add text to Section IX., Participant Fees,
which states that BOX Participant Fees will not be assessed for Trading
Floor-only Participants and Trading Floor Permit Fees will not be
assessed for any Participant while the BOX Trading Floor is
inoperable.\10\ Once the Trading Floor reopens, the Exchange will make
necessary changes to the BOX Fee Schedule to remove obsolete text.
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\10\ Trading Floor Participants who are also electronic
Participants will continue to be charged the BOX Participant 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,\11\ 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. The proposed changes are due to the closing of the BOX
Trading Floor as of March 23, 2020. The Exchange believes the proposed
changes discussed herein will incentivize Participants to direct order
flow that that would have otherwise been executed on the BOX Trading
Floor, to be executed through the Exchange's Facilitation and
Solicitation auction mechanisms while the Trading Floor is
inoperable.\12\
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\11\ 15 U.S.C. 78f(b)(4) and (5).
\12\ The Exchange notes that the QOO Orders are paired orders on
the BOX Trading Floor similar to Facilitation and Solicitation
orders submitted electronically through the Facilitation and
Solicitation auction mechanism. Under this proposal, Floor
Participants (who are also electronic Participants on BOX) will be
able to execute orders electronically despite the Trading Floor
being closed.
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Facilitation and Solicitation Transaction Fees
The Exchange believes that the proposed fee structure for
Facilitation and Solicitation Transactions while the Trading Floor is
inoperable is reasonable, equitable and not unfairly discriminatory.
The Exchange notes that assessing no Agency Order fees is in line with
the Exchange's current fee structure for Facilitation and Solicitation
Transactions. Further, the Exchange believes that assessing no fees
[[Page 19970]]
for Facilitation and Solicitation Orders in the Facilitation and
Solicitation auction mechanism is reasonable.\13\ As discussed above,
the Exchange believes that assessing no fees for Facilitation and
Solicitation Orders will attract order flow to these mechanisms that
would have otherwise been executed on the BOX Trading Floor. The
Exchange believes the proposed change will incentivize Participants to
direct their orders to the Exchange's mechanisms (instead of directing
these orders that would have normally executed on the BOX Trading Floor
to other exchanges in the industry) which will result in greater
liquidity and ultimately benefit all Participants trading on the
Exchange. Further, the Exchange believes that the proposed change is
equitable and not unfairly discriminatory, as the proposed change
applies to all Participants, regardless of account type.
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\13\ The Exchange notes that it previously did not charge Broker
Dealers, Professional Customers and Market Makers for Facilitation
and Solicitation Orders in the Facilitation and Solicitation
mechanism. See SR-BOX-2015-29.
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The Exchange believes that the proposed fees for Responses in the
Facilitation and Solicitation auction mechanisms are reasonable. As
discussed above, as part of this temporary fee change the Exchange is
removing Liquidity Fees and Credits for the Facilitation and
Solicitation mechanisms. With the Liquidity Fees and Credits removed,
the Exchange is transferring the fee for adding liquidity ($0.25 for
Penny Pilot Class and $0.75 Non-Penny Pilot Classes) and adding these
fees to the proposed Response fees. BOX Participants responding to the
Facilitation and Solicitation orders will not be charged any
differently than they are today.\14\ Further, the Exchange believes
that the proposed fees are equitable and not unfairly discriminatory
because the fees are assessed to all Participants, regardless of
account type.
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\14\ See supra note 8.
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The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to charge higher exchange fees for responders
in the Facilitation and Solicitation auctions than for initiators of
these orders and the contra orders. The Exchange again notes that the
total transaction fee for Responses in the Facilitation and
Solicitation mechanisms is not changing. The Exchange is simply
including the liquidity fees in Section III.B. to the fees for
Responses in the Facilitation and Solicitation mechanisms which are
currently assessed today. While the Exchange is decreasing the fees for
Facilitation and Solicitation orders and creating a larger disparity
between the Initiator and Responder, the Exchange believes that the
differential between what an Initiator will pay compared to what a
Responder will pay is reasonable because Responders are willing to pay
a higher fee for liquidity discovery. The Exchange believes that
assessing no fees for Agency Orders and Facilitation and Solicitation
Orders will attract more liquidity to these mechanisms ultimately
providing Responders with increased opportunity for executions on the
Exchange. Despite the increased differential between the Initiator and
Responder, the Exchange again notes that Responders are not paying any
more than what they currently pay for responses in these mechanisms
today. Further, the Exchange believes the proposed fees for Responders
are equitable and not unfairly discriminatory as they apply to all
Participants, regardless of account type.
