[Federal Register Volume 84, Number 241 (Monday, December 16, 2019)]
[Notices]
[Pages 68499-68501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26987]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87704; File No. SR-BOX-2019-35]
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 Remove the
QOO Order Rebate Cap
December 10, 2019.
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 November 27, 2019, 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
amend the Fee Schedule on the BOX Options Market LLC (``BOX'')
facility. While changes to the Fee Schedule pursuant to this proposal
will be effective upon filing, the changes will become operative on
December 2, 2019. The text of the proposed rule change is available
from the principal office of the
[[Page 68500]]
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
The Exchange proposes to amend Section II.C (QOO Order Rebate) of
the BOX Fee Schedule. Specifically, the Exchange proposes to remove the
monthly rebate cap of $30,000 per month per Broker Dealer. Currently,
Floor Brokers are eligible to receive a $0.075 per contract rebate for
all QOO Orders executed on the BOX Trading Floor. The rebate is not
applied to Public Customer executions, executions subject to the
Strategy QOO Order Fee Cap, or Broker Dealer executions where the
Broker Dealer is facilitating a Public Customer.
The Exchange notes that it is not making any other changes to the
QOO Order Rebate, and that the QOO rebate will continue to apply to
both sides of the paired QOO Order. The rebate will not apply to Public
Customer executions, executions subject to the Strategy QOO Order Fee
Cap, or Broker Dealer executions where the Broker Dealer is
facilitating a Public Customer.
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,\5\ 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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\5\ 15 U.S.C. 78f(b)(4) and (5).
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BOX established the QOO Order Rebate program and the monthly rebate
cap in August 2017.\6\ As discussed in the 2017 proposal to establish
the QOO Order Rebate program and rebate cap, the rebate was created to
incentivize order flow to the BOX Trading Floor. Unlike competing
exchanges, the Exchange does not offer a front-end order entry on the
BOX Trading Floor. With this Participants have two possible means of
bringing orders to the Exchange'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 QOO
Order Rebate program was established to attract order flow by rewarding
Floor Brokers with rebates for directing qualifying orders to the BOX
Trading Floor.
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\6\ See Securities Exchange Act Release Nos. 34-81504 (August
30, 2017), 82 FR 42195 (September 6, 2017) (SR-BOX-2017-28).
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The Exchange now believes that removing the rebate cap is
reasonable, because it will continue to allow Floor Brokers to price
their services at a level that would enable them to attract increased
QOO order flow from market participants who might otherwise utilize the
front-end order entry mechanism offered by the Exchange's competitors,
instead of incurring the cost in time and resources to install and
develop their own internal systems to deliver QOO orders directly to
the Exchange system. As such, the Exchange believes it is beneficial
from a competitive standpoint to continue to offer the rebate to the
executing Floor Broker on a QOO order without capping the dollar amount
allowed for the rebate. Further, the Exchange believes removing the
rebate cap will encourage Floor Brokers to bring additional QOO order
flow to the Exchange because Floor Brokers will be further incentivized
by the removal of the QOO Order Rebate cap for these specific QOO
orders. Lastly, the Exchange believes the proposed change is reasonable
and appropriate, as the Exchange is offering eligible participants
greater opportunities to lower their fees related to the execution of
qualifying QOO transactions.
In addition, the Exchange believes that removing the QOO Order
Rebate cap is reasonable as a competing exchange with a similar rebate
program offered to Floor Brokers currently has a rebate cap twelve
times higher than the QOO Order Rebate cap on BOX.\7\
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\7\ See NYSE Arca Options Fees and Charges, Qualified Contingent
Cross (``QCC'') Transactions Fees and Credits, Footnote 13 (stating
the ``maximum Floor Broker credit paid shall not exceed $375,000 per
month per Floor Broker firm.''). Similar to the Floor Broker Credit
for Executed QCC Transactions on NYSEArca, the QOO Order Rebate on
BOX is applied to both sides of the paired order and is directed to
the Floor Broker, and not to the Participant who is assessed the QOO
Order fee. Finally, similar to the BOX QOO Rebate, the NYSE Arca QCC
credit is only applied when the Floor Broker executes the QCC Order
manually on the NYSE Arca trading floor.
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The Exchange believes that the removal of the rebate cap is
equitable and not unfairly discriminatory because the proposal allows
all similarly situated Floor Brokers to benefit from the removal of the
QOO Order Rebate cap. Furthermore, the Exchange believes that all
market participants would benefit from additional trading opportunities
generated from increased order flow due to the removal of the QOO Order
Rebate cap. The Exchange believes that it is equitable and not unfairly
discriminatory to remove the QOO Order rebate cap for Floor Brokers, as
the previous cap only applied to Floor Brokers and not to Floor Market
Makers. Floor Market Makers only represent their own interest on the
Trading Floor and thus do not need additional incentives.
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 its
proposal to remove the QOO Order Rebate cap does not impose a burden on
competition. The Exchange notes that it operates in a highly
competitive market in which competitors are free to modify their own
fee schedules in response, and the Exchange believes that the degree to
which rebate increases impose any burden on competition is limited. As
noted above, one of the Exchange's competitors offers QCC credit cap
that is twelve times higher than the Exchange's QOO Order Rebate
cap.\8\ In addition, as mentioned above, the Floor Broker Credit for
QCC Transactions on NYSEArca is similar to the QOO Order Rebate on BOX
in that it is applied to both sides of the paired order and is directed
to the Floor Broker and not to the Participant who is assessed the QOO
Order fee. Moreover, similar to the BOX QOO Rebate, the NYSEArca QCC
credit is only applied when the Floor Broker
[[Page 68501]]
executes the QCC Order manually on the NYSEArca trading floor.
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\8\ Id. See also NASDQ PHLX (``Phlx'') Pricing Schedule, Section
4 (stating the ``maximum QCC Rebate to be paid in a given month will
not exceed $550,000.''). The Exchange notes Phlx's QCC Rebate cap is
over eighteen times higher than the QOO Order Rebate cap on BOX.
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Further, the Exchange does not believe that removing the QOO Order
rebate cap will impose an undue burden on intra-market competition
because all Floor Brokers will remain eligible to transact QOO Orders
and receive the same rebate. Further, the Exchange believes that the
removal of the rebate cap will promote competition by allowing Floor
Brokers to competitively price their services and for the Exchange to
remain competitive with other exchanges.
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 \9\ and Rule 19b-4(f)(2)
thereunder,\10\ because it establishes or changes a due, or fee.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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-2019-35 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-2019-35. 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-2019-35, and should be submitted on
or before January 6, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-26987 Filed 12-13-19; 8:45 am]
BILLING CODE 8011-01-P