[Federal Register Volume 85, Number 51 (Monday, March 16, 2020)]
[Notices]
[Pages 14993-14995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05240]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88355; File No. SR-BOX-2020-05]
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 Amend
Section V., Eligible Orders Routed to an Away Exchange
March 10, 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 March 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 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
The Exchange proposes to amend the Fee Schedule for trading on BOX
to amend Section V., Eligible Orders Routed to an Away Exchange.
Currently, BOX uses third-party broker-dealers to route orders to
other exchanges and incurs transaction fees for each order routed to
and executed at an away market, as well as related costs for routing
such orders. To offset the fees and costs incurred by the Exchange for
orders routed to other exchanges, the Exchange charges a $0.60 per
contract fee for customer accounts.\5\ The Exchange is now proposing to
amend Section V. of the BOX Fee Schedule. Specifically, the Exchange
proposes to charge $0.85 per contract for Non-Penny Pilot Classes for
customer accounts. Routing Penny Pilot Classes will continue to be
charged the current $0.60 per contract fee for customer accounts. The
Exchange notes that the proposed changes are in line to fees assessed
at other options exchanges in the industry.\6\
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\5\ The term Customer accounts includes both Professional
Customers and Public Customers.
\6\ The Exchange notes that other exchanges in the industry make
this distinction between routed order fees for Penny Pilot and Non-
Penny Pilot Classes. See Miami International Securities Exchange LLC
(``MIAX'') Fee Schedule. On MIAX, routed orders for Priority
Customers in Penny Pilot Classes are charged $0.15 or $0.65
(depending on what away market the orders are sent). Routed orders
for Priority Customers in Non-Penny Pilot Classes are charged $0.15
or $1.00 (depending on what away market the orders are sent).
Further, routed orders for Public Customers (that are not a Priority
Customer) in Penny Pilot Classes are charged $0.65. Routed orders
for Public Customers (that are not a Priority Customer) in Non-Penny
Pilot Classes are charged $1.00, $1.15, or $1.25 (depending on what
away market the orders are sent). See also Cboe Exchange, Inc.
(``Cboe'') Fee Schedule.
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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,\7\ 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 Exchange notes that it operates in a highly competitive
market in which market participants can readily direct
[[Page 14994]]
order flow to competing venues or providers of routing services if they
deem fee levels to be excessive.
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\7\ 15 U.S.C. 78f(b)(4) and (5).
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When assessing routing fees, the Exchange has generally attempted
to approximate the cost of routing to other options exchanges,
including other applicable costs to the Exchange and set a flat routing
fee. The Exchange believes that the proposed fee change for routing
Non-Penny Pilot Classes, which is based on the approximate routing
costs of these contracts, is a reasonable, equitable and not unfairly
discriminatory approach to pricing. Specifically, the proposed flat
routing fee for Non-Penny Pilot Classes will continue to provide
Participants with certainty regarding execution costs for orders routed
to away markets. Further, the Exchange believes a flat routing fee
based on an approximation of the routing costs is administratively
easier for the Exchange to manage for billing purposes and will allow
the Exchange to avoid continually updating the routing fees every time
an away market modifies transaction fees. Finally, as discussed above,
the Exchange believes the proposal is reasonable and appropriate
because the proposed routing fees are within a comparable range to that
of its competitors.\8\
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\8\ See supra note 6.
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The Exchange believes that its proposal to assess a higher routing
fee for Non-Penny Pilot Classes compared to the routing fee for Penny
Pilot Classes is reasonable, equitable and not unfairly discriminatory.
The Exchange notes that transactions in Non-Penny Pilot Classes are
generally assessed higher fees than Penny Pilot Classes across the
industry as they are typically less actively traded and have wider
spreads. As such, the Exchange believes it is reasonable to charge a
higher fee for routing such orders, in order to recoup the higher costs
of routing and executing the Non-Penny Pilot Class orders on behalf of
Participants.\9\ The Exchange notes that the current $0.60 routing fee
will remain for executions in Penny Pilot Classes.
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\9\ The Exchange again notes that another exchange charges
similar fees for Non-Penny Pilot Classes routed to an away exchange.
Id.
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The Exchange believes that the proposed Routing Fees furthers the
objectives of Section6(b)(5) of the Act and are designed to promote
just and equitable principles of trade and are not unfairly
discriminatory because they seek to recoup costs that are incurred by
the Exchange when routing orders to away markets on behalf of
Participants. Each destination market's transaction charge varies and
there is a cost incurred by the Exchange when routing orders to away
markets. The costs to the Exchange primarily include transaction fees
assessed by the away markets to which the Exchange routes orders, in
addition to the Exchange's clearing costs, administrative, regulatory
and technical costs associated with routing options. The Exchange
believes that the proposed change would better enable the Exchange to
recover the costs it incurs to route orders to away markets. The
Exchange notes that routing through the Exchange is voluntary. The
Exchange also believes that the proposed fees for orders routed to and
executed at away options exchanges is fair and equitable and not
unreasonably discriminatory in that it applies equally to all
Participants.
The Exchange reiterates that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels to be excessive or providers
of routing services if they deem fee levels to be excessive. Finally,
the Exchange notes that it constantly evaluates its routing fees,
including profit and loss attributable to routing and would consider
future adjustments to the proposed fee to the extent it was recouping a
significant profit or loss from routing to away options exchanges.
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. As discussed herein, the
Exchange's proposed fees are similar to those assessed by other options
exchanges.\10\ Further, the Exchange believes that the proposed change
will assist the Exchange in recouping costs for routing orders to other
options exchanges on behalf of its Participants in a manner that that
reflects pricing changes by various options exchanges as well as
increases to other routing costs incurred by the Exchange. The Exchange
also notes that Participants may choose to designate their orders as
ineligible for routing to avoid incurring routing fees.\11\
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\10\ Id.
\11\ See BOX Rule 15030 (describing the routing process, which
requires orders to be designated as eligible for routing).
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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 \12\ and Rule 19b-4(f)(2)
thereunder,\13\ because it establishes or changes a due, or fee.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 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-2020-05 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-2020-05. 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
[[Page 14995]]
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-
2020-05, and should be submitted on or before April 6, 2020.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05240 Filed 3-13-20; 8:45 am]
BILLING CODE 8011-01-P