The Exchange further believes it is reasonable to establish
different fees for Responses to Facilitation and Solicitation
transactions in Penny Pilot Classes compared to transactions in Non-
Penny Pilot Classes. The Exchange makes this distinction throughout the
BOX Fee Schedule, including the Exchange Fees for PIP and COPIP
Transactions. The Exchange believes it is reasonable to establish
higher fees for Non-Penny Pilot Classes because these Classes are
typically less actively traded and have wider spreads.
Liquidity Fees and Credits
Currently, the Liquidity Fees and Credits fee structure for
Facilitation and Solicitation transactions, in particular the credit
for removing liquidity, aims to attract order flow to the BOX auction
mechanisms. The Exchange believes that eliminating the Liquidity Fees
and Credits for Facilitation and Solicitation Transactions when the
Trading Floor is inoperable is reasonable as the Exchange has, pursuant
to this proposal, eliminated Facilitation and Solicitation Order
fees.\15\ Market participants no longer need the incentive of a credit
for removing liquidity when there are no fees assessed for Agency
Orders and Facilitation and Solicitation Orders in the Facilitation and
Solicitation auction mechanism. Further, the Exchange believes the
proposed change is equitable and not unfairly discriminatory in that
the change will apply to all categories of Participants and across all
account types.
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\15\ The Exchange again notes that no fees are assessed for
Agency Orders for any account type.
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Participant Fees
The Exchange believes that waiving BOX Participant Fees and Trading
Floor Permit Fees for Trading Floor Only Participants is reasonable and
appropriate because the BOX Trading Floor is inoperable due to the
precautionary measure to prevent the potential spread of COVID-19. The
Exchange believes waiving these fees is equitable and not unfairly
discriminatory because the fees are waived for all Floor Participants,
regardless of account type. The Exchange believes it is reasonable and
appropriate to continue to assess Participant Fees to Floor
Participants who are also an electronic Participant as those
Participants will still be able to execute transactions on the
Exchange's electronic market.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing exchanges. In such an environment, the Exchange must
continually review, and consider adjusting, its fees to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed rule change reflects this
competitive environment.
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 that the
proposed changes to the Facilitation and Solicitation Transaction fees
will not impose a burden on competition among various Exchange
Participants. Rather, BOX believes that the change will result in the
Participants being charged appropriately for these transactions and are
designed to enhance competition in the Facilitation and Solicitation
mechanisms. Submitting an order is entirely voluntary and Participants
can determine which order type they wish to submit, if any, to the
Exchange. Further, the Exchange believes that this proposal will
enhance competition between exchanges because it is designed to allow
the Exchange to better compete with other exchanges for order flow. The
Exchange does not believe that the proposed change will burden
competition by creating a disparity between the fees an initiator pays
and the fees a competitive responder pays that would result in certain
Participants being unable to compete with initiators. In fact, the
Exchange believes that these changes will not impair these
[[Page 19971]]
Participants from adding liquidity and competing in the Facilitation
and Solicitation mechanisms, and will help promote competition by
providing incentives for market participants to submit Facilitation and
Solicitation Orders, and thus benefit all Participants trading on the
Exchange by attracting customer order flow.
Lastly, the Exchange believes that eliminating the Liquidity Fees
and Credits for Facilitation and Solicitation Transactions will not
burden competition as the proposed change applies to all market
participants. As discussed above, the Exchange believes that
eliminating the Liquidity Fees and Credits for Facilitation and
Solicitation Transactions is reasonable as the Exchange, pursuant to
this proposal, has eliminated Facilitation and Solicitation Order fees.
Therefore, the credit for removing liquidity is no longer needed to
incentivize Participants to submit order flow to the Facilitation and
Solicitation auction mechanisms.
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 \16\ and Rule 19b-4(f)(2) thereunder,\17\ because it
establishes or changes a due, or fee.
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 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
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BOX-2020-08 on the subject line.
Paper Comments
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-2020-08. 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 (http://www.sec.gov/rules/sro.shtml).
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 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2020-08, and should be submitted on
or before April 30, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07445 Filed 4-8-20; 8:45 am]
BILLING CODE 8011-01-P